Retailers and owners of vacant shops may be hit by a government proposal to postpone the revaluation of business rates. Britain's more troubled high streets had been eagerly anticipating the next review, due in April 2015, in expectation of rate cuts. But, as part of the Growth and Infrastructure Bill, the communities and local government department now wants to delay the reset date by two years.
Junior minister Brandon Lewis said the reform would "avoid local firms and local shops facing unexpected hikes in their business rate bills" and "provide certainty for business to plan and invest, supporting local economic growth". But the entire business and property lobby has lined up to claim the opposite - that the decision will punish the firms hardest hit by the recession.
Business rates are like council tax for commercial properties. The difference is that they are based on rental values, rather than capital values, and these values are updated every five years. The government is not allowed to raise the tax take by more than inflation, so the valuations simply redistribute the burden across the country to reflect relative changes in rental levels.
The last revaluation - in 2010, but based on rental values from April 2008 - happened to coincide with the top of the economic cycle. Since then, rents have fallen by as much as a half in economically weaker towns and second-tier locations, while they have risen further in central London and remained robust in commuter towns. A revaluation would therefore reduce the tax take from economically weaker locations and raise it in the more resilient south east.
Some see the measure as political opportunism. Delaying the revaluation will spare Tory and Liberal heartlands a pre-election blow. Moreover, the overall rental value of the country's commercial property stock is bound to have fallen since April 2008, so the government will have to raise the proportion of rent it takes to maintain its revenues - a headline it would rather avoid five weeks before a general election.
The government's position on rates - which not only undermines its own Portas review into failing high streets, but also a 20-year-old ratings system that has given retailers the certainty they need to invest - is such a caricature of hypocrisy that it will hopefully be ditched. But it still highlights the risks of buying high-yielding shops: with rates higher than rents in some northern towns, vacant units haemorrhage money.
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