The UK’s leading supermarkets, already losing market share to discounters, face another blow due to the delayed business rates revaluation due to take place next year, a rating expert warns.
According to analysts, members of the Big Four could face an increase of up to 40 per cent in business rates payments, when bills based on the revised valuations come into effect in 2017. The actual date of the revaluation has been set for 1st April next year.
Originally, the revaluation was supposed to take place in 2013, but the government controversially decided to postpone it to 2015 after expressing concerns regarding the impact it would have upon businesses still struggling to recover from the recession.
Local Government Minister Kris Hopkins says; “The 2015 revaluation was intentionally postponed in order to protect local firms and local shops from sharp changes in business rates, at a time when we wanted to ensure the economy was growing.
“The Valuation Office Agency (VOA) estimated that the 2015 revaluation would have meant three times as many firms seeing a hike in their bills, with food retailers being hard hit.
“We have been focusing on providing businesses with a stable economic environment in which to invest and support jobs, and we have cut business rates for small shops and small firms.”
As the current system ensures the amount generated by business rates for the Treasury remains the same each year, in theory a revaluation serves the purpose of redistributing the tax burden for those struggling with changes in the economy. However, the announcement that supermarkets can expect to pay a much higher cost at a time when most are struggling to lift profits will undoubtedly raise further questions about whether the existing system is fit for purpose.
Independent business rates expert Paul Turner-Mitchell warns that, along with supermarkets, the revaluation is expected to hit shops in London particularly hard. This is due to changes in rental values in areas with a high level of demand from businesses, along with the performance of the economy in the central area of the capital.
Had the business rates revaluation have taken place in 2013, for example, he claims that shops in London would have seen a total annual rise in business rates from £1.4 billion to £1.84 billion. However, shops outside London would have benefited from a drop in their bills from £3.51 billion to £3.06 billion – a trend he expects to carry over into the 2015 revaluation.
Mr Turner-Mitchell says; “The two year postponement will simply see greater fluctuations in liabilities, something the Government wanted to avoid.
“London should brace itself.”
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