The Government is making moves on Business Rates reform

The Autumn Budget presented by the Labour Government included a Transforming Business Rates discussion paper. In this paper, the Government pledged to “create a fairer business rates system that protects the high street, supports investment, and is fit for the 21st century”, inviting stakeholders to share views on how the Government can deliver business rates reform.

Following this, on 13 November 2024, the Non-Domestic Rating (Multipliers and Private Schools) Bill was published containing draft legislation to introduce higher non-domestic rating multipliers for large businesses, lower multipliers for retail, hospitality and leisure (RHL) businesses and for the removal of charitable relief from non-domestic rates for private schools in England.

The Government’s objectives for reform are to protect the high street, encourage investment and create a fairer system and the paper provides a response to concerns raised that the business rates system disincentivises investment and is slow to respond to changing economic conditions.

It promises that RHL business will benefit from permanently lower business rates multipliers from 2026-27 on properties with a Ratable Value (RV) under £500,000. The Government also aims to provide support for RHL properties in the interim period by providing 40 percent relief on business rates in 2025-26, up to a cash cap of £110,000, as well as freezing the small business multiplier to protect businesses from inflationary bill increases.

The intention is to fund this by applying a higher multiplier on properties with an RV over £500,000. This policy change will capture most large infrastructure businesses and large distribution warehouses, including those used by ‘online giants’, reflecting the Government aim to boost the high street.

The Government has not yet proposed the magnitude of these revised multipliers and changes will not become apparent until next year, after the Valuation Office Agency (VOA) has negotiated RVs for the 2026 valuation. This creates considerable uncertainty around the liability that businesses will need to factor in to forward planning.

The Government “believes that the best outcomes will be achieved by developing reforms in partnership with businesses and other stakeholders through a process of co-design," and invites businesses, authorities and rating agents to respond to the consultation.

The consultation requests comment on elements of the system that could be holding back investment, tackling avoidance and evasion, making the system more fair, responsive and transparent (including data transformation), as well as any other improvements to the system.

The Government is interested in engaging with all interested parties and stakeholders on the priority areas set out in the paper. Engagement will be conducted between November 2024 and March 2025, with an initial phase of engagement before Christmas.

Following the announcement in the Budget, on 13 November 2024, draft legislation was published to allow the Government to permanently cut business rates for retail, hospitality and leisure properties. The Bill also made provision for the introduction of higher non-domestic rating multipliers for large business hereditament and for the removal of charitable relief from non-domestic rates for private schools in England.

If you wish to understand the impact of business rates policy changes on your business, we would be happy to discuss this with you. KPMG in the UK is in a unique position to provide support. Our combination of regulatory, industry and business rates experience means that we are well equipped to assist with both estimating the impact of business rates policy changes on your business, as well as producing materials to be submitted to the Government as part of its consultation. Please do reach out to the authors or your usual KPMG in the UK contact with your business rates queries.

For further information please contact:

• Laurence Crook
• Rebecca Bell