Beleaguered retailer Poundworld who today started a “closing down” sale to kick-start stock clearances were denied a £4.1 million property tax lifeline before it entered into administration according to real estate advisor, Altus Group.
Last year’s business rates revaluation should have been good news for Poundworld who operate from many economically disadvantaged areas where property values have plummeted during the previous 7 years.
Altus Group say Poundworld should have been a big ‘winner’ under the tax shakeup seeing rateable values on its stores in England and Wales, used to calculate business rates liabilities, fall by almost a fifth down 18.3%.
The Government self funding scheme of ‘Transitional Relief’ was designed to provide £3.35 billion in help over 4 years of the 2017 tax regime to all sectors of the economy for those businesses who saw big rises in tax bills under the revaluation.
But, in order to help pay for the limits on bill increases, strict limits were imposed on tax reductions.
Shops and retail premises, with rateable values over £100,000, which saw their property values plummet in struggling areas, were restricted to tax reductions in business rates bills of just 4.1% before the effects of 2% inflation in 2017/18 and this year for 2018/19 were limited to just 4.6% before the effects of 3% inflation. Restrictions were also imposed on reductions for small and medium sized premises too.
During the first year following the revaluation, business rates bills in England and Wales for Poundworld fell by just 3.7% during 2017/18 despite values plummeting according to Altus Group. Whilst that equated to a tax reduction of £442,118, without the restrictions imposed, bills would have fallen by 23.5% down by £2,806,761.
This financial year, for 2018/19, from 1st April bills fell by 6% in England and Wales for Poundworld down £717,690 on pre revaluation levels but Altus Group say, without the restrictions, the tax liabilities would have been down £2,454,393 by 20.6%
The analysis of official Government data by Altus Group show through Transitional Relief, which only applies to bills in England, Poundworld branded stores and identified were ‘denied’ tax reductions of £2,364,643 last year and £1,736,703 totalling £4,101,346.
With the stream of collapses across the retail and hospitality sectors since the turn of the year, Robert Hayton who is Head of Business Rates at Altus Group, says that the Government should now rethink transitional relief:
“Transitional relief should apply only to those bills which increase between one revaluation period and the next. Where local economies are struggling and values fall, ratepayers need to benefit from the full reduction immediately. The cost of upwards transition could be paid for by a small supplement. It would be like an insurance premium against a steep increase in liability.”
“Without this immediate reform, places where respite is so badly needed won’t get the fair deal they need to respond to changing markets leaving even more stores vulnerable to closure.”