Accountancy firm Mitchell Charlesworth is urging retailers to avoid sleepwalking into the largest change to business rates in a generation.
The government is preparing its first rates review in seven years which will see a new rating list for England and Wales taking effect from April 2017. It comes after a revaluation of 1.96million non-domestic properties in England and Wales.
Mitchell Charlesworth corporate recovery and insolvency partner Jeremy Oddie said the rates will reflect the rental values of properties, with prime city centre sites expected to be worst hit by the revaluations.
Across England, rateable values are set to rise by 9.1%, ranging from a 22.8% increase in London to a 1.1% fall in the North East. Figures for Wales show a 2.9% cut in rateable values, with shops falling by 8.8% and offices by 7%.
Oddie is now urging companies to review their draft rateable value (see notes to editors) to estimate if they are likely to see a rise or cut in their rates bill.
Mitchell Charlesworth has offices in Manchester, Liverpool. Chester, Warrington and Widnes.
“This move represents the largest change to business rates in a generation,” said Oddie. “There will be winners and losers. However, from our perspective we are not seeing enough evidence of businesses seeking clarity on their new position post April 2017.
“Our fear is that many firms are unaware of how badly they could be hit by the new measures and risk sleepwalking into the reforms. Due to the fact the revised rateable value will be pegged to properties rental value we expect to see a significant rate increase for sectors including prime offices, data centres and trade counter retail.
“It is really a double negative for the retail sector which is still reeling from competition of non-rate paying internet competitors, brought about by the proliferation of online shopping. This will also come as particularly bad news for landlords who lose tenants and will no longer benefit from empty rate relief for an extended period, which was the case in years gone by.”
Oddie said the review is significant because by 2020 councils will be able to keep 100% of all locally-raised taxes to help fund local services.
“For businesses who face an increase in rates, this rise will be capped at 5pc in the first year for small properties,” he said. “There is also transitional relief worth £3.4bn to help business owners adjust to the new bills.
“However, many businesses which have been expecting an immediate benefit are likely to be disappointed. Some northern retailers have projected a 60% fall in business rates but could see as little as 2% in the first year. The ‘transitional’ relief will also proceed at too slow a pace for many retailers. This comes on top of a two-year delay in the rates review which has left struggling firms having to cope with higher than expected bills.
“We urge firms unsure of their position to seek professional support immediately so they have a strong footing when the new rates come to pass.”