Member Article

Retailers convene for business rates reform

Finance directors from some of the UK’s biggest retailers are meeting today to draw up proposals for reform of the business rates system.

The Financial Times reported that members of the British Retail Consortium (BRC), including those with physical stores and online-only operators, would present their findings to the Government.

Business rates are charged on most non-domestic premises including shops, offices, warehouses and factories and form the third biggest outgoing for small businesses after rent and staff costs. Retailers have repeatedly called on the Government to re-examine the effect of business rates on the sector, with some arguing that it is “unfair” not to levy a similar tax on online-only retailers, according to the Financial Times.

“With further casualties on the high street in recent weeks and more retailers facing collapse, it is no surprise that retailers want a Government review of their operating climate brought forward urgently,” said commercial property law expert Stuart McCann of Pinsent Masons, the law firm behind Out-Law.com.

“Recent calls within the industry for an online sales tax to level the playing field have attracted much criticism and the suggestion of a rates holiday seems like a short-term fix. More long-term solutions are surely needed such as the replacement of the uniform business rate with the tax being fixed at a certain percentage of the rateable value of the property, or more frequent revaluations rather than the Government’s recent decision to postpone the one scheduled for this year to 2015,” he said.

Business premises are assigned a rateable value by the Valuation Office, which is used by the local authority to calculate how much the occupier of that property should pay. Revaluations usually take place every five years. However, in October the Government announced that the next revaluation exercise would be postponed for two years, until 2017; in a move it said would provide “tax stability” to shops and businesses. Industry groups reacted angrily to the decision, as it means that rates continue to be based on the 2008 revaluation.

In its pre-Budget submission, the BRC called on the Government to freeze April’s inflation-linked business rates increase as part of a package of measures, to also include changes to the method of uprating in future years. The Chancellor did not make any announcements related to business rates this year, although a new relief for new-build commercial properties announced as part of the Autumn Statement is due to come into force for properties completed after 1 October.

“Whatever the consortium agrees upon during its meeting will have to be credible and presented with a united front, because the Government does not appear to be listening,” McCann said. “The issue of business rates was surprisingly omitted from the recent Budget and it is hard to believe that the Treasury is easily going to loosen its grip on a source of revenue that yielded £26 billion in the last financial year.”

According to an independent study produced on behalf of the BRC in February, the cost of doing business for retailers has risen from £96bn to £116bn since 2006. The figures showed that costs have risen by 21% against an increase in sales of 12%; a difference that the BRC said is “forcing store closures and curtailing job creation”.

Article from Out-Law, legal news and guidance from international law firm Pinsent Masons.

This was posted in Bdaily's Members' News section by Pinsent Masons .