The Budget and business rates relief
A quick glance at the news and you’ll know that shopping in the UK is changing. Online giants such as Amazon and Asos have been a death knell for the high street. Stores have been struggling and not just the small ones. Longstanding household names, House of Fraser, Toys ‘R’ Us and Debenhams, amongst many, have been affected. Acknowledging these difficulties, the Chancellor’s recent October budget includes business rates relief for small retailers and has now proposed tech giants ‘pay their fair share’ by announcing a new digital services tax.
Business rates are a tax on commercial property paid for (generally) by the occupier. The amount is based on the rateable value of the property and makes up a significant proportion of the occupier’s costs. In the current climate properties have been left vacant with tenants unable to pay the rent. This leaves landlords picking up the cost of business rates for empty premises. Landlords do get a concessionary 3 months free from when the property became vacant (6 for factories and warehouses), but after that they are liable for the full amount (though there are exemptions). Should the landlord be able to re-let the property (where such occupation qualifies as rateable occupation thereby passing the bill to the occupier) for a period of at least 6 weeks, they would be entitled to apply for another concessionary period.
Would a lease of a 13,000 square foot warehouse to a mouse for 6 weeks qualify as rateable occupation? Probably not (a mouse is not a legal entity). But a lease for short term storage of third party goods does, as confirmed in R (Principled Offsite Logistics Ltd) v Trafford Council and others. The landmark case re-examined whether storage occupation for the purpose of mitigating rates liability qualified as rateable occupation. It was found that occupation for the sole purpose of providing rates mitigation could qualify, if it provided a benefit to the occupier (however moral the reason for occupation). At the end of the lease a new concessionary period for the landlord would then be triggered.
Whilst the Chancellor’s budget is a positive step for roughly half a million small stores affected, the relief will not be available to properties with a rateable value of £51,000 or above. Large stores have argued that the ‘outdated’ business rates model needs an overhaul, so that all stores can benefit. The Chancellor’s budget also nodded towards relaxing planning rules for the high street to allow empty shops (like with offices) to be converted into housing. Whilst the finer details of the budget are still to be revealed, it seems like the high street we know won’t stop changing any time soon.