MPs are calling on government to change the system of business rates for UK shops, which they describe as “not fit for purpose”.

They have joined retailers in asking for a government review to include a discussion whether it should be based on sales instead of rateable property values.

Delivering the report, the Business Innovation and Skills Committee asked chancellor George Osborne to consider giving shops their own tax system distinct from other businesses.

It said the government should limit increases in rents to two per cent until it implements a reform plan.

"The high street, is struggling under a system of business rates that comprises one of the highest forms of local property tax in the European Union,” said Adrian Bailey, chair of the committee.

The committee is also calling for further incentives for businesses to set up in vacant premises. Currently, business owners get 50 per cent off rates for six months if they set up in a disadvantaged area.