With the rise of online shopping, high streets are under more pressure than ever, as consumers opt to shop from home or through “click and collect”. As a result, the UK’s high streets are struggling to attract fresh business and many high street units are lying vacant.
One way in which the Government could encourage the regeneration of high streets across the UK would be to ease the rates burden for small business.
The UK Government has already introduced rates reliefs to encourage growth in specific sectors such as renewable energy rates relief (for properties involved in generating renewable energy) and new start relief (for new commercial properties constructed after 1 April 2013). Why not a relief for the high street?
Recent criticisms of the current rates system by the retail industry appear to be having an impact with the Government expected to issue a discussion paper this year.
Sensing an opportunity for change, The British Retail Consortium have published a report, The Road to Reform, in which they outline a series of potential reforms aimed at reducing the burden of the current rates system. The BRC have put forward the following options:
- Replacing the current system with an entirely new tax. This new tax could be based on energy efficiency or energy consumption.
- Rates relief based on the number of employees.
- Rates relief based on the percentage of the occupier’s corporation tax.
- Updating the current system by moving towards a banded revaluation system.
Whilst these proposals may reduce the commercial rates burden generally, they may not provide enough of an incentive to encourage small business to return to the high street.
A relief based on floor area or turnover such as 100% rates relief for units under 1000 sq ft or with a turnover of less than £500,000 a year, could be a possible solution. From a fiscal perspective, such a scheme would not affect the major retailers, and more importantly, the Government’s ability to obtain rates from these retailers. For small high street businesses it could make the difference.
The Government could also look to categorise the type of retail trade to which the relief would be available. Critics of High Streets in the UK as they presently stand point to a heavy presence of pound stores, coffee shops and betting shops which are not attracting those with general retail appetite.
It will be interesting to see how far the Government is willing to go in reforming the current system. Any major changes will take time to plan and implement. The one thing that is clear is that a change is needed.