Gift shop that’ll pay higher rates than Harrods
. . . and the stationery store to be charged nearly TEN times more than Amazon. Proof business rates are still dangerously flawed – despite Chancellor’s climbdown
SMAll shopkeepers pay higher rates of property tax than retail giants such as Harrods and John lewis, Money Mail can reveal. Across the country punitive business rates threaten the survival of many High Street stores, cafes and restaurants.
Around 510,000 businesses face higher bills from next month. Some say the huge increases will force them to close, stripping our High Streets of vital services.
Money Mail’s Save our Shops campaign scored a victory when Chancellor philip Hammond announced the worst-hit businesses would have price increases capped at £600 a year.
A £300 million relief fund will also be distributed by councils to businesses that are struggling the most with the rises.
However, many small shops in smarter areas will not be eligible because their bills are already sky-high. Shops also fear that qualifying for the relief fund may be like trying to find one of Willy Wonka’s golden tickets, with so many in need of help.
Crucially, the Government has failed to address the harsh methods used to calculate business rates. Cruel anomalies mean some small stores will pay nearly ten times the rate per square metre as department stores and online retailers.
Though bigger stores still pay more overall, business organisations say the smallest shops are forced to shoulder too much of the burden. This is because business rates are calculated on a property’s annual rental value, rather than the firm’s size, turnover or profits.
So shopkeepers and restaurant owners who barely scrape a living in prime locations are penalised at the expense of out- of- town supermarkets and online giants such as Amazon and ASoS, which have warehouses in some of the cheapest areas of Yorkshire and Wales.
Mike Cherry, of the Federation of Small Businesses, says: ‘ Business rates are fundamentally flawed. As a property tax, they disproportionately hit small businesses.’
Money Mail is calling for an overhaul of the entire business rates system, which nets the Treasury £25 billion a year.
Here, we reveal how the unfair way the tax is applied threatens our towns and villages.
SMALL GIFT SHOP VERSUS HARRODS
Sophie Likes . . . boutique, Harrogate, North Yorkshire, employs two people 2017 rate: £495 per sq m Harrods, Knightsbridge, Central London. One of the world’s largest department stores, it has offshoots in property, banking and aviation. Group turnover last year was £788 million. It has 12,000 staff 2017 rate: £243.50 per sq m SopHie HArTleY must find £9,320 to pay the taxman this year.
The founder of Sophie likes . . . is not entitled to business rate relief due to the high rental value of her store.
Harrods’ business rate bill is at a lower rate partly because few companies would be willing to rent such a vast space, decreasing the rental value per sq m.
‘it shows how wrong the system is that i’m paying a higher rate than a world-famous store in one of the most desirable location in the UK,’ says Sophie.
‘i think that profits should be taken into account.’
She fears that if independent retailers like herself are forced out, towns such as Harrogate would lose their unique identity.
The cap on rates hikes of £600 a year — announced in the Budget – will not benefit Sophie because the rental value of her shop is too expensive to qualify.
DELICATESSEN VERSUS WAITROSE
Bayley & Sage deli, Parsons Green, South-West London, has around 30 employees 2017 rate: £850 per sq m Little Waitrose. Part of the John Lewis Partnership, generating £6 billion of sales a year and employing 90,000 in 350 stores 2017 rate: £145 per sq m THe Bayley & Sage deli was founded by Jennie Allen 20 years ago, who now faces paying almost £35,000 in business rates a year on this one store.
in comparison, Waitrose will pay £92,000 for its far larger parsons Green site just down the road.
‘We are not on a level playing field with the big supermarkets,’ says Jennie, 54. ‘it is insane that we are paying such a different amount per square metre.’
Jennie has four delis in West london. She will pay more in business rates on her Wimbledon branch, which opened in 1997, than she will in corporation tax this year, which she says is ‘crazy’.
‘Smaller companies are carrying too much of the burden,’ she says. ‘i don’t mind paying more corporation tax because that is based on profits, but business rates — and the way they are calculated — makes no sense.
‘i don’t think the big shops should be punished just for being big companies, but there should be parity at least.’
INDEPENDENT CAFE VERSUS STARBUCKS
The Good Life Eatery has three cafes in London, including its first one in Chelsea. It has a staff of 75 2017 rate: £1,850 per sq m Starbucks owns or franchises 800 branches in the UK alone and employs 14,000 staff 2017 rate: £1,850 per sq m YASMine lArizAdeH and Shirin Kouros opened The Good life eatery, in Chelsea, South-West london, as an antidote to the rows of chain cafes in the area.
But they fear business rates hikes will mean the giant chains will be the only survivors.
