Port warehouses taxed to death?
February 1st 2009 HM Revenue & Customs has decided to change the method of collecting business rates for companies based at ports. The move has serious ramifications for some warehouse operators, writes Roger Williams, CEO of the United Kingdom Warehousing Association
The UK port industry is the largest in Europe. UK ports handle more freight than any other EU country.
Over 95 per cent of the UK’s international trade passes through the country’s ports – from raw commodities needed to produce goods to finished goods such as food and cars. Every year 32 million international passengers use UK ports. UK ports make a vital contribution to local and the national economy directly employing approximately 73,500 people and indirectly employing an additional 47,000 – they are among the most competitive in the world. As a result the UK is among the best in the world in the ports business.
But now many warehouse operators and other companies that operate within the 56 statutory docks in England and Wales are facing a substantial retrospective tax increase following the Government’s recent announcement that it intends to separately assess most individual occupations on the ports for the purposes of business rates.
Put simply, in its infinite wisdom, HM Revenue & Customs has decided to change the method of collecting business rates for companies based at ports and instead of charging landlords, it will now charge the occupiers.
Although the change is effective from April 2005, HMRC neglected to inform the occupiers until the valuation office had nearly finished its revaluations, in 2008, three years after they were supposed to have come into operation. That has not stopped HMRC from charging the new rates from April 2005.
The realisation that these changes are retrospective and the increased charge for business rates goes back to 1 April 2005 has done little to improve the operator’s mood. For some operators four years' worth of charges have arrived on the doormat all at once, leaving the firms with no chance to build these new charges into their costs, since they knew nothing about them.
When the new tax regime was announced HMRC insisted that the bills must be paid out of profits for last year, the year before and the year before that. In a lot of cases, the operator’s profits will not cover them. UKWA understands that HMRC may subsequently have softened and is considering allowing the tax burden to be spread over a number of years but, at the time of writing, no formal agreement has been reached.
In its usual style, the Government undertook little or no consultations before imposing this retrospective tax. The imposition of a tax which leaves many businesses facing bills running into millions of pounds would hardly be helpful at the best of times but in the current climate it is particularly damaging and causing great hardship to many operators. Indeed, the tax looks certain to bankrupt some companies. Of course, bankruptcy means wholesale job losses and the Government will forfeit any future tax from the vanished companies, but typically that does not seem to have occurred to the present administration.
It is essential that companies who operate in quayside areas take advice and act quickly with regard to the management and mitigation of their rate liabilities.
Members of the United Kingdom Warehousing Association (UKWA) are fortunate in that they have at their disposal a group of Honorary Advisors covering a range of specialist skills. UKWA’s honorary advisor on property and rates-related matters, is Lambert Smith Hampton, and the firm believes there is considerable advantage in port operators acting as a consortium, to influence the local authority (once rate demands are received), ensuring that the correct statutory appeals are lodged with professional advice against the rateable value, as well as lobbying to the local Member of Parliament and Council Leaders.
Lambert Smith Hampton also advises that operators may well need legal advice as to whether or not existing rental agreements include an amount for rates and on the chances of obtaining a refund from their landlord.
The difficulties facing property occupiers in Statutory Ports is very serious and they need high quality advice from an experienced Chartered Surveyor with rating valuation experience. UKWA members can receive very useful advice about this and other property matters as part of their membership package by contacting Lambert Smith Hampton on a special helpline entirely free of charge. www.ukwa.org.uk More articles from United Kingdom Warehouse Association: | 
