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Transitional relief could cost retailers over £1bn, says BRC

Jeremy Lim
22 July 2022

The British Retail Consortium (BRC) is calling for an end to the ‘downwards phasing’ part of Transitional Relief on the final day of the Government consultation for the 2023 Business Rates revaluation.

The Transitional Relief system sees retail subsidising other sectors, including over £550m between 2017-20 for government-owned infrastructure. It also forces businesses in poorer parts of England, where rents are dropping, to subsidise those in richer areas, where rents are rising.

The scheme, which limits how much a firm’s business rates can change in a year and forces those who are being overcharged on their business rates (as their rateable value falls) to subsidise those who are underpaying (as their rateable value rises).

This means businesses are gradually moved to the “correct” rate over a period of years. The BRC added that it contrasts with other business and personal taxes, where those who are overpaying are immediately moved down to the “correct”, lower level of tax.

However, retailers have warned that the failure to fix the flawed Transitional Relief system, could cost the industry over £1bn between 2023-261. It will be up to the next Prime Minister and Chancellor to decide how to move forward with any reforms.

Tom Ironside, Director of Business & Regulation at the British Retail Consortium, said: “The business rates system is damaging our high streets and town centres by directly undermining store viability. The retail industry accounts for 5% of the economy yet is saddled with 25% of the total business rates bill. This is directly contributing to the loss of shops and jobs, particularly in many of the parts in the UK in need of ‘levelling up’ and putting additional pressure on prices.

“Transitional Relief is a flawed system that could cost retailers over £1bn during the next three years, leaving them with no choice but to close those shops which are most impacted by artificially inflated rates bills. This is money which would be used to help address the cost of living, or support the vitality of towns and cities around the UK. In the short run, the most impactful change that any new Prime Minister could make to reform business rates, would be to scrap the ‘downwards phasing’ part of Transitional Relief.”

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