Retailers Head to Court of Appeal today over “Tax on Cash” Dispute
The case against levying business rates on the sites occupied by the machines has been brought by some of the country’s largest grocers, including Sainsbury’s, Tesco and the Co-operative Group, supported by independent cash machine operator, Cardtronics Europe.
Retailers were left reeling after a decision in 2013 to charge separate business rates on ‘hole in the wall’ cashpoints, which are classed as ‘non-rateable machinery’ and had not previously affected the store’s overall rates bill. Rates are payable by the machine’s operator, but are typically passed to the store under the terms of the contract for the machine. The rates bill for the store is typically unchanged. Loss of the machine would bring a loss of income for the store and the loss of a significant draw for customers.
Extra bills were sent to thousands of retailers in 2014, backdated to April 2010 and estimated to be in the region of £200 million over the 7 years of the previous tax regime. Altus Group says the average business rates bill for an ATM is £2,888 this year, but can be as much as £21,600 for a set of cash machines at a Tesco Metro in Liverpool.
The controversial change was triggered by an increasing reliance on property taxes by councils, which collect business rates. Since 2012 councils have been able to keep 50% per cent of any net increase in business rates, as an incentive to support job creation. This “localism” inspired cash strapped councils to identify additional rateable properties at the same time that the Valuation Office and grocers were in dispute over how cash machines should be assessed.
The number of cash machines being liable for business rates tax in England and Wales has surged from 3,140 in 2010 to 15,422 this year according real estate advisor, Altus Group. Previous legal rulings have upheld the controversial decision that cash machines built into the front of a shop or petrol station must now have a separate business rates bill. So far, the rulings of the lower courts have not affected cashpoints that are inside stores, whether they are free-standing or built in.
Altus Group says that this year business rates from separate bills for cash machines will raise £44.54 million in rates tax in England and Wales and £181.27 million over the 4-year life of the 2017 business rates regime.
Robert Hayton, head of UK business rates at Altus Group, said: “If the decision is upheld it is likely to make it more expensive for smaller independent retailers to offer free-to-use cash machines that are accessible from the outside of their store which could deprive many communities of vital access to cash given the swathes of bank branch closures.”
“It’s the same legal principles in play that gave us the staircase tax. The courts are trying to establish a coherent body of case law, consistent in England and in Scotland, which has a separate business rates regime. They aren’t easily dissuaded from those principles, which is why we’ve recently had to rely on Parliament to overturn the Mazars case and abolish the staircase tax.”
“The decision whether rates are due and payable on cash machines might require legislation once again. The Government has changed the law to overcome unpopular court rulings on the staircase tax and plant nurseries. The likely alternative is that we pay a fee for our cash or see the machines disappear indoors, where they are inaccessible out of hours.”
Which? figures reveal towns and communities have witnessed more than 1,944 bank and building society closures since 2015, with 642 more lined up for this year so far.
Jim McMahon, Labour’s Local Government Spokesman, has urged the Government to intervene, arguing that stores should be supported in stepping up when banks are pulling out of towns.
A further threat to cash machines comes from a proposed cut by the UK’s cash machine network, Link, to the interchange rate, the fee operators receive from banks each time an ATM is used. The move is intended to force operators that have been clustering cash machines in city centres to move some to rural and less affluent areas, but some business and consumer groups fear the loss of tens of thousands of machines.