New West End Company, representing over 600 retailers, hoteliers and property owners in London’s West End, has urged the UK Government to implement a business rate reform which would eliminate inequality between high street and online retailers and boost the high street with a £5 billion cut in their rates bills.
In two reports published, New West End Company has called for the introduction of a revenue based tax to replace business rates for online businesses.
The extra money raised would be used to reduce the rates burden for other businesses. Online businesses currently pay just one tenth of the business rates paid by high street businesses.
According to New West End Company, if just 1% tax was placed on online business revenues over £5 billion could be raised each year. This would allow the government to cut business rates for by an average 17.5%, at no cost to the Treasury.
High street businesses would benefit from an even greater reduction in their rate bills since they pay a disproportionate amount of this tax. According to the British Retail Consortium, retailers account for 6% of GDP but pay 26% of business rates.
The proposals, which come from a report commissioned by New West End Company from Arup and local government expert Professor Tony Travers, recommend replacing business rates with a revenue based tax for businesses that are wholly or largely online. On 22 June 22 New West End Company’s proposal was submitted as written evidence to the House of Commons Housing, Communities and Local Government Select Committee inquiry into “high streets and town centres 2030”.
RPA Perspective The rise in business rates are considered a major contributing factor to the rising number of retail and restaurant closures across the UK. Last year’s rates revaluation saw business rates for stores in London’s West End rise by an average of 80%. Some stores experienced rate increases of over 130%
High street retailers, restaurants and bars, who typically use larger store spaces in prime locations, will benefit most from the new proposal. The proposals new tax would apply only to businesses that are wholly or largely online so that high street retailers who have a strong online presence are not taxed twice.
Sir Peter Rogers, Chairman of New West End Company said: “Business rates are currently the biggest tax that high street retailers pay, accounting for nearly half [45%] of retailers’ tax bill. The current structure of business rates, whereby they are linked to the value of occupied property, not economic performance, provides online retailers with an unfair advantage and a 90% rate discount in an already struggling bricks and mortar retail environment.
“London’s West End is a major contributor to the UK economy with retailers generating over £9 billion in sales a year and employing over 80,000 people, if we do not act now we damage the ability of those business to survive and continue to drive our economy.”
In 2017 Marks and Spencer paid £184 million in business rates, with revenue of £9.6 billion. Amazon, with revenue of £7.3 billion in the UK, paid just £14 million. If Amazon had paid the same proportion of their revenue as M&S they would have paid £140 billion.
Over the coming months New West End Company, whose members include Selfridges, Marks and Spencer and Fenwick’s, will urge the Chancellor to even the playing field for high street businesses and consider the proposal in his Autumn Budget later this year.
