More than 1,500 retail shops in the City of London could see their tax bill slashed after a tribunal ruled a Cheapside store was paying too much in business rates.
The Valuation Tribunal for England ruled that the rateable value applied to the main space of a City of London shop by the Valuation Office Agency, an executive government agency, had been set too high following a 2023 revaluation.
A property’s rateable value is an assessment of the annual rent the property would rent for if it were available to let on the open market.
Business rates are then calculated by multiplying the rateable value of a property by the multiplier set by central government, which currently stands at 51.2p.
The dispute between the Cheapside shop and the valuation agency culminated in an independent panel, which hears business rates appeals, ruling that the rateable value of a shop in the City of London should be reduced from £287,500 to £179,000, a 38 per cent reduction.
Values are periodically reassessed, but turbulence in the property market over the past few years led to the misvaluation, according to the commercial real estate intelligence firm Altus Group.
The most recent revaluation came into effect in England and Wales on 1st April 2023, based on rateable values from 1st April 2021, when the country was in the midst of a pandemic and demand for new leases had collapsed.
There are 1,540 other similar shops in the City which could be impacted by the ruling, which could mean total savings of £33m for retailers in the City, according to Altus.
Alex Probyn, President of Property Tax at Altus Group, said “the agency had an unenviable task in producing more than 2 million non-domestic property valuations against that backdrop. It was always going to be the most subjective revaluation yet and there was always going to be significant sectoral and regional corrections needed.”
Probyn added “the 2023 revaluation needs a serious revisit through the urgent determination of outstanding challenges to ensure that ratepayers are paying the correct level of tax.”
Business rates have been under the spotlight recently, with over 70 retail bosses urging the Chancellor to slash business rates for retailers in a move which they claim would boost growth and fuel investment.
In a letter to Rachel Reeves, 71 retail chief executives argued the government should “level the playing field” by introducing a ‘retail rates corrector’, which would see rates paid on retail properties fall by 20 per cent.