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Asda and Boots urge reform of ‘broken’ rates system

Asda and Boots urge reform of 'broken' rates system

Boots

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Bosses of more than 50 retailers including Asda and Boots have written to the chancellor urging him to change tax rules to boost the UK High Street.

The group said it wanted him to fix the "broken business rates system", which it called outdated.

It said the tax had jumped by 50% since the 1990s and had contributed to some retailers going out of business.

The Treasury said it had announced a £3.6bn fund last month "to support our High Streets and town centres".

"The chancellor will announce further details of the government's policy programme in the coming weeks and months," it added.

In the letter to the chancellor, co-ordinated by the British Retail Consortium trade body, the group pointed out that the retail sector accounted for 5% of the economy but paid 25% of all business rates, a property-based tax.

It said "this disparity" was damaging High Streets and "harming the communities they support".

As a result, the group said there was a growing number of empty shops, with vacancy rates at a four-and-a-half year high.

Business rates are a tax on properties used for business. They are charged by the local council, but set by central government. The tenants or owners of offices, shops, pubs, and warehouses all pay business rates.

James Lowman, the chief executive of the Association of Convenience Stores, told the BBC's Today programme: "It's a really outdated system, it's designed for a time when there only was physical retail, and people doing business from physical premises. That has been changing for a long time.

"The biggest thing is the way it's a disincentive to investment – so if you take a retail shop and you improve it, you put in things that are not just important to the business, but are probably important to that community, like CCTV, solar panels perhaps, bringing in a cash machine, that sees your business rates bills significantly increase.

"Now surely it should be the other way round. We should be encouraging and incentivising investment, rather than penalising businesses for it."

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Among other things, the group wants businesses in London and the South East to pay more business rates to take pressure off firms in the North and the Midlands.

However, it also said it wanted to avoid a tax rise overall.

"The likelihood of a no-deal Brexit appears to be increasing, which we believe would place a considerable strain on retailers in the UK," says the letter.

"In this context, the prime minister's intention to pursue an economic package to boost business and investment in the UK is crucially important; we strongly believe that reform of the broken business rates system should be front and centre of that package."

Retailers employ three million people in the UK which makes the industry the UK's largest private sector employer, according to the British Retail Consortium.

The retail sector is not alone in asking for concessions to help it prepare for a potential no-deal Brexit.

The UK food industry, for example, has asked the government to waive aspects of competition law to allow firms to co-ordinate and direct supplies with each other after a no-deal Brexit.

On the other hand, government funding to help UK companies cope with a possible no-deal Brexit customs system has had a "concerningly low" take-up, the BBC's Newsnight programme reported last week.

In December, the Treasury and HM Revenue & Customs unveiled an £8m training fund which companies and trade intermediaries, such as freight forwarders, could apply for, but just 741 companies have applied for the grants.

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