Budget 2018: Treasury Considering A £300 Million Stimulus For Ailing Town Centres
The Government made a £3.35 billion package of support available in England, spread out over the 4 year tax regime, to help phase in gradually large rises in business rates bills through a series of caps to cushion the blow but, in order to compensate for the loss of revenue, strict limits were imposed on tax reductions on those properties who’s values had plummeted during the previous 7 years.
The M&S store in Stockport, who’s closure was confirmed back in February under Steve Rose’s turnaround plan, was one of the 5 biggest retail “winners” in the North of England under last year’s controversial revaluation with its Rateable Value used to calculate its business rates bill falling from £935,000 in 2010 to £500,000 in 2017.
Yet, despite the massive fall, according to calculations by real estate advisor Altus Group, the rates bill fell only marginally from £464,695 before the revaluation to £449,166 for 2017/18 as reductions were limited to just 4.1% before the effects of 2% inflation. Without the strict limits imposed on reductions, the bill would have fallen to £239,500.
Similar punitive measures were imposed this year for 2018/19 with reductions limited to just 4.6% before the effects of 3% inflation with Altus Group saying reductions of £732,969 over the 4 years would be denied.
Robert Hayton, who is Head of UK business rates at Altus Group, says that large shops that have seen their local values plummet will only see a real term fall in their tax bills allowing for inflation of about 11% by 2021 through the strict limits which he says is “grossly unfair”.
According to figures from the Ministry for Housing, Communities and Local Government, the retail sector have already been denied business rates reductions of £936 million over the last 2 years. Removing the strict limits on business rates reduction would save the retail sector £184 million next April for 2019/20 and a further £99 million during 2020/21.
With the stream of collapses across the retail and hospitality sectors since the turn of the year, Robert Hayton, a long term critic of the policy, says that “abolishing the strict limits on rate reductions would put fairness back into the heart of the system providing badly needed respite to respond to changing markets” but stressed it was imperative to maintain the capping of large increases saying that they acted as an “important shock absorber”.
The CBI, in its submission to the Chancellor, have called on the Government to end the strict limits on how quickly tax bills can fall following devaluation in property values saying it would benefit embattled high streets.
Transactional Relief Caps
Since the transitional relief scheme was designed in 2016, ahead of the implementation of the business rates revaluation in April 2017, the cycle was cut from 5 to 4 years with the Chancellor bringing forward the next revaluation to 2021.
Cost of Transitional Relief By Sector
Yield is the amount denied through the downward caps whilst cost is the relief granted through the phasing in of large increases.