Yorkshire MP Kevin Hollinrake calls for business rates to be axed and VAT increased by three pence

A North Yorkshire Conservative MP has proposed ending business rates and increasing VAT by three pence in the pound to help high street businesses compete with online retailers.

Thirsk and Malton MP, Kevin Hollinrake, has introduced a Ten Minute Rule Bill in the House of Commons which would bring an end to business rates and replace the revenue with a small increase in VAT.

He said this would create a much needed level playing field between online and high street retailers and could help save hundreds of thousands of businesses and jobs impacted by the slump in sales because of the pandemic.

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Thirsk and Malton MP Kevin Hollinrake

And in the new year they face the dual threat of rent and business rates being due after a period of lockdown, combined with the end to the moratorium on debt enforcement measures which came in at the start of the pandemic.

Business rates, also known as National Non-Domestic Rates are a tax payable at 'non-domestic properties' to contribute towards the cost of local services.

Mr Hollinrake told the Commons that business rates were designed for a bygone era when business went hand in hand with high street premises but that the way people shop is now changing for ever.

He said that since the pandemic and because the country has spent long periods in lockdown online sales now account for 33 per cent of all retail sales compared to 20 per cent only a year ago.

In July Treasury ministers undertook a review and call for evidence into business rates, amid calls to reform the system. Mr Hollinrake described his Bill as a contribution to the debate.

He says an increase in VAT from 20p to 23p would fill the £30bn per annum gap created from business rates abolition whilst levelling the playing field between online and high street businesses.

He said: “In my view, the best option would be to completely scrap business rates and apply a small increase in the sales tax that already exists in the shape of VAT.

"This would immediately level the playing field, would not create any additional bureaucracy and we would be able to completely dispense with the convoluted business rates system including revaluations, check, challenge, appeal, annual bills and debt collection.

"It would also liberate thousands of talented, intelligent hard-working people in the Valuation Office Agency and survey practices to find new career opportunities that would drive forward the UK economy”.

He added that the Government would no longer need the myriad of reliefs available to small business, charities, empty properties retail and rural as VAT would automatically adjust depending on business type and turnover.

Presenting the Bill, which was backed by a number of other Tory MPs, Mr Hollinrake gave an anecdote from the election campaign trail about his constituents' concerns and said: "It was at one of my first hustings as a prospective parliamentary candidate in 2015 that a question came from the audience about a local electrical retailer that had just closed down.

"And the question that came was 'what is the Government going to do about it?' to loud applause from the audience.

"The irony was, of course, that the business had closed not due to the actions or the inactions of the Government but because the people in that very audience had stopped shopping on high streets and started shopping online."

The Bill was introduced without a vote, with a second reading scheduled for January 15.

It has little chance of making further progress in its current form without Government backing.