Business rates based on energy usage would be 'very problematic'

The BRC, in conjunction with Ernst & Young, suggested a range of changes to the UK business rates system in a report called The Road to Reform​​, which will feed into the Chancellor’s discussion document on business rates.

Other suggestions included rewarding employment by delivering a discount to the business rates bill based on a given value per employee; supporting successful businesses by providing a discount based on a percentage of corporation tax payments; and introducing a simplified, banded revaluation system, with revaluations more often.

Complex issue​

However, Andrew Whelan, director at EPCforProperty, which specialises in providing energy performance certificates (EPCs) for the licensed trade, said that, while the proposal is a “good idea in principle”, it would be complex to implement and penalise businesses that have high energy usage.

“A pub or a launderette would have a hugely different energy consumption from a newsagent that might be next door,” he said.

“Generally speaking, more modern buildings are more energy-efficient than town-centre buildings. Would this system penalise town centres even more?

“And is it penalising success? The more successful the business is, the more energy it’s going to be using. It’s very problematic.”

'Unrealistic'​

He added that another alternative would be to base the rates on the energy efficiency of the property, but this would also be “unrealistic” since he estimates that only between 10% and 15% of commercial properties have an energy rating.

An EPC is currently triggered only by the sale or letting of a property and can cost from £125 up to four-figure sums for commercial buildings.

“It would require every property to have an energy rating and that would be a huge task to perform, even in a couple of years. With everybody flat out, my guess is it would take five to 10 years to complete. There wouldn’t be enough assessors,” he said.