Bricks and mortar shops pay eight times more in business rates than online retailers

31 May 2022, 15:38 PM
  • A new report has revealed that online retailers are required to pay just a fraction of the business rates charged to traditional physical shops
Bricks and mortar shops pay eight times more in business rates than online retailers

According to findings from Altus Group, for every £100 earned by shops in Britain, £2.91 is payable in business rates, while for online retailers this figure is just 34p. This means that traditional bricks and mortar retailers, many of which are independent, are paying a staggering eight times more.

This is understandably a blow to small retailers who are struggling to keep costs down with a rising cost-of-living crisis as we slowly recover from the pandemic

Some industry bodies believe that the government has not been doing enough to help independent businesses’ recovery. One of these is Andrew Goodacre, CEO of the British Independent Retailers Association (Bira), who said, “It comes as no surprise to independent retailers that they are paying much more in business rates compared to their online competitors.”

A government consultation on rebalancing that tax base to ensure online and bricks and mortar shops pay a similar proportion closed on the 20th of May, and independent businesses are awaiting to hear the result.

Online sales tax
One of the proposed measures is an Online Sales Tax, which could help to balance the playing field. Along with this idea, Bira has suggested a £2million sales threshold to be imposed, as it would therefore only apply to bigger retailers who can absorb this tax rather than independent businesses with much smaller profit margins.

Andrew explained, “This allows smaller retailers to grow their online presence and reduces the unnecessary burden on them (for instance, if an Online Sales Tax was introduced without a threshold, small retailers would be doing a lot of admin to pay a small amount of tax).”

He believes the government needs to go even further to help small businesses. He continued, “This reach reinforces the need to completely overhaul the rates system to reduce the burden on physical shops, and talk of an Online Sales Tax is only part of the reform needed.

“In the short term, we are asking for this year’s rate increase to be reversed. In the longer term, we would want to see the retail discount become a permanent feature of the rates system and the rates multiplier used to share the burden more equally between small shops and the large online retailers with huge warehouses and distribution centres.”

Saving the British high street
It is thought that the fact that bricks and mortar shops have to pay such a significant amount more in business rates than online retailers will put pay to plans to restore Britain’s high streets

According to Andrew, “If the government does not act soon, there will be more closures on the high street with large and small retailers deciding that their futures are online only.”

In fact, business chiefs have called for reforms of ‘unaffordable’ city centre business rates to help traders get back on their feet and fill empty shops in Edinburgh.

The Queen’s speech in May was considered disappointing for many retailers, but it did highlight the intent to improve Britain’s high streets and get customers back on them. The so-called ‘death of the high street’ is a major concern for town-based delis, cheesemongers and specialist retailers, who often rely on passer-by trade.

The new Levelling Up and Regeneration Bill announced aims to “create opportunities for new businesses and community groups, paving the way for new jobs to boost employment, strengthening local economies and restoring local pride” according to the Prime Minister.

But Charlie Hodson, owner of Hodson & Co Deli, is sceptical about these initiatives to tackle the issue of the high street. He told Speciality Food, “The high streets are being decimated as the superstore supermarkets are being built, it’s about teaching people to support local and support British farming

“I think there are many more challenges to supporting the British high street than what people think, it’s about making the local high streets accessible for people to shop in, such as parking that isn’t overpriced. 

“Governments need to speak to retailers and speak to the people because if you don’t give people what they want, they aren’t going to shop on it and won’t support the high street. Each high street needs to suit the needs of the people.”

He concluded, “Everyone’s paramount should be about how to get people back on the high streets because, without that footfall and income, there’s no point talking about business rates.”

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