The bid to subsidise tax bills for high street firms including pubs and bars will see a new levy forced on places including NHS hospitals, universities, Government ministries and police stations, according to commercial real estate intelligence firm Altus Group.
The business rates reform announced in the Budget last week (Wednesday 30 October) intends to introduce permanently lower business rates multipliers for high street retail, hospitality and leisure business premises with a rateable value of less than £500,000.
Business rates bills are calculated by multiplying the property’s rateable value, an estimate of open market rent, by figures set by the Government each year. The multiplier figures depend on the value of the property with ratepayers paying the multiplier amount for every £1 of rateable value.
The Government said that to make this tax cut fiscally sustainable, and revenue neutral, it would be funded through a new higher multiplier for the most valuable properties, those with a rateable value of £500,000 or more, which they say captures the majority of large distribution warehouses including those used by the online giants such as Amazon.
Higher rates for 15k non-dom properties
However, analysis of official Government data by Altus Group shows that while the new high street ‘levy’ will apply to 1,589 large distribution warehouses, it will also lead to higher business rates bills for a further additional 15,278 non-domestic properties too.
Altus Group president of property tax Alex Probyn said the plan had been “ill-thought-out” and added: “It is right for the Government to try to level the playing field but the consequences of this plan hasn’t been properly thought through with the vast majority of the revenue that will be raised not even coming from the online giants.”
The Government announced the current 75% business rates relief figure will be slashed to just 40% relief from April 2025 for a year and then businesses will again be on tenterhooks waiting for the new rates system’s introduction.
The analysis from Altus Group shows 297 NHS Hospitals will be subject to the new ‘levy’, 310 universities, 309 further education colleges and includes 10 properties used by the Metropolitan Police Service, such as New Scotland Yard.
Government departments will also have to dig into their budgets with more than 200 properties from military barracks to court buildings to prisons having to pay.
England ‘less attractive’
Some 295 private schools will not only see their 80% charitable relief removed from April next year but, in 2026, will also be subject to the new ‘levy’.
Large manufacturing sites, especially automotive manufacturers, who have long complained that business rates at their current levels hinder international competitiveness will also be hit by the new ‘levy’.
Probyn said: “[The plan] just does not support long-term capital investment and productivity. England will be a less attractive and competitive location for manufacturing.”
According to Altus Group there are a total of 16,867 non-domestic properties in England with a rateable value of £500,000 or more which will now be subject to the new high street ‘levy’.
While they account for just 1% of all non-domestic properties liable for business rates, collectively, they already pay £12.61bn, which equates to 48% of the £26.27bn councils in England expect to collect this year.
Business rates are devolved to Scotland, Wales and Northern Ireland.
To see The Morning Advertiser's Budget coverage, here are articles on business rates, 1p off a pint, employers' national insurance contribution rise, trade reaction and opinion.
