As the repatriation of holidaymakers of collapsed tour operator Thomas Cook continues, it has emerged that the company’s high street shops in England were ‘denied’ a £2.49m tax cut due to government policy.
Real estate adviser Altus Group said that the tour operator should have been a “big winner” under the 2017 business rates revaluation having seen it’s rateable value on its retail stores in England and Wales, which form the basis of the property tax calculation for rates, fall by almost 14% from £32.59m to £28.17m.
However, in order for the Government to help pay for relief to phase in increases for those firms facing sharp rises, strict punitive limits were imposed on tax reductions for those properties in struggling areas where property values and rents plummeted.
Analysis of official government data by Altus Group revealed that, through the policy of ‘Downward Transitional Relief’, which only applies to tax bills in England, the tour operator’s retail stores in England have been ‘denied’ tax reductions of £2.49m under the policy so far since the 2017 revaluation came into effect.
According to the group, the overall business rates bill for the tour operator’s retail shops in England and Wales was £11.76m this financial year.
The Swindon branch of the tour operator which saw its rateable value fall significantly from £229,000 to £139,000, would have paid an extra £146,000 in tax under the 2017 revaluation due to government policy.
Robert Hayton, Head of UK business rates at Altus Group, said whilst Thomas Cook have been “treated unfairly” by the system, the policy has been “hugely damaging” for high streets in England as a whole costing the retail sector £1.12bn so far.
Hayton added: “The 2017 revaluation will only gradually alleviate cost pressures on firms with large premises that saw property values plummet seeing a real term fall in business rates bills of no more than 13% by 2021, allowing for inflation.”
“Whilst it is too late for Thomas Cook, abolishing these ridiculous restrictions on tax reductions would put fairness back into the heart of the English business rates system where the effects will be far more pronounced for the high street at the next revaluation. However, it is imperative to maintain the capping of large increases as they do act as an important shock absorber.”