Should agents repay Business Rates relief because offices were open?

Almost a year ago the government announced that estate and lettings agencies were to be included in the business rates relief introduced because of Coronavirus.

That came after a campaign led primarily by Propertymark, following the rate relief given to other sectors of the economy a few weeks earlier.

However, now questions have been raised as to whether companies should pay some or all of the business rates for the 2020-2021 year after all, if they stayed open for all or some of the time - and estate agencies have been operating for a substantial period of that year.

The issue has been raised by John Webber, head of business rates at Colliers International, who suggests that the government now needs to re-think the way in which it hands out support to sectors of the economy.

Webber’s comments are primarily related to the retail and hospitality sectors; in those parts of the economy, a blanket approach was taken.

This means that on the one hand pubs and hotels were given business rate relief, and went on to be closed for substantial periods of the past year. However, supermarkets were also given business rate relief, and they remained open almost as normal. 

He says as a result of this, there has been ‘naming and shaming’ with several supermarkets - Tesco, Morrison’s, Sainsburys, Asda and Aldi - paying back more than £1.7 billion in business rates relief between them. 

Estate and letting agencies have been classified by government as retail for the purposes of business rates relief.

A statement from Colliers says: “Now there is pressure on other companies to follow suit – although some, particularly those who sell clothing and other non-essential retail, as well as foods, such as John Lewis, are resisting the pressure due to the challenges their wider business are facing.” 

Just two months ago Propertymark called on the government to make the temporary Covid business rates exemption given to High Street agencies permanent - and it called for online agencies to have their taxation levels increased if necessary, to give the industry a level playing field on which to operate. 

In its submission to the government’s formal consultation on business rates, Propertymark wrote in December: “Property agents have long been a bedrock of the local High Street and in light of recent events, we believe that estate and letting agent business should be able to continue to access the existing and proposed business rates relief available for retail,” it says.

But Colliers’ John Webber says it’s time for a government rethink on the future of the business rates relief, once the current exemptions expire on April 1.

“The government’s blanket approach last year was in many ways perfectly sensible. We did not know what we were dealing with in the early stages of the pandemic and which companies would be able cope well and which wouldn’t under lockdown - and the overall priority was to preserve jobs and keep the nation fed” he says. 

Webber instead says the government should now:

- Asks businesses in retail and hospitality to apply for business rates relief or a rates holiday rather than receiving it automatically. “Businesses need to show proof of a decline in turn over or profit caused by the pandemic and lockdown to be eligible. That way neither the supermarkets nor the on-line retailers who have benefitted from the closure of physical shops would apply unless they had undergone genuine hardship.”

- Extend reliefs to businesses outside the retail/ leisure and hospitality sectors. “This includes businesses in the offices sector where many businesses have been prohibited from using their offices during lockdown and workers are told to work from home. The financial implications have been dramatic for many – as we are seeing by the sheer number of companies currently appealing their rates bills via material change of circumstance- which in the first six months of lockdown averaged 1,000 appeals a day.”

- Allow the names of the businesses that do apply for the rates holiday to be in the public domain. “Again focusing the minds of companies to only apply if they have genuine need.”

- For those eligible businesses, offer a business rates holiday for the next six months. “We suggest the government acts quickly on to avoid new bills being sent out to struggling companies as we start the new rating list in April. The Scottish Government has already announced a three-month extension of reliefs for the retail, hospitality, and leisure sectors in Scotland, so what is the UK government waiting for?”

Webber continues: “Basing the rates holiday or rates relief on a transparent ‘needs’ basis would save the Government substantial funds compared to a blanket holiday approach and also take away the embarrassment and administrative headache that some companies faced this year who were granted the monies, but felt they should pay it back. 

“We estimate a blanket six months rates holiday for retail and hospitality would cost the government around £6 billion, but an application only system with widened usage would be no more than £4 billion or £5 billion.”