Alternatives to Business Rates – Land Value Tax?
-come on Chancellor, just look at Ontario and tell me “you want to follow that system”?
Business Rates has been around, in one form or another since 1601 when it was known as the Poor Act under Elizabeth I. It has survived civil wars, world wars, depressions and recessions – its job is simply to raise money for the Exchequer and not as often misquoted, “to empty your bins”.
It raises £35bn every year and automatically adjusts upwards to reflect inflation. Government, in particular HM Treasury loves it because it is dependable whereas VAT, North Sea oil royalties and corporation tax are volatile.
The only problem to HM Treasury is that the large retailers have identified this tax as the main reason they are not competing in the market, they issue press releases and the news agencies (BBC in particular) mop up the text as if it is completely true and contains the essence of why our High Street are diminishing.
This February 2020, the outgoing Sajid Javid and the incoming Rishi Sunak have been quoted to study various well placed discussion documents on Property Valuation Tax. The political goal of getting rid of business rates to win votes is attractive. But what of the proposed alternative? A value based on open market value for the freehold of a property unencumbered by leases… This is the 1998 Ontario model. Imagine, ½ acre of business park, unencumbered by a lease – what is it worth? Well today, the freehold value is 100% driven by what rent the Landlord would expect to receive – how do we find the evidence? What if it was a plot with decaying buildings on it – should it pay as much as the next-door neighbour with his high-tech B1 units on it? Are we rewarding those who have allowed the land to rot? Does this bode well for the renaissance of our High Streets? Invest and pay more!
Finally, to my friends in big retail, I ask three simple questions in the hope of receiving an honest answer: –
“Do you think your Landlord is not going to pass on the cost of this tax directly back to you?”
“How do you feel about a tax that only your Landlord can appeal and you can’t?”
“Feeling in control now?”
This is the jaundiced opinion of Roderick Bisset, a Canadian, of Villiers Chartered Surveyors.
“Business rates – we’re on your side”
Roderick has been practising in London and the South of England for the past thirty years in the field of Rating Valuation and Business Rates.