Increase in warehouse rates ruled out in Budget – for now…
An increase in the amount of business rates paid by warehouses with a rateable value over £500,000 has been ruled out by the Chancellor ahead of the Budget due at the end of October.
By Liza Helps, Property Editor, Logistics Matters
THE CHANCELLOR has announced that the cut in business rate tax for 140,000 high street shops, pubs and clubs will be paid for by tightening tax rules for online market places rather than implementing a further ‘warehouse tax’.
He has indicated that he will make online platforms responsible for collecting VAT from sellers with annual turnover exceeding £90,000, closing loopholes exploited by overseas retailers to avoid tax and undercut British businesses. The move is expected to raise close to £1 billion.
Only last week high street retailers including the heads of Marks & Spencer’s and John Lewis warned the Chancellor in an open letter against imposing a further ‘warehouse tax’ as they said it would only increase pressure on stores leading to higher prices.
Prime Minister Andy Burnham had mooted that a promised 20% cut in business rates for high street shops, pubs and clubs could be paid for by online operators of warehouses – typically those with a rateable value of £500,000 or more. However, John Lewis Partnership chair Jason Tarry wrote that it was wrong to see modern retail as ‘a zero-sum game of physical shops vs online’.
It should be noted that properties including warehouses with a rateable value over £500,000 already pay a multiplier over 50p compared to a rate of 38p for a small high street shop.
Indeed, in its submission to the Treasury ahead of the Budget later this month, the UKWA said new analysis showed that seven in ten large distribution warehouses are caught by the new high-value multiplier, and as a result warehouses had already been hit hard by this year’s business rates changes. It warned the Treasury that warehousing is vital to the Government’s aims on controlling the cost of living and boosting growth in every post code.
Property consultancy Savills noted earlier this year that following publication of the draft 2026 Rating List, average rateable values for warehouses in England, Wales and Scotland increased by 21%, 23% and 13% respectively.
Luckily in the last budget the annual multipliers have came down by more than expected in England and Wales, but less than expected in Scotland with the much feared ‘large property supplement’ – which could have added as much as 20% to rates bills – set at a ‘mere’ 5.8% increase in England and 2.8% in Wales.
This meant that with rateable values in England rising by an average of 21%, , the average rates bill will be restricted to just an 8.67% increase. It could have been so much worse.
The fact that the Chancellor has indicated that there will be no additional warehouse tax added in this budget is a reprieve but it does not actually resolve the issue with Marks & Spencer’s chief executive Stuart Machin calling for the Chancellor to fix business rates once and for all.
He notes: “Retail makes up around 5% of the economy but pays over a fifth of all business rates. That’s not sustainable. M&S alone pays around £170 million a year. It’s right to support the pubs, bars and music venues on high streets that bring our towns to life. But if you do that by taxing supermarkets, [and their warehouses] you’re paying for a cheaper pint by loading costs on to the weekly shop.”
The UKWA which has challenged the Government on business rates was one of the organisation urging the Treasury to look at clamping down on VAT evasion by foreign sellers on online marketplaces, which they said ‘would be much better than another tax hikes on warehouses’.
