Retail is in crisis. In June last year, The Confederation of British Industry reported the country’s worst retail slump in a decade. Now in 2020 we look back at 2019 as one of the worst years for retail.
Part of the problem is that consumer shopping patterns have changed dramatically in recent years. Now we might browse in-store or try shoes on in-store and then buy online – perhaps from a different seller and very often from Amazon. To add to this asphyxiation of the bottom line, physical stores face many taxes and charges that e-commerce sellers don’t have to pay.
Business rates: a vicious circle
“Retail accounts for 5% of the economy, yet pays 10% of all business taxes and 25% of all business rates.”
– Helen Dickinson, Chief Executive of the British Retail Consortium
Britain’s business rates system is broken. As even the bigger industry players are starting to go into administration, from HMV to Karen Millen, it is clear that the current business rates system needs urgent reform.
Some councils have even gone so far as to offer rate relief to struggling local businesses. Earlier this year, Dorset Council paid out £560,000 to help small rural retailers in the local area. Department stores.
Department stores have been particularly affected as business rates valuations are based on a price per square metre – meaning that stores have to find ways to reduce the space in their stores or to drive more revenue to pay for rates that can be up to £7,549 in the London area.
Somehow the playing field needs to be levelled. So, what needs to change and, until regulation catches up, how can business owners make the most out of their commercial properties?
What needs to change?
One solution could be the introduction of an internet services tax. If e-commerce giants such as Amazon or boohoo are more expensive, this will remove the cost barriers to shopping in-store – the paying for costly parking or 5p for a carrier bag.
The Centre for Retail Research has suggested other viable solutions such as halving the current total of rates or introducing a turnover tax on all retailers.
How to make the most out of your commercial property
Aside from making your in-store experience as engaging and enticing as possible, there are some practical options you can consider to ensure you’re getting most value out of your commercial property.
Business Rates Relief
Make sure that you have checked if you could benefit from any of the available rates reliefs. Prydis can help you determine if you are eligible for transitional relief or small business relief. Transitional relief ensures that changes to your bill as a result of the Government’s revaluation of business rates in 2017 are phased in gradually. Small business relief exempts you from paying any business rates if your rateable value is below £15,000.
Investing from your Pension
Another strategic idea to help your retail business grow and succeed is to consider using your SSAS pension to invest in commercial property. You retain control over the property as before, you won’t have to pay tax on rental income and when you come to sell your store, you won’t have to shell out on capital gains tax. Find out more about investing in commercial property from your SSAS.
Prydis are lawyers, accountants and wealth managers who work together strategically to maximise the performance of our clients’ wealth. If you’d like to find out more about how we can help you to grow your wealth and your business, get in touch.