Business rates are one of the biggest cost burdens on retailers, and while the government’s review of the system is a great opportunity, there will be winners and losers. It’s our job to explain why local shops should be net beneficiaries of the review.
How do we think we can achieve this? Firstly, we want to see the smallest retailers taken out of the business rates system altogether, saving costs for retailers but also for the Valuation Office Agency (VOA), which calculates rates bills. Secondly, we need to incentivise investment, rather than the current system that gives you a higher rates bill if you have increased the value of your store. Thirdly, we need a complete overhaul of the separate rating schemes that give such disproportionately high rates bills for ATMs and forecourts.
Forecourt retailers are the segment of the convenience market that has seen the starkest movement in property usage. According to recent research there were fewer than 9,000 forecourts in the UK in 2014, down from 40,000 in 1960. This is in part a reflection of the high burden of business rates on forecourt retailers’ stores because a turnover-based rating methodology is used instead of the standard zoning and square footage methodology used for the rest of the convenience market. At the last revaluation, forecourt retailers saw their business rates bills more than double.
Forecourts rely significantly on shop sales to make their fuel sites profitable. Turnover-based rating methodology has a direct impact on the bottom line of all forecourt retailers’ profits and this rating approach is stifling growth in the forecourt sector. In our submission, we strongly urged the Treasury and the VOA to review the rating methodology used for forecourt convenience stores and move towards a zoning method.
We also need valuations every three years so that bills reflect changes in property values. Alongside this, we need the total income generated for government by business rates to flex with the economic circumstances like every other tax, rather than being guaranteed to move every year with inflation.
We have a detailed submission which you can read on our website, along with a shorter infographic style summary to help simplify what can be a complex issue.