The party proposes to abolish business rates: “Taxing Land, Not Investment”

The party has just published a comprehensive blueprint for replacing the broken business rates system.

Ground-breaking research was led by Andrew Dixon, founder of the Lib Dem Business and Entrepreneurs Network (LDBEN), in response to mounting concerns about the negative impact of business rates on struggling high street businesses and the wider economy.

The report – “Taxing Land, Not Investment” – calls for the abolition of business rates and its replacement with a tax on land values, the Commercial Landowner Levy (CLL). The levy would remove buildings and machinery from calculations and tax only the land value of commercial sites, boosting investment and cutting taxes for businesses in nine out of ten English local authorities.

Andrew Dixon said,

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.

I am delighted to support this initiative which I believe would boost business and enterprise across the UK, and I am grateful to members of the Liberal Democrats Business & Entrepreneurs Network for their valuable contributions to this important research.

Key recommendations of the report include:

  • Business rates should be abolished and replaced by a Commercial Landowner Levy based on the value of commercial land only
  • The levy should be paid by owners rather than tenants
  • Non-residential stamp duty should be scrapped to improve the efficiency of the commercial property market
  • Commercial land should be taxed regardless of whether the buildings above it are occupied; the tax should also apply to unused and derelict commercial land

The report also finds that:

  • The CLL would mean lower taxes for businesses in 92% of English local authorities. In places like Oldham, Blackburn, West Bromwich, Barrow, Middlesbrough, average taxes would be cut by over 25%, and in some cases by as much as 46%
  • The manufacturing and technology sectors would be the most significant beneficiaries of the CLL, receiving tax cuts of over 20%. Retailers in struggling areas would also receive a boost.
  • The CLL would represent a tax cut initially, but is likely to be at least revenue-neutral in the long-term. Redistribution between local authorities would be adjusted to ensure no change in local funding.
  • By taxing landowners rather than businesses, half a million SMEs would be spared the bureaucratic burden of property taxation. With far fewer plots of land than individual businesses, the CLL would save councils both time and money

Liberal Democrat leader Vince 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 struggling to adapt to the rise of online retail.

Many of the areas around the country that voted for Brexit feel they have been left behind. In place of policies the Brexiters offer only rhetoric. Great swathes of the country demand better, and this policy offers change to the manufacturing industry and the small towns passed over by economic growth.

Chris Richards, Head of Business Environment Policy at EEF, the manufacturers’ organisation said:

This report is a strong addition to the debate on the future of business rates and property taxation, which despite many reviews is not an issue that has gone away.

Manufacturing as a sector with high capital intensity is perversely affected by business rates, as investments in productivity boosting plant and machinery are included in tax calculations – for some manufacturers making significant investments this is enough to put them off making that investment in the UK.

Innovative solutions will be needed to remove this challenge while ensuring stability from a future tax regime, and today’s report is an important contribution to finding a solution.

Philip Salter, Founder and Director of The Entrepreneur’s Network, said:

Business rates are a tax on investment, adding to Britain’s productivity woes. Introducing a Commercial Landowner Levy would remove a key disincentive to investment and reduce administration costs for thousands of business owners. This is exactly the sort of policy entrepreneurs need to thrive.

Liberal Democrat members will have the opportunity to debate and vote on the proposals at Conference in Brighton next month. The full report can be found here.

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  • Simon mcgrath 30th Aug '18 - 8:49am

    The motion is proposing an average 11% increase in property taxes on businesses in london, much higher in some areas.
    Wonder whether this will help us in the GLA and mayoral election in 2020

  • Nick, my guess would be that the name Commercial Landowner Levy was chosen because we don’t want it to be automatically passed on to the business owner (as opposed to the land owner) through the wording of lease agreements. Also what you call something is very important, as we now know because we can’t get people to believe that something called Tuition Fees are really a sort of Graduate Tax – Honest guv.

    Simon, I presume it depends how many votes the commercial landowners have but more importantly how good they are at scaring people in London.

