We provide a systemic and sustainable answer in response to the government’s business rates reform agenda.
The CBI has launched a new report to provide the government with a roadmap for fixing antiquated business rates rules to boost investment and grow the economy.
For many years, our members have consistently told us that the existing system is complex, burdensome, unpredictable and inequitable. Governments and think tanks have tried to tackle this before, but none have got to the root of the problem.
We launched this project to fix the rates system once and for all. Our report is a result of the work and input of dozens of our brilliant members, from retail and hospitality, to manufacturing and logistics - we brought together the voices of those most affected by the inefficiencies of the current system.
We set out the pathway to a fairer business rates system, one that is underpinned by the crucial principles that have so far been lacking: certainty, transparency, simplicity, competitiveness, and fairness.
The government has already committed to reforming the rates regime but insists that overall revenue must remain the same – which makes root and branch reform almost impossible and risks simply creating new and different imbalances. Firms want to see a fair and balanced approach to reform, which requires ditching the revenue neutrality principle.
Firms want to see a fair and balanced approach to reform, which requires ditching the revenue neutrality principle and a bridge between the current system and any long-term systemic changes. That could mean short-term support for the most adversely affected sectors, which could be delivered, along with a long-term plan, at the coming Autumn Budget.
Our business rates reform recommendations include:
A progressive tax system that provides certainty
Reducing the business rates burden means moving to a more progressive tax system. A ‘slice’ system – one that is banded in a similar way to income tax – that operates on a per site basis will support businesses’ ambitions to invest and grow, helping to revitalise high streets.
Our report sets out a system where half of all sites assessed for business rates in England would be exempt from paying business rates and cliff edges with marginal tax rates as high as 290% are a thing of the past, so entrepreneurial businesses won’t be punished for expanding.
Annual revaluations from 2029 will give firms certainty that when the economy and property values shift, the tax base will keep pace and reflect a fairer system. The first step in this journey to greater certainty is to freeze multipliers immediately at their current levels.
Investment support
Investment is the lifeblood of any economy. To encourage businesses to expand, our proposals also include making improvement relief and capital allowances more generous.
Incentivising upgrades, renovations, and technological advancements will improve business productivity and the energy efficiency of commercial buildings.
Streamlined reliefs
Complexity is inefficient, costly and damages transparency. The annual cost of business rates reliefs is forecasted to be as much as £8bn and a shift in approach to prioritise reform over reliefs is long overdue. Our banded (‘slice’) approach reduces the need for many existing reliefs altogether.
Government needs to cut out bureaucracy by excluding public sector buildings without a commercial purpose, such as NHS hospitals and government departments, from business rates. This will save public money and provide a clearer picture of the true costs and benefits of the current system.
Valuation Office Agency (VOA) overhaul
The VOA - the gatekeeper of property valuations - needs an upgrade. Our report calls for improving the service offered by the VOA. Timely assessments, transparency, and responsiveness are non-negotiable.
Given the scale of the task, the current timeframe to implement the duty to notify from 2026 is unrealistic and it should be delayed until 2028.
From Slabs to Slices: A roadmap to a fairer business rates system
If you are interested in finding out more about the CBI’s Business Rates Reform Project, please contact Rahim Mohamed.
