Building Britain for Generations: A Policy Agenda for Family Businesses
“Successive Governments have advocated for unequivocal Business Rates reform and ways to cut the burdens on business, however, the system is archaic and broken”
Incentivising Management to Think Long Term
Business Rates Reform Business Rates receipts are forecast by the Office for Budget Responsibility (OBR) to grow by nearly 10%, reaching around £37 billion in 2026–27 and rising further thereafter. As the system is designed to be revenue neutral, there will inevitably be winners and losers, as the Government relies on this fixed revenue stream to balance the public finances. FBUK data shows that 43% of family-owned businesses say Business Rates are having the greatest impact on their operations. FBUK Members report that their biggest challenge is the lack of transparency and consistency within the Business Rates system. Businesses want to understand what their future liabilities will be and why they are charged the amounts they are. Many feel there is limited comparability and an element of unfairness, with some paying more and others less for properties on similar estates. Clear, accessible explanations for these differences are often missing. Successive Governments have advocated for unequivocal Business Rates reform and ways to cut the burdens on business, however, the system is archaic and broken. No other tax guarantees a predetermined level of income to the Treasury in this way.
Enterprise Management Incentives (EMI) or Company Share Option Plan (CSOP) schemes provide employee retention opportunities in entrepreneurial ‘owner managed’ businesses and private equity businesses with a potential future exit. However, family businesses cannot utilise these, as they do not plan to exit, they plan for succession. Listed businesses can utilise approved schemes such as Save As You Earn and Share Incentive Plans to similarly attract, retain and align employees to the growth of the business. The increase in EMI/CSOP limits is generally viewed as a positive development. However, family business owners are looking for a simpler set of eligibility criteria and rules for EMI and similar schemes.
Recommendations Move to a progressive approach for calculating Business Rates. Under a new system, each portion of the rates bill would be charged at the rate applicable to that specific band, rather than applying a single percentage to the entire amount. This is how Income Tax and Stamp Duty Land Tax work, enabling revenue and fairness to be achieved together. In the long term, the Business Rates system needs a fundamental overhaul to make it genuinely fair for family‑run, bricks-and-mortar businesses who act as the long‑term custodians of our high streets.
Recommendation Introduce a similar scheme to EMI/ CSOP for family businesses – which allows efficient and simple equity incentivisation. This could be done by amending EMI rules to allow exit via share buy-backs. An ‘ownership focused’ equity scheme incentive for family businesses would be the primary focus.
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