Cash in on rate relief

The government is yet to be convinced on reforming business rates, despite pressure from lobby groups, retailers and MPs. However, in the latest Budget in October, chancellor Philip Hammond took some action to relieve the cost burden of rates in the short term: for the years 2019-20 and 2020-21 sites with a rateable value of less than £51,000 will get a one-third discount on their rates bill. Sites with a rateable value under £12,000 remain exempt from paying business rates.

Hammond says the discount will apply to 90% of small independent shops, saving them about £8,000 per year. However, with National Living Wage rises coming up in April, the measure is seen by many c-store retailers as essential financial relief rather than a bonus.

Spar retailer Paul Stone, who owns eight stores in Greater Manchester, says: “The rates cut is to be welcomed and it’s a good thing. But it’s only a temporary relief and the system needs a complete overhaul. It doesn’t go far enough - and it applies to only half of my eight stores.”

Ketul Desai, owner of The General Store in Tufnell Park, London, adds: “Any initiative that can help to inject some life back into high streets must be welcomed and implemented as soon as possible.”

The good news is that the first annual discount will come into effect in April - and eligible retailers, in theory, do not need to take any action to ensure it happens. However, reality is not always as simple as that.

Local authorities automatically apply the rates discounts to ratepayer’s bills, so the concessions should appear in bills in the next few weeks. “In theory this should be straightforward, but as the local authority is the one administering it, there could be problems with the processing, which is why we’re encouraging eligible retailers to check that their discount has been applied,” says ACS head of communications and research Chris Noice.

Ken Batty, managing director of Ken Batty Chartered Surveyors, adds: “There may be a delay, because the rating authorities have to update their software.” He advises retailers to call up the rating authority if a problem arises.

The ACS also recommends retailers check the local authority website for criteria for issuing the relief if the discount has not been applied. “If there is a problem or they are unsure, contact us and we will help,” it says.

Calculating rates

However, some retailers may question the rateable value of their sites if they are deemed to be ineligible for the discount.

Batty asserts that it is rare for the Valuation Office Agency (VOA) to get its calculations wrong, but Sunder Sandher has recently demonstrated that it does happen. Sunder’s One Stop franchise store in Leamington Spa is just below the £12,000 rateable threshold, so he was surprised last year when he was told he was eligible to pay rates.

“I called the VOA and asked for a breakdown to understand their calculations,” he says. “I calculated it myself and it came to about £11,000. I told them and they said it was their mistake and we got the money back.”

Sunder advises other retailers to take the same hands-on approach. “It’s important to get your calculator out and make sure it all adds up. Speak to the VOA and ask how they worked out the rateable value,” he says. “There’s all kinds of things you don’t realise will be accounted for in the calculations. For example, my door opens at an angle so I get a discount on that. They’ll value your cameras, air conditioning - my air-con operates only at the front of store so I got a discount on that. You may save yourself a few thousand pounds.”

Conversely, Batty stresses that there are usually reasons for one store being rated higher than another, even if it appears they’re of a similar size. “There is one retailer I’ve been advising who doesn’t understand why nearby stores are getting an exemption even though they’re the same size,” he says.

“I explain to him that he has a larger Zone A, which means a higher rate of sales per square metre than elsewhere in the store. Others say they wish they were just under £12,000 - and that’s where you need the expertise. If you’ve got pillars in Zone A, that’s automatically a disability [a reduction on the rateable value].”

Batty reminds retailers to be wary of the so-called rating cowboys, even though there is less room for them to manoeuvre nowadays.

“The number of appeals has gone down by more than 90% as you now have to appeal through the government gateway site, and it’s so complicated. It means cowboy agencies have little chance, although they’re still out there,” he says.

As for the future on business rates, the chancellor is sticking to his guns on maintaining the existing formula. However, MPs may have other ideas, with the Treasury Committee having just launched a new inquiry into rates, which will look at alternatives to a property-based business tax.

Hammond has acknowledged that more needs to be done to tax the digital economy to create a more level playing field. In the Autumn Budget he announced a digital services tax, which will apply to companies generating more than £500m per year in global revenue when it is introduced in 2020. It is not an online sales tax on products bought on the internet.

In the meantime, there is some relief. So to sum up: for eligible stores, expect the one-third discount to appear on your bill in the next few weeks. If not, contact your local rating authority, or the ACS. If you want to question your rateable value, contact the VOA, or seek professional advice.