The UK Government"s decision to assess the occupiers of commercial and industrial property separately for business rates will undoubtedly bankrupt some businesses.
The UK Government"s decision to assess the occupiers of commercial and industrial property separately for business rates within the 56 statutory docks of England and Wales will undoubtedly bankrupt some businesses, warns commercial property consultants, Lambert Smith Hampton. Worse still, perhaps, such a move could see many shipping companies switching their business to Zeebrugge or Rotterdam, finishing journeys by road or rail and so bypass British ports completely.
Made retrospective to April 1st 2005, with little or no consultation between Government and the affected businesses, the tax will hit port businesses like import, export and shipping companies with an estimated £33m tax hike. Adding to their potential woes in a deteriorating business climate is the Government"s axing of relief for empty properties, like warehouses, last April designed to raise an extra £1bn.
Early in this decade the Government decided that when the current revaluation came into effect on April 1st, 2005, the basis of rating valuation for ports should change to bring it in line with other property. In other words, it is the premises" occupiers and not the port owner (landlords) for quayside berths who are now being assessed, despite the fact that the landlords remain in overall control of the port. Port owners, therefore, will see their assessment bills fall sharply. In the case of Hull, the port authority assessment has fallen from £9m to £3m, while individual companies now face seven-figure liabilities, backdated to April 1st, 2005.
Another bone of contention is the Valuation Office Agency"s strong opinion that land alongside docks has considerably greater value than industrial land nearby.
The Chancellor of the Exchequer has given occupiers eight years to pay their backdated amounts and it seems that many billing authorities are preparing to place on hold their statutory duty to collect these rates. The latter"s action, however, laudable though it seems, cannot continue indefinitely.
The knock-on effect of this hit on ports could have widespread repercussions. It seems certain that these higher taxes will discourage regeneration, because developers risk increased costs if new buildings are unintentionally empty in the currently depressed property market. Already, inland warehouse operators are demolishing older warehouses to avoid the charge on premises left empty for more than six months.
The UK government in the current climate clearly needs to raise extra revenue to mitigate the effects of the credit crunch on the public purse but it is questionable that revenue raising on businesses should be undertaken without an impact assessment of the changes. This has clearly not happened over the tax hit on English and Welsh ports. In Scotland, however, the situation is less severe because early consultation carried out in advance of the change to the new method of assessment identified some of the difficulties which ratepayers would face. A self-financing transitional scheme was introduced which alleviated these problems.
Companies who operate in quayside areas should take advice, preferably acting as a consortium, to influence local authorities and lobby their MPs and council leaders. It may also be possible to mitigate higher costs by taking a fresh look at their warehouse operations. Many dockside warehouses use conventional counterbalanced forklifts or reach trucks, which require minimum racking aisle widths of 3.6mt and 2.6mt respectively. An articulating forklift, however, like Translift"s Bendi, can work in aisles only 1.6mt wide and lift loads to 13mt. They can also work outside on the roughest of yards. This means that compared with a counterbalance and reach truck, a Bendi can store up to 50% and 33% more pallets respectively in a given cube. By switching to articulated forklifts, therefore, it may be possible to close down satellite warehouses, or rent out surplus storage space.