Commercial property tax could be scrapped in business rates reform

The Prime Minister has opened the door to radical changes in the tax after acknowledging an imbalance between high street and online retailers.

“I think we do need to look at longer term reform,” Mr Cameron said at the Federation of Small Businesses conference.

“It is not going to be easy because rates raise about £24bn and I don’t think there is any one solution that is going to make everybody happy.

“But I think we’ve got to start addressing this issue, particularly this issue about internet retailing and high-street retailing.”

Retail sources suggested that moving away from a tax on commercial property to a modern alternative – such as a sales tax – is an option being considered.

The British Retail Consortium has hired leading accountancy firm EY to draw up alternatives to business rates and is due to present its findings to George Osborne next month. Mr Osborne has said the Government wil look to reform business rates at the next revaluation of Britain's property in 2017.

One retail source said that it did not want the Government to simply introduce an online sales tax.

“Taxing by property is no longer fit for purpose. But why on earth should we punish someone who has started a profitable online business?” they said.

Helen Dickinson, director-general of the BRC, said: “The Prime Minister is right to recognise the urgent need for business rates reform. The Government has promised a discussion document on changing the system in the spring and we are keen to see that published as soon as possible, so that we can engage constructively with this vital work.

“Whether retailers operate online, through physical shops, or through multiple channels, the current system is outdated and disincentivises businesses from investing in property. Our members are clear that a fundamental change to the system will unlock new investment and jobs across the UK.”

The Government will on Wednesday confirm a £1,000 cut in business rates for small firms alongside £100m towards infrastructure in enterprise zones and £15m towards new university enterprise zones in eight cities.

Mr Pickle said: “As part of our long term economic plan, we are backing business and enterprise right across the country, helping town centres and local industries to prosper, and building a stronger economy.”

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