Nearly 100,000 London business properties face inflation busting tax rises next month

With increases of more than 3 per cent

Almost one hundred thousand business premises in the Capital will face tax rises above the rate of inflation in April for the property taxes that they pay through rates to their local Councils. The news comes as a host of major names on the high street are signalling financial problems.

Business rates bills for properties across London began hitting doormats last week but, according to Altus Group, 93,990 business premises will see tax rises of more than 3 per cent when demands for 2018/19 fall due for payment in April.

Last week, Toys R Us and electrical goods retailer Maplin both collapsed into administration threatening almost 6,000 jobs whilst the blight appeared to be spreading as Mothercare admitted it was in talks with its banks. Meanwhile, shares in Carpetright hit an all-time low after it issued its third profit warning in just four months. Fashion chain New Look is set to launch a company voluntary arrangement (CVA) with help from the accountancy firm Deloitte this week. 

Chancellor Philip Hammond sought to appease concerns over last year’s business rates revaluation, announcing a £2.3 billion reprieve in his Autumn Budget by bringing forward plans to switch the inflation measure used to calculate annual increases from 2020 to April.

Business rates will now increase annually in line with September’s lower Consumer Price Index (CPI) of 3 per cent. 

However, under the revaluation, which came into effect on 1st April last year, transitional relief means that large increases to bills are phased in gradually over the 5 years of the new tax regime.

The ‘caps’ for 2018/19 limiting increases in bills are 7.5 per cent for small properties, 17.5 per cent for medium and 32 per cent for large properties to which the effects of September’s CPI is then added creating a double whammy of tax rises. 

Small properties are defined by the Government as those with a Rateable Value of less than £20,000 and £28,000 in London. Medium sized properties are classed as at a Rateable Value of up to £99,999 with large properties being defined as those at a Rateable Value over £100,000.

The Rateable Value of a property is the annual open market rental value on 1st April 2015 and, under last year’s revaluation of business rates, will determine tax bills for business rates for the next 5 years.

The detailed analysis by Altus Group shows 50,869 small premises, 35,652 medium sized premises and 7,469 large premises across London’s 32 boroughs and the City will all see tax rises greater than last September’s 3 per cent CPI rate totalling tax rises of £379.78 million. 

There are 306,590 properties liable for business rates in London and, under the revaluation, Rateable Values used to calculate tax bills rose 23.37 per cent overall across London. 

Furthermore, the analysis shows 7,469 large premises in London will collectively face rises of £233.92 million, an average rate rise of £31,319 each. 

Alex Probyn, president of UK business rates at real estate advisor Altus Group, said:

“The past few months have seen a stream of collapses across both the retail and hospitality sectors with many others teetering on the brink or considering large scales closures.”

“Historically, the Spring is when Chancellors have made key fiscal decisions so it’s not too late for a freeze in inflationary rises to help cushion the blow for those in transition amidst challenging trading conditions.”

Probyn added:

“Businesses need to carefully understand their new rates assessment and to check that what they’re being told to pay is indeed accurate and correct.”

Councils across England have, however, made a special provision within their revenue forecasts and have set aside £1.2billion for tax rebates back to business during 2018/19 for successful business rates appeals according to MHCLG.

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