Osborne ‘not in a position’ to change business rates

Bill Dodwell, head of tax policy at the Big Four accountancy firm, said research needs to be undertaken before “substantial changes” could take place.

It comes as the Confederation of British Industry (CBI) sets out its stall for the final economic statement before the General Election.

The industry lobby group called on Chancellor George Osborne to overhaul the “outdated business rates system” as part of the Coalition’s measures.

High street rates have put pressure on businesses after steep rises in recent years, adding to the difficulties of low consumer confidence. The British Retail Consortium (BRC) has warned the taxes affect occupancy and investment.

Research from Grant Thornton found the devolution of rates to be among the priorities of medium-sized businesses.

Despite hopes that next month’s statements could tackle the problem, Mr Dodwell said it is unlikely.

He said: “We don’t think the Government is yet in a position to make big substantial changes in this area.

“We would have preferred to have seen some sort of investigation into the best system for taxing retailers and property generally. We haven’t seen that work.”

The BRC completed its own evaluation of around 50 options and suggested four alternatives in its Manifesto Milestones report in July. However, Mr Dodwell said no-one has found a “magical answer” to the problem.

He said: “We have to bear in mind that business rates raise about £27bn, a big, big amount of money.”

Valuations “haven’t changed as rapidly as they should”, while relief, where available, is spread over five years, he said.

Mr Dodwell added: “It’s not a very well thought through process in terms of delivering relief.”

Control of business rates is one of the key areas medium-sized businesses want devolved, Grant Thornton said.

Andy Wood, practice leader for Grant Thornton in Leeds, said: “There is significant appetite for business rates to be set at a local level with all revenue retained, which would as a result give authorities tangible incentive to promote business growth.”

The current system is “a disincentive to company expansion”, the CBI said.

CBI director-general John Cridland said: “We want to see the Government encourage innovation and enterprise.”

The Autumn Statement will take place on December 3.

The CBI’s measures for growth

The CBI has called for a focus on infrastructure, innovation and barriers to enterprise in the Autumn Statement.

It has proposed:

- switching business rate increases from Retail Price Index (RPI) to Consumer Prices Index (CPI), raising thresholds for smaller properties and more frequent property valuations;

- “supercharging” the research & development tax credit to incentivise domestic development, sale and manufacture of ideas; and

- addressing the Annual Investment Allowance ‘cliff edge’ from 2016.

- measures to reduce congestion and upgrade the road network.