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Viewpoint - 15/06/2016

Business rates shock for shopping centre owners

A new aggressive approach by the Valuation Office Agency (VOA) is leaving shopping centre owners facing an unexpected increase in their business rates bills.

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The target 

The VOA has come under pressure to help plug the gaps in the public finances by introducing ‘new’ properties to the Rating List. As a result, some shopping centre owners are facing unexpected bills of up to £75,000 per annum as business rates are levied on temporary lettings of residual space for the first time.  

The VOA is targeting over 100 shopping centres across England and Wales with the intention of creating a new rating assessment based on a percentage of receipts, thereby increasing the total rateable value of the centre and, ultimately, the business rates income for the Treasury. 

The income being targeted extends to any temporary installation with less than three months duration and typically includes exhibition stands and seasonal stalls such as children’s favourite Santa’s grotto. 

The impact 

The rateable values for the new entries vary dramatically; from £4,000 at The Chimes in Uxbridge to £154,000 at The Bullring in Birmingham. In the case of the Bullring, this equates to an increased business rates liability for the centre of £74,550 for 2016/17 backdated for up to five years. 

Retailers which occupy these temporary positions bring a great deal to the centre’s overall shopping experience. However, the fact shopping centre owners are now likely to face increased rates liabilities as a direct result of them, will no doubt act as a disincentive to any future agreements. 

The rationale 

This latest initiative is part of a sustained attached on what the VOA sees as an ‘easy target’. In his 2016 Budget, the Chancellor removed the Retail Rate Relief scheme and Long Term Empty Re-occupation discount and this latest grab will increase the burden on the sector even further. 

When you consider that the retail sector accounts for 23 per cent of the total rateable value across England Wales, it’s perhaps unsurprising that the sector continues to remain the focus of the Government’s attention. Added to the fact that it is high profile and there is a wealth of information available on the internet that the VOA can mine to target additional sources of income, it’s an easy target. 

The outlook 

The fear is that the VOA is using the new tactics to plug the anticipated revenue gap as local authorities look to offset some of the spending cuts in the lead up to 2020 when they will become responsible for 100 per cent retention of business rates income. 

Our main concern is that this is the thin end of the wedge. The VOA has so far failed to provide a concise description of what will be included as part of the new rating assessments or how they will be calculated, and their approach thus far has been illogical and uninformed. There is a potential for anything and everything to become a target. 

The solution 

If you are affected, we strongly recommend you seek professional advice from a qualified rating surveyor. For more information, please contact your local Business Rates surveyor.

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