Do the numbers add up for Burnham’s business rates promises?

Andy Burnham has come through on business rates, for pubs and live music venues at least.

Three days after taking the keys to No 10 last week, he announced both would get a 20% rates reduction from April 2027. The £100m support package is to be funded by clamping down on VAT avoidance by online sellers and raising rates for ‘antisocial businesses’ such as vape shops.

Trade association the FWD has welcomed it as “a change from [Burnham’s] previous comments about increasing taxes on out-of-town warehouses”.

But could he be forced to revisit his warehouse tax idea if he wants to deliver on his other pre-office promise of removing the business rates burden entirely from thousands of small, independent shops?

“During the Makerfield by-election campaign, the soon-to-be PM consistently proposed increasing the threshold for 100% small business rates relief from £12,000 to £18,000,” notes Alex Probyn, practice leader at tax firm Ryan. It means businesses occupying property with a rateable value of less than £18,000 would have to pay no business rates at all.

That appears to still be on the table, with the government promising a “return to our commitment to reform the wider business rates system, including small business rates relief, at the budget”.

It would lift 140,000 small premises out of business rates at a cost of £880m a year, according to Ryan calculations, making it “substantially more significant fiscally than the £100m package for pubs and music venues”, says Probyn.

The funding plan so far – leaning on vape shops and online tax dodgers – is also raising questions. “It remains unclear how much revenue this will realistically raise or how such measures will be administered and enforced,” says Damien Clarke, UK head of business rates at property consultancy Knight Frank.

The funding sums

Since 2021, online marketplaces have been liable for collecting VAT on behalf of overseas sellers. A consultation launched in June proposes extending this to UK sellers of goods in the UK at point of sale. A key aim is to catch sellers claiming to be UK-based to avoid the marketplace deducting VAT on their behalf, while not declaring their tax liability to HMRC.

The government has not provided an estimate of how much additional tax could be raised, beyond the consultation saying “hundreds of millions of pounds in VAT is lost annually through non-compliance”.

Amazon says independent analysis by Flint Global shows £700m in tax a year could be raised – which is not enough to pay for all Burnham’s promises.

As for vape shops, that plan has yet to be fleshed out. The government has said only that it is reviewing the rates relief they receive, with Burnham later adding that gambling shops were also in the firing line.  

Ruby Hartery, senior underwriter at trade credit insurer Atradius UK, says: “The government will need clear criteria to avoid creating uncertainty for other legitimate businesses.”

Given that so much is yet to be clarified, wholesale’s welcoming of the plan is caveated with caution. FWD CEO James Bielby says it is “good that the PM has listened” when it comes to raising rates for warehouses and the negative impact that would have on wholesalers, “which underpin every community”.

But he adds: “As the government develops the next stage of business rates reform, they must ensure this principle is applied consistently.”