New Chancellor Rishi Sunak is planning to announce a major review of the controversial business rate system in tomorrow’s Budget, it can be revealed.
Business rates have come under heavy fire in recent years, with rates often higher than shop rentals – and the move to online retailing has highlighted the huge tax being paid by struggling retailers.
It’s been a double whammy for commercial estate agents, losing letting fees on empty shops while at the same time paying huge rate bills on their own high street offices.
The review is likely to focus on replacing business rates with a property land tax, though any changes would not be immediate. There is likely to be a package of short-term measures in the Budget to help small and medium-sized businesses, who are also being hit by scares over the coronavirus.
NAEA and ARLA recently wrote a joint letter to the Department for Business, Energy and Industrial Strategy calling for a review of business rates, and for the existing small business retail discount to be extended to estate and letting agents.
“Over the last five years agents in both sales and lettings have incurred increased costs due to ever increasing legislation and regulation,” they said.
“The increased costs associated with operating in the sector, coupled with liability for business rates which others on the high street are not subject to, are forcing agents to close their public-facing high street agencies.”
They said that one member had told them the amount they were paying in business rates was greater than their annual profit.
“As is the case for high street retailers, the increase in costs faced by high street agents is compounded by the rise of online agents. Those online agencies face lower costs, squeezing agents with a physical presence on the high street out of the market,” they added.
“Should estate and letting agents continue to leave the high street, not only will communities be faced with more empty premises and lack of services, but tenants, in particular, who rely on agents to manage their properties will lose vital relationships.”
An inquiry into the business rate system was launched in 2019 by parliament’s Treasury Select Committee. It’s then chairman, MP Nicky Morgan, said: “Many high street businesses are struggling to remain competitive. It has been estimated that 10,000 shops will close this year. Unless action is taken, closures could continue and job losses may soar.
“Business Rates can represent a substantial financial burden on the high street.”