Are retailers using CVAs as a business rates workaround?

10th August 2020

As retailers are faced with rising business rates to pay, CVAs could become a surprisingly appealing option for embattled high street traders. The Sunday Times reported that retailers were using CVAs to reduce their business rates bill. While CVAs have received a fair amount of press as a controversial form of insolvency, they could be on the rise for retailers looking to strike back against the much-slated tax on commercial property occupancy.

Business rates were re-evaluated by the government for the 2017-2018 financial year, with many retailers facing rising tax bills. The Treasury collected more than £27 billion in business rates in the last year alone, with the tax now being blamed for contributing to the demise of the high street.

CVAs were designed to give insolvent companies breathing room to reschedule their payments to unsecured creditors. However, retailers are realising this also includes the local authorities. James Keates, head of restructuring at Shoosmiths, told The Sunday Times: “A lot of these retailers are struggling because of the rising cost of business rates, which are crippling. “In other CVAs, landlords have been taking all the pain, but maybe local authorities need to realise that business rates going up does have an impact. “The law allows CVAs to compromise all creditors, and they are a creditor like anyone else.”

The news comes a few weeks after Chancellor Philip Hammond admitted that business rates wee hitting the high street too hard. In a letter to MPs, Hammond refused to bow to parliamentary pressure to overhaul how business rates are charged, saying it supported the stability of local government funding.

(Retail Gazette)

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