In the build-up to the UK’s general election, Labour’s shadow chancellor – and now chancellor – Rachel Reeves, said the party wanted to reform the country’s business rate framework.

Reeves said a Labour government would look to cut overheads for small retailers on the high street, while asking larger corporations and multinationals to “pay their fair share”.

Business rates are a tax charged on all commercial properties in the UK, with some exceptions. The amount commercial property tenants pay is linked to how much they pay in annual rent, also known as the rateable value. In total, this tax is said to generate upwards of £29 billion per annum, which is typically used to fund local government and grants to local authorities.

It’s true that aspects of the current business rates system are unfair. According to Helen Dickinson, CEO of the British Retail Consortium, approximately 22% of all business rates are paid by retailers, which only accounts for 5% of the entire UK economy.

However, £29 billion is by no means an insignificant sum for the public purse, so how could the new government go about implementing fairer business rates reform in a way that’s ‘revenue neutral’, in accordance with Labour’s manifesto?

Empty Rates relief

One of the first reforms mooted in the business rates system is the revision of Empty Rates relief. In a bid to rejuvenate Britain’s high streets, the government could enhance this relief to incentivise commercial property landlords to fill their vacant units.

Since 1st April 2024, commercial units must be re-occupied for a minimum of 13 weeks instead of six weeks to qualify for additional periods of Empty Rates relief. This figure is six months for industrial and warehouse units too.

Extending the timeframe a property must be empty to claim relief was designed to prevent the practice of “box shifting”, enabling landlords to claim additional Empty Rates relief after every six-week letting.

Within the industry, some figures have suggested increasing the length of time 100% business rates relief exists for. After which landlords would have to pay full rates on empty units. This would encourage property owners to reach out to prospective new tenants and encourage more new retailers and services to the high street.

Small Business Rates relief brackets

At the time of writing, Small Business Rate relief is available to tenants if their rateable value sits below the £15,000 threshold. The amount of rate relief is tapered down, the closer you get to a rateable value of £15,000. The gov.uk site uses the example of a property with a rateable value of £13,500 receiving 50% rate relief and a unit with a £14,000 rateable value receiving 33% rate relief. Anyone with a rateable value of less than £12,000 doesn’t pay a penny in business rates.

One option for the new government could be to widen the Small Business Rates relief brackets, giving preferential treatment to those firms who only occupy and operate from one high street location. However, this could hinder growth for retailers, since expanding to two or more units would result in them losing their rate relief.

The VOA’s ‘Duty to Notify’

As part of the Non-Domestic Rating Act 2023, which was enacted into law in autumn 2023, there has also been a fundamental shift in how ratepayers must manage their commercial properties.

The ‘Duty to Notify’ commitment has been the biggest change of them all, legally obligating ratepayers to notify the Valuation Office Agency (VOA) of any alterations to a property they are responsible for within 60 days of the changes. This must be done regardless of whether the property has an existing rateable value.

These changes could be anything from the installation of new services or utilities through to a full-blown property extension.

Currently, the law gives rate payers a 12-month exemption if additional business rates are payable following any changes or enhancements to a unit. The government could look to extend this period to further incentivise businesses to invest and improve their retail offerings.

Labour also said it will look to level the playing field between high street retailers and the “online giants”. How this is factored into a new business rates system remains to be seen, but it’s highly likely all will be revealed in Reeves’ first Autumn Budget as Chancellor.

What does this mean for your business?

At the present time, it’s very much a case of ‘watch this space’ about business rates. The government has announced the Autumn Budget 2024 will take place on Wednesday, 30th October 2024. Chancellor of the Exchequer, Rachel Reeves MP, may confirm plans or consultations to reform the system next month.

You can view the existing business rates framework listed on the Gov.uk website here.

In the meantime, it’ll be business as usual for growing firms like yours. If your business is seeking a new high-value, low-cost home or you need a cost-effective base for a start-up venture, explore our available units today.

For all enquiries, call our team on 020 8986 7221 or drop us a line using our online enquiry form to get the ball rolling.

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