MPs launch inquiry into impact of business rates on high street retailers

An influential committee of MPs is launching an inquiry into the government's policy towards business rates, amid mounting pleas for tax relief from embattled retailers on the high street.

Parliament’s Treasury committee has revealed today that it is set to scrutinise the impact of Downing Street’s business rates tax, which has been at the centre of a debate over how much tax bricks-and-mortar outlets should pay compared with their online rivals such as Amazon.

MPs from across the political spectrum will probe the impact of the government’s current policy towards business rates, as well as the potential alternatives to property-based levies such as the proposed digital services tax.

"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," according to Nicky Morgan, chair of the Treasury Committee.

Morgan, a former cabinet minister and influential Conservative backbench MP, added: "We’ll examine how the current system is working and consider whether an alternative system, for example a land-value based tax, may help level the playing field between retailers."

In October Philip Hammond announced plans to introduce £900m of business rates relief for roughly half a million small retailers.

However, major high street retailers with larger portfolios have still been expressing frustration over the property tax. When the business rates regime was first introduced, the multiplier was set at 34.8p, but thanks to a combination of years of rising property prices and inflation, the multiplier will rise to 50.6p in the pound in April, marking the first time that firms will pay an effective tax rate of more than 50 per cent on their properties.

At the end of the inquiry the committee will make a series of recommendations to government on the fairness and effectiveness of the current system, along with recommendations over how it could be improved.

"Obviously any review that tries to stem the current carnage on the high street is welcome. However this does feel like loud banging on the stable door after the horse has long charged off down the lane," said John Webber, head of business rates at Colliers International.

He added: "As we have long been saying, the current business rates regime needs a roots and branches reform: regular revaluations, a proper review of reliefs, a sensible multiplier, a reform of the appeals system (which ground to a halt in 2017) and a properly funded valuation office, as well as some immediate action- to freeze rates rises this year and to remove downwards transition, that is strangling many of the provincial retail stores.

"But whatever review takes place, if the Government insists on raising the same amount of money by the same group of people (25-30 per cent of business rates are paid by the retail sector), then we will be no further forward."