Government plans for radical business rates reform, including raising the tax for large properties, have received a setback in the House of Lords.
The Non-Domestic Rates Bill paves the way for business rates to be lowered from April 2026 for smaller properties in the retail, hospitality and leisure sectors. The tax cut is to be funded by increasing business rates for larger properties in all sectors, including hospitals, manufacturing sites and offices, along with larger high street retailers.
The bill is due to go through its third reading in the House of Lords today (24 March) after several peers last week voted for a series of amendments, including exempting anchor high street stores from the higher tax rate, as well as hospitals and healthcare settings.
The bill – which critics claim has been poorly thought out and is being rushed through by government – sets the threshold for properties to be eligible for the lower or higher tax rate at £500,000 in rateable value. Retail, hospitality and leisure properties with a rateable value up to that threshold will face a lower business rates multiplier, while all properties above the threshold will face a high multiplier.
The bill was introduced to the Commons in November and pitched by the government as a way of shifting the tax burden away from high streets to make online giants pay more. However, critics argue it will damage high streets by impacting large stores, which act as anchors for footfall and create the most jobs, while also treating them the same as large online warehouses.
Peers have recommended a review of whether there should be a separate business rates multiplier for retail services provided by fulfilment warehouses that do not have a material presence on local high streets.
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They also want manufacturing to be added to sectors eligible for the lower multiplier, and a review of how the changes will impact properties close to the £500,000 threshold.
John Webber, head of business rates at property consultancy Colliers, which has been lobbying against the bill, said it was likely to be passed into law regardless of the recommendations.
“The government is rushing through parliament new business rates legislation that has not been properly thought out and will potentially add millions of pounds onto the rates bills of UK plc, doing little to help grow the economy,” said Webber.
“Given the government’s enormous majority in the House of Commons, it will most likely reject these amendments from the Lords, despite the common sense they bring, and the bill will become law.
“I hope, however, that the government will at least consider the issues that have been highlighted and conduct some fact-finding among businesses.”
Peers have also recommended the removal of a clause in the bill which takes away charitable business rates relief for private schools.
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