retail

Retailers push for overhaul of business rates system

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More than 50 British retailers, including some of the biggest names in the industry, on Tuesday urged the government to “fix the broken business rates system”.

The retailers — including Marks and Spencer, J Sainsbury, Asda and Harrods — used a letter to chancellor Sajid Javid to call on him to freeze increases in business rates, a property-based tax.

One-tenth of high street shops are now vacant, according to the British Retail Consortium, the trade body which co-ordinated the retailers’ letter to Mr Javid. This is the highest vacancy rate since 2015 and has been spurred by people increasingly shopping online and fragile consumer confidence amid Brexit uncertainty.

The retailers’ letter proposed several changes to business rates and Helen Dickinson, BRC chief executive, said the shake-up would “be an important step to reform the broken business rates system, which holds back investment, threatens jobs and harms our high streets”.

Almost one in six English businesses has been summoned to appear before magistrates for non-payment of business rates in the past year, according to Altus, a consultancy, raising the prospect that the tax has become unaffordable.

This, coupled with high rents and increases in the minimum wage, has pushed some retailers including Arcadia, Debenhams and Monsoon to use insolvency procedures to reduce costs and close stores.

The retailers complained in their letter that they shouldered too much of the corporate tax burden, including business rates. “Retail accounts for 5 per cent of the economy but pays 10 per cent of all business taxes and 25 per cent of all business rates,” they said.

Business rates are based on “ratable values”, calculated every five years by reference to property rental values and a multiplier that rises annually in line with inflation.

In their letter, the retailers said there should be a “freeze in the business rates multiplier to stop yet another tax rise”. They also complained about a “mish mash of reliefs” within the rates system that they said were causing harm.

In 2018, retailers whose ratable value is less than £51,000 received a one-third discount off their bills for the property-based tax for two years.

But James Lowman, chief executive of the Association of Convenience Stores, said this was discouraging corner shop owners from increasing the services they could offer, “such as pharmacy, cash machines and post offices”, in case this took their ratable value over the discount threshold.

The retailers urged the chancellor to offer business rates relief for smaller retailers who invest in their operations.

A government spokesperson said Boris Johnson, the prime minister, last month announced a £3.6bn fund to support town centres and high streets, adding Mr Javid would unveil further details of the administration’s policy programme in the coming weeks and months.

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