Overhauled rates system paves way for more new supermarkets

An expert has warned that local councils' increased reliance on business rates for income means supermarkets are more likely to be approved.

There will be an onslaught of new multiple-owned stores opening in the next four years as councils become reliant on the revenue brought in by business rates.

That was the warning from a business rates expert, who told Retail Express that the Government’s decision to hand over business rates power will mean councils veer towards approving more supermarket planning applications, ramping up competition for small stores.

By 2020, all local authorities will keep 100% of their area’s business rates revenue, which they will have to survive on instead of Government grants.

“Supermarkets are more likely to be approved because they could generate an extra £2m annually in council funding”

Paul Turner-Mitchell

“Supermarkets are more likely to be approved because they could generate an extra £2m annually in council funding,” said Paul Turner-Mitchell, business rates expert.

“When councils had no financial interest in business rates, they were more likely to reject multiples’ applications for new stores, citing concerns about impact on local businesses. As these changes come into effect, it’s going to sway planning decisions.”

One London-based retailer, who did not want to be named, told Retail Express her business had lost “almost all of its custom” since a Tesco opened opposite the store four years ago.

“When we get our rates statement, we’re told we’ve already been given all of the discount available to us,” she said. “We need more relief – our business is no longer profitable. There’s so much competition, the shop is dead.”

According to the Valuation Office Agency (VOA), retailers may be eligible for a rates reduction if they have evidence that a large multiple’s presence is severely damaging revenue – classed as a material change of circumstance (MCC).

“The opening of a new supermarket which competes directly with existing business properties is the type of change within a locality that may be a MCC,” a VOA spokesperson said.

Examples of changes that may count as MCCs include:

  • road or streetworks which affect your property – closures; changes to road layout; pedestrianisation
  • building work or demolition nearby or the erection of scaffolding on a neighbouring property
  • damage to infrastructure caused by flooding
  • an increase in the number of vacant properties in the vicinity
  • opening of a new development within the locality eg a supermarket or retail park which competes directly with existing business properties
  • a change in the use of another property in the locality

Source: gov.uk

“Retailers facing an issue like this should contact the VOA with details of their property and the change of circumstance. They should also provide any additional evidence to support their view that the MCC affects their rateable value.”

However, Turner-Mitchell warned that it was not in a council’s best interests to agree with small retailers. “Councils don’t want to help businesses that are suffering because of MCCs, as they’ll lose out if the rates are amended,” he said.

“They should want to stand up for their local retailers – but if they admit there is an MCC they are effectively damaging their own revenue.”

MP Clive Betts, who chairs the Communities and Local Government Committee, said the committee has suggested making business revaluations more frequent than every five years.

“Currently, revaluations tend to impose large cost increases, which disrupt businesses and lead to mass appeals,” he said.

He added that he was not aware of any cases where the 100% retention scheme was affecting decisions around business planning.

For more information on MCCs and how to appeal, click here to go to the government website.


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