Just two doors down from their independent cafe, there is a huge Starbucks. pret A Manger, itsu, eat and Costa Coffee are nearby.
Yasmine, 27, says it’s a big struggle for smaller start-ups to compete. The business rates on the friends’ cafe will go up from £18,800 to £21,800 in April.
They must pay £1,850 per sq m — the same rate as global coffee giant Starbucks and a big rise from £1,275 per sq m last year. While Starbucks can absorb the cost, it will hit Yasmine’s business hard.
The Good life eatery is also charged seven times the rate of John lewis’s store peter Jones in Sloane Square — a favourite of the duchess of Cambridge — which is billed £253 per sq m. ‘it makes no sense that all cafes are treated the same and we are charged the same as Starbucks,’ says Yasmine.
Small business rate relief — where shops will pay nothing if the rental value is less than £12,000 a year and get a discount if it’s below £15,000 — was meant to help shops such as hers. But she is not eligible because the property is worth too much.
There is no tax break to help new and relatively small shops that occupy expensive properties. ‘our rates are not sustainable,’ says Yasmine. ‘it is affecting our profits, our recruitment and how much we can reinvest into the business.
‘The chains are taking over every High Street. They will soon be the only ones left.’
Yasmine is sceptical of the £ 300 million relief fund for businesses worst affected by the rises. ‘it will be like all of these other funds to help start-ups: there is a big announcement, then you never hear about it again,’ she says.
‘And when you apply, you’re not eligible or it’s no longer running.’
CLOTHING SHOP VERSUS BOOHOO
Kidzone, Melton Mowbray, Leicestershire 2017: £185 per sq m Boohoo.com, Burnley warehouse, Lancashire. The online clothing retailer has an annual turnover of £195 million and 1,000 staff 2017: £15 per sq m pACKinG up the remaining stock last month, children’s clothing and school uniform retailer Stewart Jones, 57, bid farewell to the shop he opened five years ago.
He’s been pushed off the High Street by business rates, which were due to increase by £1,000 next month to almost £6,000 a year.
His new premises will be less prominent and more difficult for pushchairs to access — but he’ll pay no tax because it is small enough to be exempt.
Meanwhile, online clothing giant Boohoo will pay £25,000 less on its warehouse in Burnley over the next five years after its rates were cut. They have dropped from £19 to £15
per sq m, while Stewart’s rates would have risen from £175 to £185 per sq m if he had stayed.
‘Another £1,000 a year might not sound like a lot, but theses rates are killing me,’ he says. ‘They should be based on your profit, not just the space you occupy.’
For Stewart, the relief measures announced in the Budget have come too late. He has already shut up shop and moved premises. But he still wants to see an overhaul of how rates are calculated.
‘ If something doesn’t change quickly, our High Streets will have only charity shops, big chains and nothing else,’ he says.
STATIONERY SHOP VERSUS AMAZON
The Pencil Case, Cowbridge, South Wales. Sells stationery, school uniform and ballet and dancewear. Two part-time staff 2017 rate: £250 per sq m Amazon warehouse, Crymlyn Burrows, Swansea. The global internet giant takes £5 billion in sales in the UK a year and has 14,000 staff nationwide 2017 rate: £27 per square metre SAlly STepHenSon fulfilled a childhood dream three years ago when she opened The pencil Case in the pretty market town of Cowbridge, Vale of Glamorgan.
But she finds herself competing with one of cost- cutting online giant Amazon’s huge distribution centres just 28 miles away.
plus, she is charged business rates more than nine times higher than Amazon per sq m. next month, they will rise from £200 to £250 per sq m — while the rate for Amazon will drop from £31.50 to £27 per sq m. ‘It is crazy and unfair that a huge multinational competitor such as Amazon gets taxed at such a lower rate than I do,’ says Sally, 42.
While Amazon’s overall bill will be bigger because it owns a much larger space, Sally can’t understand why online retailers are offered more generous rates per sq m.
Her annual bill is due to rise from £960 to £1,430 — and within three years will be up to £5,000 a year. I was going to hire a new member of staff and invest in a website, but I have had to put the brakes on everything,’ says Sally.
‘you can’t put up your prices enough to cover this type of increase. At best it will squeeze your margins and at worst places will have to close.
‘The rating system rewards online over bricks-and-mortar shops.’
Welsh shops are not entitled to the business rates relief announced in the Budget because devolved powers mean the Welsh Assembly makes its own decisions on this tax.
A spokesman for the Government’s Valuation office Agency says: ‘We approach all classes of property fairly and equally, and use recognised methods to set rateable values.’ l.eccles@dailymail.co.uk