The Treasury has reportedly u-turned on a decision to exempt shops from plans to raise business rates, leaving major supermarkets facing a multimillion-pound tax hit.
Supermarkets bosses had previously received firm indications the Treasury had “listened” to their demands to exempt retail from plans for a business rates surtax on the largest properties across all sectors.
The BRC warned in September that 400 of Britain’s largest shops could otherwise be forced to close.
Supermarkets chiefs had publicly expressed confidence that Rachel Reeves had bowed to their demands after meeting with the Chancellor at 11 Downing Street in September.
Lidl GB CEO Ryan McDonnell told The Grocer in October: “We’ve been very communicative with government, not just ourselves individually, but through the BRC. We think those discussions have been quite productive. I’m quite hopeful the government will see sense.”
M&S CEO Stuart Machin expressed similar confidence last month, saying: “I think thankfully that seems to be a point that has been discussed and received, so I’m hopeful.”
However, Treasury officials have now told supermarkets they will be included in the planned higher tax rate in Reeves’ budget speech on Wednesday, according to the FT.
The business rates surtax is set to add up to 10p to the multiplier – used to calculate the tax – for properties rateable over £500,000. The extra tax raised is to pay for a discount of up to 20p on the multiplier for smaller properties in retail, hospitality & leisure (RHL) sectors. The reforms are to replace temporary business rates relief for RHL premises, while giving smaller operators in those sectors a permanent discount at a similar level.
The BRC has campaigned for the Treasury to go ahead with the discount for smaller RHL premises while exempting large shops from the proposed higher rate. The discount should be funded by introducing a slightly higher surtax on large properties across sectors other than retail, according to the trade body.
The chiefs of nine of the UK’s biggest supermarkets wrote to the Chancellor in October warning that ordinary households would be impacted through inflation unless she excluded shops from the proposed higher rate.
“If the industry faces higher taxes in the coming budget – such as being included in the new surtax on business rates – our ability to deliver value for our customers will become even more challenging and it will be households who inevitably feel the impact,” said the letter, signed by bosses of Tesco, Sainsbury’s, Asda, Aldi, Morrisons, Lidl, M&S, Waitrose and Iceland.
Operators of smaller shops have been just as vocal in demanding Reeves grant them the maximum possible discount.
Co-op group CEO Shirine Khoury-Haq said in October: “The proposed system would improve the financial situation of 99% of retailers. How much they are protected from tax rises depends on decisions made in this budget.”
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