UK retailers hoping for lower trade rates in 2023 may be disappointed

Retailers in England who are hoping for a significant drop in business rates in 2023 may be disappointed after the government appeared to rule out removing the so-called fiscal neutrality rule in the commercial property tax, experts have warned.

In last week’s budget, Chancellor Rishi Sunak froze corporate rates in England until April 2023. At that point, the assessed values, which are based on annual rents, will be reassessed for the first time. since 2017.

Commercial rents – especially for stores – in many areas have fallen sharply since then, reflecting both the effects of the pandemic and longer-term trends in online shopping. In theory, corporate rates should adjust accordingly, as the government has delayed the reassessment for a year to ensure rent cuts are factored in.

But findings from a Treasury review of corporate rates released alongside the budget suggest ministers do not intend to end the legal requirement that every revaluation must be revenue neutral for the government. Treasure.

Under this rule, if taxable values ​​go down overall, the multiplier – the factor used to convert those values ​​into an annual amount payable – must increase to preserve the government’s fiscal catch. Business rates are the only major tax where such a requirement applies.

In previous reassessments, the multiplier was reset to a lower level after the increase in overall assessed values.

Jerry Schurder, head of corporate tariffs at consulting firm Gerald Eve, said it was possible for the multiplier to rise significantly in 2023, negating much of the benefits of lower taxable values. It would then be subject to an annual increase based on consumer price inflation.

The consultation for the review showed that “a large number of respondents were opposed to the current system of fiscal neutrality,” according to the Treasury’s interim report.

Respondents felt that the rule prevents the tax burden from adjusting to changing economic conditions, introduces complexity and reduced predictability, he added.

But the final report makes little mention of the subject, preferring to stress the importance of corporate tariffs as a source of revenue and the benefit of recent multiplier freezes.

Schurder said that almost certainly meant the tax neutrality rule would remain, as removing it would require legislation. The government has not denied this interpretation; the Treasury said: “We will consider the multiplier for 2023 next year.”

Another uncertainty is the transitional relief, which only applies in England and mitigates the impact of higher taxable values ​​for some by limiting the impact of lower rents for others. Retailers complain that they have left thousands of stores, especially in the north of England where rents have fallen sharply, paying more in rates than in rent.

Chris Wootton, chief financial officer of Sports Direct owner Frasers, said “companies will not pay fair rates from rebased values” if the back-up system remains in place. “Likewise, landlords will not be able to accept lower or no rents indefinitely. Rebooting the tariff regime to sustainable levels is as important to them as it is to retailers. “

The transitional relief could allow Amazon and other tenants of large distribution centers – whose rents have risen due to growing demand for online shopping – to be protected from proportional rate hikes, while stores high street people see less benefit from lower rents in their own tariff bills.

However, the government has pledged to initiate further consultations on the design of the transitional relief and will announce its findings in fall 2022, ahead of the 2023 reassessment.

Source link

About Andrew Estofan

Check Also

US nuclear industry gets $ 6 billion bailout

The US nuclear power industry has been trying to overcome negative stereotypes since the Three …