Friday, 14 August 2015

The madness of levying Business Rates on cash machines.

From The Daily Mail:

An individual cash machine can attract a business rates charge ranging between £2,500 and more than £15,000 per year for each machine. The industry as a whole is facing a combined £500 million charge, according to some estimates. The rule about taxing cash machines outside shops as separate businesses was introduced in November 2013 by the VOA, which also ruled to backdate charges to 2010...

But the ACS, which represents over 33,500 local shops across the country including the Co-operative Group, Spar UK and Costcutter, has called on the Government to scrap it and make free ATMs outside shops exempt from taxation.

The ACS said: "We believe that ATMs are a high street enabler providing shared benefits to a range of traders, allowing consumers to access their cash and spend it within their local communities... We therefore believe that the Government should consider removing ATMs from the rating list completely. The benefits of removing ATMs from the rating list would be that more consumers are able to access their cash free of charge and spend it in local shops and high streets."

Exactly, and well said ACS.

The presence of a cash machine on a high street benefits all cash businesses on the high street, not just the shop where it is, so this is spiteful and unnecessary. Presumably, the presence of a cash machine is reflected in higher rental values in the vicinity, so even under normal Business Rates rules, that cash machine boosts Business Rates revenues anyway.

The other trick they are missing is that it is far better to deliberately under-assess rental values and then charge a higher percentage tax rate.

For example, if the government wants to get £6,000 in rates from a shop with a rental value of somewhere between £10,000 and £15,000, it could assess it at £15,000 and charge 40%, resulting in a shedload of appeals arguing for an assessment of 40% x £10,000. If that shop is assessed at only £8,000 with a 75% tax rate, the yield is the same, but as the only thing you can appeal against is the rental value, and as it would be impossible to prove a rental value as low as £8,000 there is no point in appealing.


buildingstoat said...

"The other trick they are missing is that it is far better to deliberately under-assess rental values and then charge a higher percentage tax rate."

Yes, but the idea is to try to hide tax rates, or at least make them appear as small as possible, and the appeals create uncertainty (and jobs).

After all, what sort of world would it be if politicians promoted clear, effective and transparent policies and then stood by them?

Mark Wadsworth said...

BC, yes, the idea is to have "stealth taxes" which is at odds with "being honest about how much tax people and businesses actually pay" (it is colossal). Somehow I prefer the "being honest" option which is why I have failed as a politician.

A K Haart said...

These people are mad. We are on holiday and one of the first things we did was go to the nearest ATM for a wad of cash to spend in the local shops, cafes and pubs. The change goes into local parking meters.

Ben Jamin' said...

How did they work out that the rental value of cash machines was between £5000-£30,000 per year?

I'm guessing these premises charge this amount to the cash machine companies to rent the space?

In which case, the UBR isn't going to put anyone off still doing it, so I can't see the problem.

Mark Wadsworth said...

AKH, exactly.

BJ, that's a fair point, does the article say?

Ben Jamin' said...

So, the retail outlets only get a cut.

I guess the actual number of places suitable for one of these ATMs is quite limited.

So, in some areas demand outstips supply, or maybe the ATM companies "organise" things that way :)

Kj said...

That's the beauty of LVT, those whi maximise the use of their land, puts in an extra extension on a spare bit, allows for an ATM, those should win. But just tweaking UBR a bit would help as well, they should just ignore any extra rents that could be obtained from ancilliary incomes, like ATM's and cellphone bases.

James Higham said...

The Tories' failure to address such things after 5 years says a lot about their true intent or their level of competence or both.

Mark Wadsworth said...

BJ, Kj, but with LVT not BR, we would see more rather than fewer cash machines, which as a lay person I think is a good thing.

JH, it is not their "failure to address", it was them who introduced it in the first place.

What they conveniently "failed to address" was a revaluation when it was due, as a result of which London landlords are underpaying and Northern landlords are overpaying.