More business rates pain for supermarket giants in 2015

Britain's biggest supermarkets will be hit by increasingly disproportionate hikes in business rates, spelling more pain for the grocery giants as sales continue to slide.

New analysis shows that Tesco, Sainsbury's, Asda and Morrisons face an additional bill of more than £110,000 per superstore in 2015-16 compared to when the Coalition came to power in 2010-11.

Paul Turner-Mitchell, a business rates campaigner who has advised the British Property Federation, said this represented a 19% increase over the period. It means the 'Big Four' face paying £693,651 more in property tax for each of their bigger stores, while small businesses have seen their bills reduced.

This comes as retail specialists Kantar project that income for Tesco's largest 'Extra' stores will fall by 13% to an estimated £66.8m per store in 2016, from £76.9m in 2011 – under increasing pressure from discounters such as Aldi and Lidl.

Mr Turner-Mitchell said just under 2,000 of the biggest stores, which represent less than 0.5% of all shops and retail warehouses in the UK, now pay a fifth of the business rates bill for retail premises. Tesco has already abandoned plans to open a superstore in Margate after fighting for years to get planning permission. It is also considering selling off other property assets.

Mr Turner-Mitchell described a pledge by the Chancellor in the Autumn Statement to review the structure of business rates as 'jam tomorrow'. He added that there was little hope of reducing the burden on Britain's biggest supermarkets without inflicting pain on small businesses, which have enjoyed a range of temporary reliefs under the Coalition.

The Office for Budget Responsibility (OBR) projects that business rates will raise £27.6bn for the Government next year. This is more than it will receive from fuel duties.

Also worth noting is the quiet changes to the business rates system introduced this month mean that firms wishing to appeal against their bill must do so by 31 March, 2015 – or they will not receive a refund on backdated over payments.

Backlogs at the Valuation Office Agency, which is responsible for business rates, are already expected to exceed 60,000 by July next year.

For more information contact stuart.hicks@dunlopheywood.com