At this rate... there’ll be no profit left
Business rates, as a topic, is all the rage (and there’s plenty to rage about) at the moment.
According to Thair Majid, the devil is in the detail and he is doing his best to publicise the fact that the Valuation Office Agency (VOA) gets its sums wrong when working out rates retailers pay and the rateable values used to calculate these amounts.
Thair, who runs several sites in the London area, has seen his rates double and even triple at some of his properties over the past year. He says: "As a result I have had a lot of dealings with the local government and the VOA on how these increases have been calculated and justified for businesses who have not seen similar increases in their sales and profits. I have ascertained the government/VOA is calculating these rateable values and business rates incorrectly and in such a way that these inaccuracies can’t be reversed so that a business can pay the correct amount instead of the inflated incorrect amounts."
Last year he appealed against a tripling of rates at one of his sites. He adds: "Additionally the VOA claimed they had been charging me incorrect business rates for the previous five years and as a result of their mistake, they wanted me to pay £58,000 in backdated business rates."
Thair took this to a tribunal and although the result went against him it was through this process and through questioning the VOA’s representative that he found out how the VOA was incorrectly calculating the rateable value for businesses.
"The crux of the problem is regarding how the VOA assess the turnover of a business. They look at a site’s turnover for different categories (fuel/shop) and multiply this against a standard percentage for all sites. The problem occurs with the calculation for the shop turnover."
Various categories such as PayPoint/lottery/car wash are calculated at a separate rate and from the remaining shop turnover they take 3%. "This is fine on grocery/shop sales where the profit margin is between 20-30%," says Thair, "however they also take 3% on tobacco sales which only have a profit margin of between 3%-7%."
He has a lot of competition nearby so he works on an average margin of 4% on tobacco.
"To then have to pay 3% of that profit to the VOA just does not make sense in business terms and can lead to difficulties for businesses when they are paying 75% of their profit in business rates, especially with petrol stations, as usually more than 50% of their shop turnover is made up of tobacco sales (it is 70% in my case)."
The calculations he sent me show that, of the £435,000 shop turnover, approximately £280,000 is made up of tobacco sales. He says it means that his sites are being overcharged by nearly £20K each year.
"There is an extremely simple solution to this problem, they just need to separate out tobacco sales as they do with the other categories and charge a more appropriate percentage."
I asked Ken Batty, my go-to chartered surveyor in Preston for his opinion and his practice manager pointed out that the scheme is normally agreed in conjunction with the Petrol Retailers Association. The PRA is currently looking at Thair’s issues. As I said to the PRA, I’m regarding this story as a sort of ’episode one’ because it seems to have added one more corridor to the labyrinth of business rates.
So... hopefully, more next time.
We do want your money... honest
Tom Dant, managing director at Gill Marsh Forecourts, wrote that their Ulceby Cross Site has just changed banks from Lloyds to Natwest. This in itself was fine but he describes his dealings with Camelot over this change as a nightmare. "They had the same communications as all our other suppliers of the new bank details and dates etc. We even rang them the week of the switch to check that everything had transferred. The Wednesday after switching banks, we had a phone call from the store telling us the lottery terminal had been switched off."
Head office immediately phoned Camelot which said the invoice hadn’t been paid.
After some discussion the machine was switched back on but the activity became a repeated refrain with the terminal switched off three weeks in a row. Tom then turned the problem over to us.
A quick email from Forecourt Trader to Camelot and it got investigated and sorted.