The Chancellor is to announce a radical investigation of how to change the system which sees 1.8million business in England paying rates which experts have warned are crippling small firms.
The Treasury said the review will look at how firms use property, what the UK could learn from other countries and how the system could be modernised to better reflect changes in property values.
The announcement follows widespread criticism of the current system, where rates are charged to retailers based on the value of their shop or other commercial property. The rates paid by English businesses are the highest of any European Union country and can be a company’s biggest expense after wages and rent.
The arrangement means companies with similar turnovers can pay dramatically different sums for business rates because their properties have varying rateable values depending on the size and location of their premises. Critics have warned that the system unfairly punishes high street firms with large properties and unfairly benefits online retailers who only need small premises.
John Cridland, director-general, CBI, said: “The current system of business rates is outmoded, clunky and regressive and it’s holding back the high street. This review provides an opportunity to go much further and we’ll be making the case for removing the smallest firms from paying business rates completely, linking rates to CPI rather than RPI and introducing more frequent valuations. This would go a long way to achieving a more competitive business rates regime that incentivises business investment and supports the high street.”