Rate reform: major changes ahead

Following many years of debate the government is now in the process of implementing major alterations to the rating system which will affect both domestic and business occupiers. A great deal of press comment has concentrated on the proposed ‘poll tax’ or, more correctly, Community Charge, which will replace domestic rates. This is not surprising given the political implications of the proposals, but it has overshadowed the very substantial changes to the present system of taxing the occupation of business premises. Assuming there is no significant change to the reforms currently proposed, existing patterns of rate burden will change dramatically. For many companies, particularly smaller ones, rates are the second largest overhead after rents and therefore the significance of the present reforms cannot be underestimated Taxes are rarely popular but those which appear capricious, as has been the case with rates in many parts of the country in recent years, deserve particular criticism. As a result there has been strong pressure from the business community for major reforms. The resulting proposals, however, will not suit everyone. The plan is redistribution of businesses' rate burden, not an overall reduction. The 1986 government Green Paper, ‘Paying for Local Government’, said, foreshadowing the changes, ‘there will be shifts in individual rates burdens both between different types of property and between different areas’. As many occupiers will discover, this could have been stated much more strongly.