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Beales’ total business rates bill for this year on its 22 stores is £2.8m, according to Colliers

Struggling department store Beales has paid over £1m more in business rates than it should have, according to Colliers International.

The property agency has hit out at ‘transitional relief’, which limits how quickly business rates can fall in line with dropping rents.

Transitional relief was introduced by the government following the 2017 business rates revaluation. It staggers rate rises for businesses over four years following an upwards rent revaluation.

But to keep total business rate tax revenue neutral, it also phases in reductions after rents fall. As a result, many struggling retailers have paid more than they should, according to Colliers head of business rates John Webber.

Beales, which is at risk of collapsing into administration without a last-minute buyer, has overpaid by £1.06m over four years, according to Colliers’ calculations.

The retailer saw a 14% decline in its rateable value in the 2017 valuation and therefore should have seen a 14% reduction in its rates bill, the property agency said. Instead it saw a 3% drop in 2017/8 followed by 1% and 2% drops in subsequent years.

Beales warned earlier this week that it could collapse into administration, putting its 22 stores and 1,000 jobs at risk. The business is in talks with potential buyers and attempting to negotiate rent reductions with landlords.

Beales CEO Tony Brown has called the business rates system “lunacy”.

The company’s business rates bill for this year is £2.8m, according to Colliers.

“Of course, Beales is not alone,” said Webber. “Many other stores who have joined the long list of CVAs and administrations since 2017 have suffered in a similar way.

“A number of Debenhams and House of Fraser stores on the closure lists were there because they were paying artificially high business rates due to phased downwards transition. Toys R Us suffered the same fate and was paying many hundreds of pounds worth of business rates bills higher than it should have been.”

Webber said there was a “chink of light at the end of the tunnel” in the 2021 business rates revaluation.

“Given retail rents have collapsed, business rates falls should in theory follow,” he said.

But he added: “Of course, the government could put a spanner in the works and again introduce downwards transition as it did in 2017, limiting reductions. But that would be disastrous.

“One can only hope and pray that Mr Johnson and his colleagues have learnt from the deserted high streets of 2020 and the thousands of job losses – and provide a fairer playing field for the physical retailers. If he doesn’t, I’m afraid the crisis can only get deeper.”