Replace business rates with land value tax, say LibDems

3 Sep 18

Abolishing business rates and taxing land values instead would benefit businesses in 90% of English local authority areas, a Liberal Democrat report has claimed.

The party has suggested the current business rates system – which taxes a business’s machinery and premises – should be replaced by a ‘commercial landowner levy’ based on the value of commercial land only.

Proposals for the CLL would mean lower taxes for businesses in 92% of English authorities. Places like Oldham, Blackburn and Middlesbrough would see average taxes cut by over 25% and up to 46% in some cases, the LibDems said in their report, issued on 30 August.

Although, the party admitted this would mean a short-term cut in revenue for councils it would be ‘cost-neutral’ in the long run. 

In his foreword to the report, Andrew Dixon, founder of the Lib Dem Business and Entrepreneurs Network, said: “Business rates – by taxing the value of a business’s machinery and premises are a tax on investment itself.

“The result is a higher bill for the ambitious entrepreneur who decides to expand her factory space or add solar panels to the roof, and a lower one for the speculative landowner who chooses to leave his commercial plot derelict or unused.”

The party claimed taxing landowners rather than businesses would mean half a million SMEs would be spared the bureaucratic burden of property taxation and, with fewer plots of land to tax, councils would save time and money.

LibDem leader Vince Cable said: “Business rates were a badly designed policy to begin with and have become an unacceptable drag on out economy.

“They are a tax on productive investment at a time of chronically weak productivity growth, and a burden on high streets struggling to adapt to the rise of online retail.”

The CLL will be debated and voted on at the party’s conference later this month.

It also proposes that commercial land be taxed regardless of whether the buildings on are occupied or in use.

Luke Murphy, associate director at the Institute for Public Policy Research think-tank, said: “Business rates have been described as one of the worst taxes – penalising productive investment and disadvantaging property-intensive businesses, it is a particular burden on UK manufacturing and retail.

“IPPR has called for the abolition of business rates, to be replaced by a land value tax which would give a boost to business investment, help rebalance the economy and capture the upflit in land values that arise from new infrastructure projects.”

Business rates are charged on most non-domestic properties including shops, offices, pubs and factories.  

It was recently revealed that councils are taking earlier enforcement action to collect unpaid business rates.

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