By Altus Group | May 4, 2018

Embattled department store, House of Fraser, has been left with a £120 million business rates tax bill in England and Wales as a result of last year’s controversial revaluation it has emerged.

The ailing retailer is embarking on restructuring of its store portfolio, which it intends to do via a company voluntary agreement, or CVA, with stores expected to close through a formal proposal that will be issued at the start of June.

Frank Slevin, the company’s Chairman, says he aims to create “a leaner business” through the CVA citing “an uphill struggle” on the high street with “hikes to business rates” amongst other things.

According to real estate advisor, Altus Group, the retailer saw the overall rateable value on its stores and outlets in England and Wales increase by 13.8% up £7.2 million to £59.50 million as a result of last year’s revaluation with the chain facing bills of £570,641 per store on average culminating in an overall rates bill of £30.24 million this year representing a second year increase of £3.99 million under the revaluation meaning an over increase in tax liabilities of 15.2%.

Altus Group say, over the 4 year period of the new rating cycle, the stores and outlets located in England and Wales, will pay £122.25 million in business rates up £17.26 million compared to bills in 2016/17 the final year before the revaluation came into effect.

Robert Hayton, Head of U.K. Business Rates at Altus Group, says the overall tax position has been “skewed” by stores that have been denied substantial tax reductions under a scheme called transitional relief.

Despite the vast increases overall in tax liabilities, 20 House of Fraser stores and outlets saw their rateable values used to calculate business rates actually fall with 8 of those stores seeing substantial drops in values over £100,000.

The Altrincham department saw its rateable value plummet by half under the revaluation being cut from £435,000 to £215,000. But, under transitional relief, the fall in tax liabilities are limited to just 4.1% last year and 4.6% this year before the effects of annual inflation are taken into account. Despite the £220,000 fall in rateable value, for 2018/19, Altus Group say the store will still pay £205,162 in business rates just £11,033 less than the 2016/17 bill being denied £375,349 in total tax reductions over the 4 years.

Transitional relief is a self financing method of limiting or “capping” significant variations in business rates bills with both large increases and decreases under the revaluation gradually being phased in with increases in some areas subsidised by reduced savings in others areas.

Whilst House of Fraser is still working on plans as to which stores to shutter, Hayton has called on the Government to rethink transitional relief amid the ongoing high street crisis saying:

“Transitional relief should apply only to those bills which increase between one revaluation period and the next.  Where local economies are struggling and values fall, ratepayers need to benefit from the full reduction immediately. The cost of upwards transition could be paid for by a small supplement. It would be like an insurance premium against a steep increase in liability.”

“Without this immediate reform, places where respite is so badly needed won’t get the fair deal they need to respond to changing markets leaving even more stores vulnerable to closure.”


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