474. Business rates are taxes designed to fund services within a local authority. They are levied on business properties. Business groups have long called for business rates reform and cited business rates as a barrier and distortion that constrain business investment.338
475. Business rates policy matters for business investment:
"The proposal to increase the Small Business Rates Relief threshold was ranked as a top three investment incentive by 24 per cent of small businesses in FSB's 2021 tax survey." - Federation of Small Businesses (FSB)339
476. HMT's Business Rates Review, which focused on English business rates, recognised that extra relief was required to support investment in property improvements. This was to enable occupying businesses to invest in expanding their properties and making them work better for their customers and employees.
477. Additionally, it highlighted the need for exemptions for eligible green plant and machinery such as solar panels, wind turbines and battery storage used with renewables and electric vehicle charging points, as well as a 100% relief for low carbon heat networks that have their own rates bill.
478. The Government should continually assess the existing business rates incentives to ensure there are no further inadvertent disincentives for businesses to invest in net zero technologies. For example, up to 50% of business investment is potentially subject to business rates.340 HMT should consider the balance between increasing business rates and the use of business rates in supporting business growth and decarbonisation.