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Embattled department store Debenhams has reportedly planning to ask 30 local authorities to accept a 50% reduction in its business rates bill, as part of its proposed CVA.
According to the Sunday Times, the department store’s creditors are set to vote on the proposal on Thursday (9 May).
Small landlords are expected to be the worst affected as only a quarter of the properties facing closure or rent reductions are owned by major companies and pension funds.
John Webber, head of business rates at Colliers International, the global property agency and consultancy, said this illustrated how “ludicrous” the current business rates regime was and said the decision was “akin to going with a begging bowl to the person who has just robbed you”.
Webber said: “Asking local authorities to grant business rates reductions – and these reductions if granted are only likely to last for a year and as they are discretionary relief could easily fall foul of state aid limits.”
He added that a 50% plus business rates tax was part of the reason Debenhams was going through a CVA.
According to Colliers, the rates bill for Debenhams’ current 166 stores was over £71m in 2018/9 and in addition to this, many of its stores have been “paying considerably more” in business rates due to the “onerous effects of downward phasing” on its bills, following the 2017 Rating Revaluation. Colliers analysed the rate bills of 46 of the stores most impacted by downward phasing and found out that they would be paying £6.4m more in business rates than they should have been over the next three years.
Webber added: “What Debenhams and others are doing through their behind closed doors discussions illustrates how out of step the system is – if the government really was listening, they would remove downward transition immediately – and by doing that it would save the thousands of jobs that will disappear this year.”
