In February 2019 the Treasury Select Committee announced that it would conduct a review of the impact of business rates on business in the UK. As part of that review the Committee held five oral evidence sessions, taking evidence from a number of business ratepayers, both large and small, from professional bodies and trade associations, from the valuation office agency and from the government departments responsible for business rates, HM Treasury and the Ministry of Housing Communities and Local Government. As well as these oral evidence sessions, the committee received more than 140 written submissions from all types of businesses, trade and professional bodies, and academic institutions. Its report has now been published and copies have been placed in the Parliamentary library and on the Parliament website.

The Committee’s report is a unanimous one which is, itself, something of an achievement given that the committee consisted of Conservative, Labour, SNP, and Independent MPs. Government is normally expected to respond promptly to any recommendations contained in a Treasury Select Committee report but, as the general election will intervene, it seems unlikely that we will see any formal response until next year.

The first and most important finding is that the business rate revenues have significantly outpaced inflation since the current business rates system was first introduced in 1990. The committee asks that the government should explain whether this “above inflation” increase is deliberate policy. The report also notes that this increase is inconsistent with other corporate taxes which have, generally, fallen over this period.

The report also notes the extensive number of exemptions, reliefs, and other complexities in the business rates system and comments that “The number of reliefs that are needed for business rates to work indicate a broken system”. The report recommends a review of all exemptions and reliefs and has particularly harsh words to say about the system of transitional relief following the 2017 rating revaluation which has “kept rate bills artificially high over a prolonged period for many businesses”.

The committee is clearly concerned that successive changes to business rates had not properly aligned with the government’s general policy for business and, in particular, that “The current approach to business rates acts as an immediate significant disincentive to investment”.

A significant proportion of the report deals with the new business rates appeal system (known as “Check Challenge Appeal”) and it is clear that the committee considers the new system to be badly implemented, if not actually misconceived. The report is critical of the timescales for responses from the Valuation Office Agency (VOA) to checks and challenges made by ratepayers under the new system, calling the response times “too generous”. The report also echoes concerns from ratepayers that the new system is not properly transparent and noted that “It is unacceptable to bring in a system that creates so many difficulties for ratepayers”.

A section of the report considers alternatives to the current business rates system and comments on a wide range of possible alternatives, particularly land value tax. But the report notes that the practicalities of implementation of this are “very difficult”.

The final section of the report considers the work of the VOA and expresses concern that the VOA may not be properly resourced to deal with the proposed change to 3 yearly revaluations. The report suggests that the “VOA must perform a detailed analysis of its staffing and skills requirement in time for the next Spending Review and share it with this Committee”.

The report is a welcome one, albeit that it is strong on picking up on the deficiencies of the current system, but weak on practical alternative proposals. The key findings, that the level of business rates liability is very high in relation to both international comparisons and to other UK corporate taxes, and that the system is overly complex, are concerns that we have commented on numerous times. The report recommends an in-depth review of the business rates system by government, in time for the 2020 spring statement. Given current political uncertainty it would seem unlikely that this will be accomplished, but we must hope that whatever government is in place following the general election will recognise the seriousness of the criticisms contained in this report of the business rates system, and carry out a proper review prior to the next proposed rating revaluation in 2021.