Business rates specialist Gerald Eve has warned the Government that the decision to postpone the 2015 rates revaluation risks becoming a “Poll tax tipping point” for businesses.
Gerald Eve’s head of rating Jerry Schurder said: “With the poll tax there was outrage because of the perceived inequity that a Duke would pay the same as a dustman. Businesses across the land are telling us that deferring the 2015 revaluation will force those struggling the most to continue to pay over the odds, whilst those sectors which have prospered such as central London retail are shielded from paying a fairer share of the rates burden. Rochdale is being penalised to keep rates down in Regent Street.
Schurder said it is particularly ironic on the day that senior representatives from retail, banking, property and local government came together to create a new Distressed Retail Property Taskforce that the Minister for Local Government Brandon Lewis should be disingenuously spinning the benefits of a revaluation postponement in Monday’s Daily Telegraph.
“High street retailers will be particularly outraged by the Minister’s claim that “retail is one of the sectors which will face big hikes in bills because of the revaluation.” Empty, dilapidated shops are a familiar scene across Britain’s struggling town centres and it is preposterous to claim that postponement provides any real benefit in those locations. “Business rates are already far too high and are a cause of hardship and vacancies in the high street, because bills are based upon pre-recession rents. Postponement of the 2015 revaluation means businesses will continue to pay rates based on property rents in 2008 for two extra years. With property values now much lower than during 2008, retailers and other businesses were looking towards the 2015 revaluation to bring some much needed relief from spiralling rates charges, an opportunity that has now been taken away from them.”
Gerald Eve has undertaken a research study using its business rates specialists alongside IPD rental growth data, its own research as to forecast movements in value and its unique specialist knowledge across a comprehensive list of property sectors not covered by IPD data.
“Our conclusion is that total Rateable Values (RV) would have fallen by about 9.5% at a revaluation in 2015. Assuming inflation for the next two years of 3% then the Uniform Business Rate (UBR) would have increased from 48.4p in 2014/15 to 55p in 2015/16. What this means is that all properties whose rental values fell by more than 9.5% between April 2008 and April 2013 would have been revaluation winners and expected to benefit from the 2015 revaluation,” said Schurder.
So far as retail is concerned, the IPD data alone suggests huge swathes of the country where rental values have fallen by more than this. Gerald Eve has identified Canterbury, Plymouth and Derby amongst major towns whose rates bills would have dropped by at least 20%. Retailers would have benefitted from bills at least 10% lower in Bristol, Leeds, Nottingham, Sheffield, Blackpool, Swindon, Walsall and Wolverhampton, with the South West and East Midlands being the two regions where retailers would have seen the largest falls.
In Lewis’ piece in today’s Daily Telegraph ahead of Monday’s debate on the Second Reading of the Growth and Infrastructure Bill, which includes the postponement measure, the Minister cited the Valuation Office Agency’s (VOA) own estimate of a 13% fall and a 2015/16 UBR of 56.9p.”
The Minister said the VOA’s best estimate of rental value movements across England without detailed work and informed on by limited rental evidence up to January 2012 suggests that 800,000 premises would see a real-term rise in their rates bill, whereas only 300,000 premises would see their bill fall.
Schurder said: “On their own admission this is based on very limited out of date evidence. Valuation Officers are not active in the market and have not yet commenced collecting rental evidence for the 2015 revaluation. Their ‘best estimate’ is flimsy and not one on which national taxation policy should be based. Claiming that ‘small and medium’ firms would have been harder hit is non-evidenced spin and our own data on the impact on retail supported by the IPD, shows how wrong the VOA is.
“How can the Minister claim that retail would see ‘big hikes’ unless he can identify all the retail locations in the country where rents have increased or have decreased only marginally since April 2008?
“The Minister’s extrapolation to try to show that most businesses are going to be better off with a delayed revaluation is again unsubstantiated – and it seems highly unlikely.”
Schurder concluded: “Business rates are a very efficient tax for the treasury bringing in some £25bn per year, approximately 5% of all tax receipts, but any property tax requires reasonably frequent revaluations in order to ensure acceptability and fairness and postponement of the revaluation delivers neither.”