Leading high street retailers are due tax refunds of up to £500 million after appeal judges ruled yesterday that business rates should not be imposed on cash machines in shops.
Sainsbury’s, Tesco and the Co-op defeated the government over its attempt to place separate rates on thousands of cash machines in stores.
Commercial property specialists estimate that refunds to the supermarkets will be about £496 million. In addition, it is estimated that the Court of Appeal ruling will deprive HM Revenue & Customs of up to £40 million in tax each year.
The appeal ruling comes after a five-year battle between the big supermarket chains and the government’s valuation office agency (VOA).
This morning’s judgment came in the appeal of a decision last year in the upper tribunal, which hears tax disputes.
That lower court also ruled against the government, finding that cash machines sited on retail premises should not be assessed for business rates.
But in that original judgment, the tribunal agreed with the VOA that cash machines outside a shop should be subject to a separate tax.
However, sitting in the Court of Appeal today, three judges – Dame Elizabeth Gloster, Lady Justice King and Lord Justice Lindblom – ruled that even cash machines located outside of shops should not be assessed for additional business rates.
The three judges refused HMRC permission to appeal to the Supreme Court. However, the tax authorities can apply directly to the UK’s highest court to take the dispute to a final round.
Tax offcials brought the case to the Court of Appeal to insist that retailers should pay business rates tax on cash machines in addition to their normal store rates.
In advance of today’s ruling, analysts had estimated that each cash machine on a retail property would attract an average rates liability of £4,000 if the government had won.
Up until the ruling, the valuation once had assessed 15,500 cash machines around the UK that are situated outside shops. It had planned to assess another 10,000 cash machines that are housed within stores if the government had won the appeal case.
Cardtronics, a provider of cash machines to retailers, was the fourth successful claimant in the Court of Appeal hearing.
Lawyers for the retailers said that business rates are an increasing concern among high street retailers.
“The decision is fundamentally good news for retailers, operators and, more importantly, users of ATM machines,” Bryan Johnston, a partner at the law firm Dentons, which acted for Sainsbury’s in the appeal case, said.
“The property occupation-based system is putting ratepayers under intense pressure as retail habits change and ratepayers feel the financial pinch.”
Today’s appeal ruling provided “at least some resistance against the wave of rating pressure,” Mr Johnston added. “The decision should also make the provision of an ATM network more viable,
something of importance in areas where banking services are limited.”
Specialist banking commentators agreed that the ruling was “welcome relief” for high street shops.
Mark Aldred, a banking consultant at Auriga, a technology company for financial services businesses, said: “As banks close their branches and leave communities financially isolated, we need to ensure that businesses which operate ATMs are able to do so cost effectively.”
He predicted that the Court of Appeal ruling would encourage businesses with cash machines to “think about how to prove their value and oer even more to the local community”.
Mr Aldred forecast that high street businesses with cash machines would now have an incentive to over a range of additional services, including functions for paying bills, opening accounts and taking out loans.
John Webber, head of business rates at Colliers International, a commercial property management company, said there had been “a real fear” among high street shops that had the government won the appeal it “would have opened up the floodgates to assess up to 400,000 vending operations which would have been calamitous for both retailers and those operators”.
However, the Court of Appeal ruling “puts the VOA zealots back in the box”, Mr Webber said.
A VOA spokesman said: “We are considering the implications of the Court of Appeal decisions.”