Colliers International has revealed a plan for a reform of business rates to alleviate the retail crisis.
It is urging the government to implement its action plan, which it says could have an impact on several decisions currently being made by retailers and restaurant chains over whether to close or keep open stores in a number of regional high streets.
As the 2018/19 rate bills start to hit home, Colliers says that there are 23 sizeable retailers and restaurant chains (with more than 10 stores/branches) who have gone into CVA/administration since 1 January 2018 (and 28 since the April 2017 revaluation) – some of which were facing large business rates rises. It says that House of Fraser was due to pay a rates bill of £40m this year, Poundworld £24.5m and New Look more than £58m.
Its six-point plan to deal with the crisis is as follows:
- Immediately freeze any business rate increases next year – shelve the unsustainable 49% for top rises as currently planned. It says such businesses will already have had to swallow a rise of 74% plus inflation since the revaluation.
- Immediately remove downward phasing of business rates payments, enabling rate payers to pay their true rates liability now and not wait four years to do so.
- Review and implement a policy to reduce the multiplier – the uniform business rate (UBR) against which the rateable value of the property is multiplied to give the final rates bill. This multiplier is currently around 50p in £1 – so is an effective 50% tax. Colliers says that, if it could be reduced to 34p in £1, as it was in 1990, many extremely high bills would be reduced to something businesses could meet.
- Look at the whole systems of reliefs. It says the current relief system is incredibly complex and has created “business rate deserts” in the country – where, due to the system of small businesses reliefs, some businesses are paying no business rates at all for the services they receive.
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Introduce a fairer system for the business rates tax take. It suggests that a rebasing of the multiplier could be paid for by asking small businesses to make a minimum contribution to the system and looking at other reliefs – such as agricultural reliefs – which may need reforming, therefore spreading the load more evenly across the UK economy.
- Reform the appeals system to provide more support to the Valuation Office Agency (VOA). It says that “check, challenge, appeal” (the new business rates appeals system) introduced last year has been described as a “car crash ready to happen”, as it is an over-complicated appeals system that few can navigate. Only around 23,700 properties have begun to check and challenge their rating assessments: 1.3% of the 1.85m rateable properties in England. It says that it is essential that businesses have a true and fit-for-purpose appeals system, if they believe they have been assessed unfairly.
John Webber, head of business rates at Colliers, said: “We have devised this action list because we see the pain experienced by a number of retailers following the 2017 revaluation is only going to get worse. The policy of phasing in business rate increases means that retailers, particularly in central London, who saw big rises in their rateable value in 2017 are continuing to experience further significant rises.
“A company with a 100% rise in its rateable value (RV), for example, would have seen a 42% rise in its actual bills in year one, following the revaluation (2017/18), a 32% additional increase in year two (this year, 2018/19) and a massive 49% increase on top of this next year (2019/20). These figures do not include inflation.
“This is totally unsustainable. If we look at how many retailers and casual-dining restaurants have already gone under or gone into a CVA or restructuring since the beginning of the year, what is going to happen when further rises come into play next year?
“Obviously, business rates aren’t the only financial issue such companies are facing, but in the current market they could well push a company over the edge, particularly with no signs of a reprieve on the horizon.”
Webber said that some commentators have called for a cap in business rate bills, without suggesting any alternatives, adding: “This is naive, given the system needs to be revenue-neutral and must still pay for public services. The government can’t afford to reduce the £25bn pot it receives from the business rates levy. But it is in everyone’s interests that we properly reform the system so that every business pays something for the services it receives from the local community and the rates burden is not purely on a few that increasingly can’t afford it.”
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