Tory Leadership Hopefuls Must Reform Business Rates and Rule out Downwards Transition If They Are Serious About Cutting Taxation & Saving the High Street Says Colliers

13th July 2022, 10:57 am

Leading business rates consultants warn any implementation of phased downwards transition in the next revaluation will stifle recovery in the high street and hinder the levelling up agenda.

“Conservative runners hoping to lead the party must uphold the Conservative party manifesto and bring in proper business rates reform,” says John Webber, Head of Business Rates at Colliers, “ and on the immediate front must commit to ruling out downwards transition following the next Revaluation in 2023- if they are serious about saving the high street.”

He continued, “While many  of the candidates are throwing around tax cuts like confetti, all we are asking is that they all commit to a revaluation and levelling up agenda that will provide the instant tax cuts they have all already committed to.”

As the election for the new leader of the Conservative party hots up, much of the debate is based on a commitment to cut taxes, but references to business rates has been limited. Colliers warns the party hopefuls that to ignore business rates runs the risk of hindering any claims of reducing the tax burden, encouraging business growth or of supporting the levelling up agenda. The tax has had a major impact on occupier costs, particularly in the retail and hospitality sectors and has compromised the viability of many physical shops and ultimately jobs in the sector for several years, particularly in some of the poorest parts of the country.

Webber continues “At last after seven long years, we now have the rating revaluation in 2023 to look forward to – whereby rates bills should be based on rental values of 2021. In some locations retail rental levels have fallen 50 or 70 % since the 2015 valuation date for the current rating list – and this should hopefully mean rates bills will come down dramatically for many in the sector. This drop will make a massive difference to the business’s running costs.

But as Webber continues, “ This will be meaningless if the government  does not allow business rates reductions to be implemented immediately rather than spreading them over the years of the list in a transitional arrangement, as it did in the last list of 2017.”

Downwards transition meant many businesses in these sectors paid too high business rates for too long. It was a key factor in the demise of Toys R Us, Laura Ashley and other high street brands and had a major impact on the high streets of many of the UK’s provincial and poorer towns- areas of the country the government claims it now wishes to “Level Up.”

Webber believes the new Conservative leader has a golden opportunity to make a difference.

“We call on Rishi, Liz, Penny and the rest of the gang to announce there will be no downward transition following the revaluation in 2023 and that rates bills will immediately find their true level, comparable to rents. We are saying as much in our response to the government’s recently announced consultation on the issue which ends on 25th July.

Webber rolls his eyes at unworkable plans suggested such as Jeremy Hunt’s five-year business rates holiday for deprived areas- which he believes would only add another layer of complexity to the issue. The plan is based on using indices of deprivation which means business rates could vary at the “lower layer super output area”.

“If we had a revaluation every three years or ideally less and rate bills immediately reflected rental levels, we would not need any further complicated schemes such as this.  Because the business rates tax take needs to be revenue neutral, we would just find that the likes of Amazon would see increases in their rates bills to balance the reduction in retail rates. As this sector have been booming, it is only fair they take their share of the tax burden.”

“There is no downward transition in Scotland or Wales, so why is it considered sensible for England?”

Webber concludes , “Retailers and other high street operators considering their business plans now for next year will be looking closely at their future business rates liabilities, particularly now the Covid-related reliefs have come to an end.

It is essential the new leader provides reassurance that rates bills next year will immediately reflect the lower rents we are seeing in the market today -providing incentives for businesses to keep or expand space and for property investors to invest in the sector in these areas.

Without this reassurance,  the government’s  “levelling up agenda” will be meaningless. And the high street unlikely to get back on its feet.

The new leader has a golden opportunity to make a major impact on the future of physical retail and breathe new life into the high street.  Let’s hope one of them has the backbone to act.”

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