Saving Newcastle businesses 7% of their business property taxes under new Liberal Democrats policy
"We'd tax land used by businesses, not their productive investment , " says Cllr Robin Ashby, who speaks for the Liberal Democrats in Newcastle on business matters. "Business Rates and non-residential stamp duty are an unacceptable burden on business and unfit for purpose in a modern economy. Under the policy I supported at our Brighton Conference, we'd ease the burden on Newcastle businesses by an average 7%."
Dissatisfaction with Business Rates has reached an all-time high, following a long-delayed and poorly implemented rates revaluation in 2017 and a deepening crisis on Britain's highstreets.
Recently there have been calls for reform of Business Rates from all the major business organisations, including the CBI, the FSB, the BCC, the BRC, the EEF and the IoD. The Institute for Fiscal Studies' seminal 2011 Mirrlees Review recommended that Business Rates should be replaced with a tax based on land values.
Liberal Democrats have had a longstanding commitment to Business Rates reform, with a specific emphasis on replacing it with a land value tax. We believe that by taxing business premises and equipment, Business Rates are a disincentive to investment, and are a particularly heavy burden on capital-intensive sectors such as manufacturing and renewable energy.
It would be more efficient solely to tax the land value of commercial property, removing the disincentive to invest and enabling the state to better capture increases in land value driven by public infrastructure investment.
Because it taxes commercial property transactions, Non-Residential Stamp Duty is an unwelcome burden on businesses that want to acquire or change premises, with the result that commercial property is not allocated efficiently.
The replacement of Business Rates in England (currently set at a rate of 49.3p per pound) with a Commercial Landowner Levy (CLL) set at a rate of 59p per pound but based solely on the land value of commercial sites rather than their entire capital value, would stimulate investment, and shifting the burden of taxation from tenants to landowners.
The immediate abolition of Non-Residential Stamp Duty would improve the efficiency of the commercial property market and making life simpler for businesses that want to own or change premises.
We'd end discounts for empty and derelict premises and allowing councils to tax unfinished commercial developments beyond a reasonable construction period, increasing the supply of commercial property and reducing rents.
We'd also abolish the current system of Small Business Rates Relief - much of which is absorbed by landlords through higher rents - and replace it with a doubled Employment Allowance, giving every employer a £3,000 tax cut by reducing their National Insurance bills, and providing a boost to wages and employment.
Existing relief for agricultural land would be maintained, as well as relief for charities being protected except in the case of private schools and private healthcare.
Local authority revenues from Business Rates would be protected under the CLL through an adjustment to the redistribution formula, so that tax cuts for businesses would not mean lower revenues for those local authorities.
The transition from Business Rates to the CLL would take place over 4 years, with bills shifting gradually from a property to a land value basis and incidence moved to landlords when contracts are renewed or at rent reviews. Annual revaluations of commercial land values by the Valuation Office Agency would be introduced as well as the completion of a comprehensive and publicly-accessible Land Registry.
Introducing the CLL would give businesses a net tax cu, amounting to 7% in Newcastle. The majority of economic sectors would receive a boost under the CLL, with lower bills in manufacturing, hospitality and shops among other sectors.
Under the CLL, the 61% of small and medium sized businesses that do not own their own premises would no longer directly pay property tax, shifting the administrative burden of tax away from businesses onto a smaller number of commercial landlords, and saving both businesses and councils' precious time and money.
"These new policies represent a substantial commitment by the Liberal Democrats to fairness in accordance with our principles held for generations, and when implemented by Liberal Democrats in government would be a boost which would be welcomed by businesses in Newcastle, the North East and the rest of the country," said Robin Ashby.