County business chiefs have welcomed a call by MPs for fundamental reforms to business rates but warn a new system would face serious practical challenges.

MPs on the Business, Innovation and Skills Committee say in a report the property tax is no longer fit for purpose and have called for a “wholesale review”.

The MPs say fundamental reforms are needed to help retailers and boost local economies.

Their views chime with many business leaders, such as the former Tesco boss Sir Terry Leahy.

He described it as an “ancient tax” that “has not worked for years”.

Business rates are currently charged to retailers based on the value of their shop or other commercial property.

In its report, the MPs said suggest an examination of whether retail taxes should instead be based on the value of sales. This could potentially lower rates for smaller shops.

The report also suggests there could be a different system of rates for the retail sector.

Roger House, chairman of the Kent and Medway Federation of Small Businesses, says the existing system was flawed.

He said: “I have had personal experience of this - I had to shut a business because of the anomalies.

"The problem is that we have a system not based on company profitability or the ability to pay.

"It is a completely idiosyncratic approach to the whole thing. But how you work out an alternative I do not know.

“The government has to find a simple formula which is proportionate to the size of the business.

"There is some sense [in the MPs report] and it seems the government is listening.”

Committee chairman Adrian Bailey MP said: “Among the many challenges they face, business rates are the single biggest threat to the survival of retail businesses on the High Street.

"Since the system was created the retail environment has changed beyond all recognition.

"A system of business taxation based on physical property is simply no longer appropriate in an increasingly online retail world.”