Business

London shops get huge tax break, says research

  • 15 November 2013
  • From the section Business
A picture of a local High Street's closing down signs
Regional High Streets have lost out after Westminster delayed a decision, research says

New research reveals shops in London's West End have been the big winners from the government's decision to delay a revaluation in business rates.

The research, commissioned by Estates Gazette, found shops in Westminster will be better off by £130m a year.

But this comes at the expense of many struggling regional High Streets.

The government's move to postpone the five-yearly revaluation on business rates until 2017, two years later than planned, has proved controversial.

Business rates, a form of property tax, are pegged to inflation and property values.

They were last set according to values in 2008, at the height of the property boom.

The rates were due to be reset, on the basis of 2013 property values, to take effect in April 2015.

But the government postponed it, meaning retailers will have pay the tax on rental values at the top of the market for an extra two years.

There have been increasing calls for a rethink.

Many retailers believe the burden of business rates is one of the main reasons for the rise in empty shops on Britain's High Streets.

'Huge tax break'

Ministers insist the delay is fair, saying it would help bring financial stability to businesses, especially certain sectors that would have seen big hikes.

Just last month, Brandon Lewis, the government minister responsible for High Streets, ruled out a reversal, claiming that big London offices would have been the main beneficiary, as rents had fallen sharply in the downturn.

He made the claim during an appearance before a Business, Innovation and Skills Select Committee hearing.

Estates Gazette says it now has research which proves this is not the case.

It reports that the government's figures are based on rental data that only goes up to 2012.

It asked Investment Property Databank to analyse rental data based on April 2013 values, the date on which the original revaluation would have been based.

Estates Gazette news editor Nick Whitten said there was a clear trend.

He said: "The government has repeatedly claimed that carrying out a business rates revaluation would harm struggling retailers across the country, but as this research shows, that is clearly not the case.

"In fact, it is the complete opposite. The West End is getting a huge tax break which is essentially being subsidised by the regions."

Estates Gazette said the main losers were shops in the Midlands, North of England, Scotland and Wales, as rents have plummeted by an average of 19.2%.

In a statement, the Department for Local Government and Communities said: "Valuation Office Agency estimates showed that over 800,000 premises would have lost out.

"Our commitment to the inflation cap means that business will see no real terms increase in business rates.

"In addition, we have doubled small business rate relief for three-and-a-half years - to March 2014. Half a million businesses in England are benefiting, with approximately one-third of a million businesses paying no rates at all."

But with business rates now the number one issue for retailers, the research will add more fuel to the campaign for change.

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