Struggling retailers face a further £115 million hit to their cashflows because the much-maligned business rates process is delaying overdue refunds.
Retailers pay just over £7 billion, or more than a quarter, of the country’s £26 billion business rates — a regime that has come under fire for unfairly penalising chains that have lots of stores as more shoppers shift online.
Last month more than 50 retailers, including Marks & Spencer, Harrods and Iceland, wrote to Sajid Javid demanding action from the chancellor on the business rates burden to safeguard the future of the high street.
The amount owed by retailers depends on the rateable value of a property determined by the Valuation Office Agency, which tests market rents of a local area. These market rate values are usually reviewed every five years and the most recent revaluation came into effect in April 2017 based on 2015 rateable values.
Two years ago the government introduced a system for companies to “check and challenge” their rates bill, but the widely criticised service has meant that there is a huge backlog of appeals. The latest statistics show that the number of outstanding appeals has risen sixfold.
Analysis by Colliers International, the property group, found that the valuation tribunal had managed to clear only 13 appeals between April and June this year, with 123 claims outstanding, and experts are anticipating up to 40,000 appeals against the 2017 valuation. Colliers estimates that retailers receive about 5 per cent of the rates bill, equivalent to £38 million, back as a cash refund. However, the new system is delaying these refunds at a time when many retailers are already battling to stay afloat.
“This could have far-reaching consequences, particularly for many retail businesses who rely on their refunds following appeal for their financial planning,” John Webber, head of business rates at Colliers, said. “Cash is the lifeblood of such businesses, so once you turn the tap off it could very well add further financial pressure on those retailers who are struggling.”
To add to the delays, Mr Webber claimed that the VOA was focusing now on values for the forthcoming 2021 revaluation and that case workers were being reassigned from appeal work to deal with this. “This lack of manpower at the VOA certainly gives us concern that the situation will deteriorate further, particularly as 2018-19 and 2019-20 build up further rates rises.
Research by Altus, a property advisory group, has revealed that councils sent bailiffs to 78,000 commercial properties last year for unpaid business rates.
The Treasury select committee launched an inquiry into business rates in February. The British Retail Consortium has argued that ministerial reshuffles and preparations for a no-deal Brexit could delay its findings.