Scrutinising commercial property tax reform in England

Retailers and offices across the UK are struggling to overcome the economic effects of the pandemic, and the move to online shopping and home working. The closure of commercial property impacts not only business owners, but local authorities who are unable to collect locally generated Business Rates. This in turn has direct consequences for the provision of welfare (social care, housing, transport, cultural services) in these areas. With a shortfall of billions of pounds in local government funding, securing new income from commercial and industrial property within local administrative boundaries appeared to be a panacea in 2013, when the Business Rates Retention Scheme (BRRS) was introduced. However, Northumbria’s researchers have shown that alternative solutions are needed to alleviate inequalities in relation to funding provision across the country.  

The Business Rates Retention Scheme (BRRS) was introduced in England in 2013. It was initially designed to enable local councils to retain up to half of the rates revenue raised from businesses in their local area and income from new property development. Dr Kevin Muldoon-Smith and Professor Paul Greenhalgh were the first to research the interconnection between local property markets and local government funding, focusing on the variegated geographical impact of BRRS across England. Their research revealed that a minority of ‘premium locations’ had the potential to generate more new local income through the BRRS, but a much larger number of ‘stranded’ and ‘redundant’ locations (e.g., when assets located in seemingly buoyant markets cannot be developed due to regulations protecting built environment heritage) had less capacity to exploit the BRRS. These findings showed that BRRS had negative impacts, spurring spatial inequality and underdevelopment in parts of cities most in need of investment.

In search of alternatives, Northumbria’s researchers contributed to several government consultations on the topic, acting as expert witnesses and presenting evidence to the House of Commons Housing, Communities and Local Government Select Committee Inquiry into BRRS and the All Party Parliamentary Group (APPG) enquiry on Reform, Decentralisation and Devolution in the UK. They then went onto scrutinize the Business Rate system more broadly, with Muldoon-Smith making an expert witness contribution to the House of Commons Treasury Committee Enquiry into the Impact of Business Rates on Business. This work was also covered by the BBC in a news feature focused on the impact of empty property rates relief on local authorities’ income, and reached numerous regional and national media outlets. The research has also been communicated in articles and columns in the Estates Gazette (the leading commercial property publication in England), The Valuer (the quarterly magazine of the Institute of Revenues, Rating and Valuation), The Planner (the monthly magazine of the Royal Town Planning Institute), RICS Property Journal (the monthly journal of the Royal Institution of Chartered Surveyors) and The Conversation (read over 15,000 times and reprinted in such national media outlets as The Guardian, Essential Retail, Inside Retailing, Planning Resource, New Start Magazine and Tax Research UK). 

In addition, Greenhalgh and Muldoon-Smith offer consultancy and expertise for investors, landlords and organisations, through a spinout company R3Intelligence, who want to understand how commercial real estate can work more efficiently for them. Such influential organisations as North East Chamber of Commerce and the British Council for Offices have used Northumbria’s work in their decision-making and publications. Their objective is that businesses nationwide will better understand intricacies of the property tax reform, and form robust business strategies that address these changes.