Tesco’s mothballed stores in the VO’s sights

The Valuation Office seems to be providing an incentive for major supermarkets to do something with store assets they have mothballed during the recession.

With major competition coming from Lidl and Aldi with their cut price offerings and back to basic stores, the likes of Tesco have been reducing their UK superstore roll out to more modest levels.

But despite their recent more prudent approach to balancing the cheque book, Tesco has just been informed by the VO it will have to start paying business rates on a mothballed store in Chatteris, Cambridgeshire – a move welcomed by local MP Steve Barclay who wants to push the company to sub-let the property as quickly as possible.

It is thought that Tesco had been taking advantage of a technicality that meant they wouldn’t have to pay Business Rates on the building they had commissioned to be built. The retailer argued the building was incomplete because it was not fitted out and was also missing other items including air conditioning – not an unusual ploy when it comes to rates’ mitigation.

However, a completion notice has now been sent and the VO has also issued a bill – although it is not known what rateable value is on the 47,000 sq ft superstore. Tesco should begin payments from July 1, but with a three month exemption period, will actually start paying rates in October. After spending already £22m on it, the company announced earlier this year that Chatteris would be mothballed – one of 49 planned stores across the UK to be cancelled, with a further 43 existing outlets also shut or due to be shut down.

Mr Barclay, who has been lobbying Tesco to find a new tenant for the store, hopes the fact they will now have to pay business rates will incentivise them into sub-letting rather than just ignoring the “asset”.

It will be interesting to see if business rates are really the stick needed to get Tesco to re-evaluate the future of these behemoth empty stores, or whether they view the tax as an irritant that pales into insignificance when counted against the cost of the hundreds of millions already poured into the now defunct expansion strategy.