Debenhams in Newport could still owe thousands of pounds in business rates despite closing down.
It has been confirmed that the Friars Walk store, which closed in December, could still have to pay back a massive sum if it is found not to qualify for the Welsh Government business rates holiday.
The store had its payment of business rates deferred last year by Newport council due its financial situation, and a review of its rateable value is still pending.
And the council has now said the rates will still have to be paid if it is found that the value of the premises does not fall below the £500,000 threshold at which the government is granting businesses a rates holiday.
A council spokesperson confirmed that “any remaining outstanding rates remain payable by the receivers”, despite the sale of the brand to Boohoo in January not including any of its stores.
It said: “The council will be one of the unsecured creditors looking for repayment.”
But it added that rates are paid to the Welsh Government, so any loss is borne by the government rather than the council.
The Welsh Government confirmed that Debenhams will be liable for a full rates bill for the store unless their review is successful.
How much could Debenhams have to pay?
We won’t know how much the rateable value of the Friars Walk store is until the completion of the review.
The formula for businesses in Wales to calculate their non-domestic rates (NDR), usually known as business rates, are set by the UK government.
They are paid on most properties other than homes, and are said to be taxes to help pay for local services.
Rates are calculated by multiplying the rateable value of the property by the appropriate multiplier for the financial year, which is set by the Welsh Government.
The multiplier in Wales for 2020/21 is 53.5 pence in the pound.
So, for example, if the rateable value of Debenhams’ Newport store is found to still be £510,000, it would be liable to pay £272,850 in business rates for the year.
Business rates are collected by each local authority in Wales, but are ultimately paid to the Welsh Government.
If the rates review finds that the store’s value is below £500,000 it will still qualify for the Welsh Government’s rates holiday, meaning no payment will be due.
Why would Debenhams still have to pay rates when the store is closed?
In May, Newport council stepped in to help the store in Friars Walk after it was initially threatened with permanent closure.
At the time, the council allowed Debenhams to defer payments while a review of the store’s rateable value was undertaken. The store had a rateable value of £510,000 – £10,000 over the limit at which the Welsh Government had been granting companies a business rates holiday.
But Debenhams announced the permanent closure of all its stores last month when it announced the brand’s sale to Boohoo.
A statement from Newport council said: “Debenhams did not qualify for the Welsh Government retail, leisure and hospitality rate relief when it was introduced last year.
“The council recognised the additional burden this placed on the company and agreed to defer the non-domestic rates for the rest of this financial year while an appeal against the rateable value is pending.
“Now that it has been confirmed that the receivers have sold the brand and the shops have ceased trading, any remaining outstanding rates remain payable by the receivers. The council will be one of the unsecured creditors looking for repayment.
“Any rates due will be due to Welsh Government, on whose behalf the council collects business rates, so any loss is borne centrally rather than by the council.
“Additionally, Debenhams’ rate review is still pending and should they subsequently qualify for the rate relief, then there will be no outstanding rates to claim form the receivers.”
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