Culture Shock: How London's Theatreland Will Be Squeezed By Business Rates Re-Evaluation

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Culture Shock: How London's Theatreland Will Be Squeezed By Business Rates Re-Evaluation
The Lyceum Theatre will be one of the hardest hit. Photo: Dongning Li

London’s theatreland will be forced to pay an estimated £31m in property taxes over the next five years once the government’s planned hike in business rates comes into effect in April.

The total rates bill for theatres in the West End will rise by nearly 40% to £6.3m for the 2017 to 2018 year alone, according to figures compiled by City A.M.

Business rates across the country are set to be re-evaluated for the first time in seven years, leading to significantly higher bills for many of the UK’s 1.8m commercial properties.

The rates are tied to the rental value of the property and as these have rocketed in central London over the last seven years, businesses in the West End are facing a particularly hard hit.

Some of the theatres being landed with substantial tax rises include Her Majesty’s Theatre, home of the Phantom of the Opera, and the Lyceum Theatre, where The Lion King has been playing for the past 18 years. Both theatres face tax hikes of around 50% this year.

The Victoria Palace Theatre, which will put on the Broadway hit Hamilton when it re-opens later this year, has been saddled with a 47% rate rise. On the South Bank, the National Theatre faces a 21% tax rise and The Old Vic will have to contend with a 30% hike.

Overall, businesses across the capital will see taxes jump by up to £9.38bn over the five year period.

London Mayor Sadiq Khan has called for the capital to have power over how business rates are set, and how relief is given to smaller businesses. The mayor’s London Finance Commission has warned that thousands of employers are at risk from the rate hike.

Phantom of the Opera's current theatre faces a 50% tax hike. Photo: Pierre Mallien

Mark Rigby of business rates specialists CVS said: "A system which works better and more efficiently for businesses in London could not be more important.

"I support the mayor on his forward-thinking approach that London should have more power over the valuation of its commercial properties.

"And subsequently, with the right support for the valuation office agency, this should lead to a swifter resolution of appeals for the capital’s ratepayers and provide greater political, local accountability."

The government only published details of the re-evaluation in September, giving businesses just six months to plan for the tax rises.

The New West End Company, a lobby group for the West End, has warned that the dramatic tax changes could lead to job losses and reduced investment for the capital’s retailers.

Additionally, shops are contending with a dramatic increase in labour costs due to the implementation of the national living wage, which will also increase in April.

A DCLG spokesman said: "The revaluation improves the fairness of rate bills by ensuring they more closely reflect the property market. Three quarters of businesses will see no change or a fall in their bills, and no small property will see more than a 5% increase next year.

"London will benefit more than anywhere else in the country from the transitional relief scheme, with over £1bn of support to ensure no business is unfairly penalised."

This article was originally published on City AM.

Last Updated 13 February 2017