Ellandi and Montagu Evans identify Chancellor’s missed opportunity
As of April 2019, the government will be reducing business rates by one third for all retail properties with a rateable value of up to £51,000 for the next two years. It was stated in the November budget that this would equate to a reduction of tax of about £900 million over the period.
Ellandi, the community shopping centres investor, has undertaken research with its retained rating advisor Montagu Evans to ascertain the real impact of the change on the high street.Ellandi has one of the UK’s most diverse shopping centre portfolios, 22 of which are in England and are subject to the business rates regime set in Westminster. As such its portfolio represents a reasonable proxy for the wider retail market in towns across the UK.
The conclusion reached by Ellandi and Montagu Evans is that of the £37m of rates payable from their shopping centres, only £700,000 of rates would be saved. Only around 30% of the rates assessments fall between £12-51k Rateable Value and state aid rules mean that only local retailers are likely to benefit from the relief so in fact only around 20% of this will actually benefit retailers. The one-third saving granted to local retailers amounts to just £700,000 rates payable saved – which is less than 2% of the £37m total rates payable in the Ellandi English portfolio.
Recently the Treasure Parliamentary Select Committee has announced another inquiry into business rates and the impact of the tax on business and investment. The deadline for written submissions is 2 April 2019. Ellandi will be sharing this data with the committee.
Investment director Jonathan Cole said, “While the sentiment behind these headline grabbing measures to help retailers is welcome, in practice we have found they are more style than substance for the majority. To enable our town centres to adapt and flourish in the face of structural change, comprehensive tax reform is needed. This should level the playing field and re-connect all retailers’ rates bills to today’s economics of operation. In particular, ‘downwards transition’ should be immediately abolished, as it is still pegging many retailers’ rates liabilities to the 2008 rental peaks of more than a decade ago.”