The property industry has urged Government to seize a “once in a generation opportunity” to undertake a truly radical review of the business rates system in England.

Welcoming further details of the long-awaited review, announced by Chief Secretary to the Treasury Danny Alexander, the British Property Federation set out the key tests by which any replacement to the current system should be judged.

It said Government should aim to create a new business rates system that is:

* Responsive to the wider economy – where business rates bills rise and fall in line with rental values. At present, the tax rate tends to fall as property values rise, and rise as property values fall,

* Based on up-to-date property values – businesses should pay rates based on up-to-date rents, rather than on values that are up to nine years old as at present,

* Designed to encourage the greatest possible investment – the business rates system should be set at a level that allows development to go ahead across the country, and should not penalise businesses for refurbishing or renovating their property through rates charges on empty property.

The BPF said it was understandable that Government would want to make the review “fiscally neutral”, but pointed out it was the only UK tax designed to raise a set amount each year, regardless of other factors such as economic growth, business profitability and property values.

The BPF has made business rates reform one of its priority asks of the next Government in its General Election manifesto, Manifesto 2015: A Vision for British Property, published earlier this month.

Melanie Leech, Chief Executive of the British Property Federation, said:

Business (PD)“Modernising business rates so that they are fit for the 21st century is one of the defining challenges facing the next Parliament. This is a once in a generation opportunity, and so we would urge all parties to commit to a review of the system that is as wide and comprehensive as possible.

“The current system, where businesses continue to pay the same, arbitrary, amount each year, regardless of wider economic conditions, constrains development and prevents businesses from investing in our towns and cities – particularly in places that are struggling and that need investment the most.

“We would urge all parties to consider a wider definition of what is ‘fiscally neutral’, considering how rates may change from year to year but still raise a similar amount across the business cycle, or through the greater economic activity that business rates reform will encourage.”

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