Lib Dems call for new "commercial landowner levy" to replace business rates

Sir Vince Cable, leader of the Liberal Democrats, has called for a new "commercial landowner levy" to replace the UK's business rates system.

At the moment, the £30 billion business rates system is calculated every five years according to shop rental values, a multiplier that rises annually in line with Consumer Price Index inflation. This levy is paid for by tenants, rather than landowners.

Under the proposal, buildings and utilities would be excluded from calculations, and only the land value of a commercial site would be subject to tax.

A joint report from Lib Dem advisers and economist Adam Corlett is due to be published later this month that claims businesses in 92% of local authorities would pay lower business taxes as a result of this proposed commercial landowner levy.

In the report, the Lib Dems argue that the rates should be paid for by land owners, and not the tenant, "sparing over half a million SMEs the bureaucratic burden of property taxation".

Crucially, businesses in the most deprived areas of the UK would see the biggest fall in their bills, but expensive areas such as central London would see a small increase.

Commenting on the proposals, Cable said "Business rates were a badly designed policy to begin with, and have become an unacceptable drag on our economy. They are a tax on productive investment at a time of chronically weak productivity growth, and a burden on high streets adapting to the rise of online retail."

"By only taxing land and not the productive capital above it, this reform would remove a major disincentive to investment, boosting productivity and contributing to a necessary revival in UK industry.

"While separate action is needed to ensure online retailers pay their fair share of corporation tax, our proposals would offer a lifeline to struggling high streets."

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