Supermarkets are said to be preparing for the “worst-case scenario” of paying hundreds of millions in extra tax, after the business rates reform bill got its second reading in Parliament on Monday.
The bill paves the way for the Treasury to introduce one or more higher tax rates from 2026, to apply to larger properties with a rateable value over £500,000.
While the extent of the rise is to be determined in next year’s budget, the bill permits the Treasury to add up to 10p in the pound to the tax.
As revealed by The Grocer last week, figures from property consultancy Colliers suggest 1,900 hypermarkets and superstores fall above the £500,000 threshold. They already face a property tax rate – known as the business rates multiplier – of 55.5p for every £1 of rateable value for the financial year 2025-26.
Figures also supplied by Colliers suggest the combined rateable value of those 1,900 hypermarkets and superstores in 2023 was £2.3bn. It means the permitted 10p in the pound business rates hike could add up to £230m to their combined annual tax bill.
The Non-Domestic Rating (Multipliers and Private Schools) Bill 2024-25 also allows the Treasury to establish up to two new lower tax rates for retail, leisure and hospitality properties below the £500,000 threshold. These can be up to 20p lower than the small business multiplier, which would take it from 49.9p to 29.9p.
The reforms – which were pitched by Labour as a way of levelling the playing field between the high street and online giants – are expected to be particularly punishing for the traditional big four supermarkets, thanks to the weighting of their estates towards large stores.
It is understood figures extracted from Colliers’ data by The Grocer – including the 1,900 hypermarkets and superstores above the threshold – are seen as conservative in light of supermarkets’ full exposure to the proposed higher tax.
Retailers are said to be keen the government should not underestimate the full impact of the proposed higher rate.
“They’re looking at the worst-case scenario and thinking, we’ve already got National Insurance and minimum wage rises. Should we look again at those store opening plans?” said a source.
Another source said: “The numbers are seen as conservative. The other catch is there is a massive business rates revaluation going on before this is determined.” It means the 2023 rateable values also provide a conservative picture of the potential impact, with the revaluation due to take place before the proposed higher rates are applied.
The Public Bill Committee is inviting interested parties to submit views on the bill, ahead of a first sitting on 11 December and a report on its findings on 17 December.
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