  • nigel hunter 30th Aug '18 - 10:34am

    Could this imply an empty property, say a pub, could have multiple small industrial or single units in one building? Equally craft orientated projects individuals or community run sharing the cost whilst producing their products. They could produce their product whilst linked to one ‘next door’ (next cubicle say )which when linked together adds added value and cuts the cost of a product and therefore produces more at alower price.

  • David Becket 30th Aug '18 - 10:57am

    These are proposals to tackle one of the key areas of “Broken Britain”. Another key area , Housing, is also being debated on the Monday.
    Where is our attempt to draw attention to these debate? Nowhere
    Do they figure in Latest News on our Web Site? No
    Where are the Press Releases, copied to all Local Parties? Nowhere
    Are we generating debate before Conference? No
    Instead the public sees a one issue party, Exit from Brexit, consumed with proposals to allow non members to vote for a leader who is not an MP. (Desperate stuff from a desperate party)
    I have said it before, and I will say it again, this party needs to take an urgent grip of its media management if it is to move forward.

  • Eddie Sammon 30th Aug '18 - 11:13am

    Land is too difficult and expensive to value and tax. If we have to increase taxes then we should focus on things like corporation and income tax. Most agree we have to increase taxes so I probably go for corporation tax and reform the system too so multinational PLCs can’t game the system.

  • Sounds lovely.

    Regarding online retailers, I don’t see what’s wrong with just taxing the land they occupy rather than doing that + a bunch of specific taxes for them. The only thing businesses should be paying for (in my eyes at least) is the land they occupy. They don’t need to be taxed on anything else.

  • William Fowler 30th Aug '18 - 1:01pm

    Also not sure how land is going to be valued, hopefully not through some large bureaucracy that will take a huge bite out of the taxes raised. But employer NI is missing from this reform, companies that employ people are taxed more heavily than robot factories, surely just as important as getting rid of business rates.

    Small companies often get exemption from business rates, if the owner of land is being taxed does that mean that rents will have to rise to cover the tax, which would make rates-exempt small businesses worse off.

  • Innocent Bystander 30th Aug '18 - 3:44pm

    “The levy should be paid by owners rather than tenants”

    Where do the bright sparks who think this stuff up imagine the “owners” will get the money from to pay the levy?

  • John Chandler 30th Aug '18 - 4:34pm

    About time.

  • Remember 1906, the election and the Liberal Party election marching song, “The Land belongs to the people”. Are yes I remember it well!!!
    Meanwhile the electoral scene tonight is Sevenoaks. On the face of it, little for us, but will there be a surprise?

  • Innocent Bystander 30th Aug ’18 – 3:44pm:
    “The levy should be paid by owners rather than tenants”

    Where do the bright sparks who think this stuff up imagine the “owners” will get the money from to pay the levy?

    From tenants. Which means the owners of vacant premises are incentivised to keep reducing the rent until they get one.

  • I can see how this would encourage landowners to make productive use of land, rather than leaving it empty and banking on future appreciation of it’s value, but it obviously will ultimately be paid by tenants because rents will rise to cover it. How else could the landowner generate the cash flow to pay it?

    However, what happens to commercial or residential property that is half way through a 99 year lease, with rents based on market rates 50 years ago that are peppercorn by today’s standards? Do you base the tax on land values from 50 years ago too? If not, you will bankrupt some landowners.

  • Andrew McCaig 31st Aug '18 - 7:57am

    I think the elephant in the room here is local government finance… Any change like this needs to be part of a comprehensive package..

  • nigel hunter 31st Aug '18 - 11:59am

    As Michael Meadowcroft says the party seems to be ‘frit’ on pushing popular policies which therefore do not attract votes. It is if they grandees wish to be ruled b ythe 2 other parties and doff the hat to them. Not a forward thinking thing to do to progress. Equally we seem to act at a snails pace and therefore loose the race to the other parties. When we agree to policies we should put a focus leaflet out NATIONALLY,rapidly, for the voters to comment on for us to see if we are on the right track.

  • Peter Hirst 31st Aug '18 - 2:46pm

    Perhaps this is a policy that’s time has come.

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