'They must rethink this sorry mess' IN ASSOCIATION WITH Rensburg Sheppards The Big Feature Merseyside's maritime industry is bracing itself for a huge hike in business rates that could cause some operators to go bust. Ben Schofield looks at how they may cope in the stormy waters ahead.
THEY have been branded "detached from commercial reality", "potentially devastating" and "ill thought-out".
But the delivery of dozens of sixfigure tax demands to port-based businesses is imminent.
The Valuations Office Agency (VOA) said, after a nationwide revaluation exercise, Liverpool should expect notices of liability at the start of October.
Asking for hugely inflated rates and back-dating them to April, 2005, they threaten to bring with them the spectres of numerous insolvencies and wholesale redundancies.
The VOA - which, as part of HM Revenue and Customs, sets the rates companies need to pay - embarked on the revaluation of the UK's 55 ports in May, 2006.
New legislation shifted how business rates are to be paid in ports. Whereas previously the port operator and owner would pay, tenants are now being directly charged for the rent based on the value of their site.
And because business rates are based on fiveyearly valuations - the last of which should have been conducted by April 1, 2005 - the tax bills are being back-dated three years.
Andy Nichols is bracing himself for the hit.
The managing director of Huskisson Dock-based stevedoring firm Thomas Nichols Brown says the rates likely to be demanded for one of his units is pounds 225,000, more than the annual rent of pounds 160,000. His overall liability will top pounds 1m, which he will struggle to find from a turnover of pounds 1.8m.
Mr Nichols, 48, told the Daily Post: "We've known since March that there would be a change to this property's ratings system - which will devastate our whole industry.
"We won't be able to pay the bill.
That popping sound in October will not be Champagne corks. And we will hear it rippling around the country.
"Even moving forward, it will place me out of the market."
Standing on the seven-acre storage area where Huskisson Two used to be - before it was filled in following an attack on a munitions ship in World War Two - next to crates holding tonnes of Portuguese granite, he added: "Free ports used to be free and they're not any more.
And there was a good reason that they were free - because you do things that you don't do outside of a port area."
But, in May, inspectors from the VOA turned up "unannounced" to assess TNB's business liability. The VOA say they wrote to port operators in May, 2006, to explain the review.
Mr Nichols, who is American and originally from Louisville, Kentucky, is the third generation of his family involved in heavy transportation.
Since taking over the business in September, 2005, he has employed more staff and overseen a 40% growth in turnover.
He continued: "In the States, they try to attract business to the port by offering deferred tax for 10 years to bring jobs into an area. What separates a free port from a general warehouse is that you're bringing in products that are very basic. We do steel and timber and granite blocks that are low value but take up a lot of space. If you glance into a warehouse, it wouldn't look like it was 40% full. So to put a square footage or meterage rate on our space is ridiculous."
He also said to class his low-grade, inefficient warehouse along with other, newer premises is unfair. The valuers did not appear to have taken into account the depth of water in the dock. If Huskisson Dock was deeper, the business could generate more income by servicing larger ships.
The rates will, if TNB doesn't fold, force Mr Nichols to nearly double his prices. Removing a tonne of concrete from a ship currently costs pounds 6.50, but would probably rise to pounds 12 per tonne to absorb the new rates.
"It will be very inflationary," Mr Nichols, who is being represented by city lawyer Phil Rees-Roberts, continued, "if it rippled through your economy.
"It's going to grind your economy to a halt."
The best way to fight the introduction of the rates, Mr Nichols says, is through political mobilisation.
He said he would vote for John McCain in November's US election because the Republican candidate espouses the maxim "that government is best which governs least - the opposite of this Government".
And Mersey port companies appear to be galvanising against the new rates.
Representatives from around a dozen other port businesses from across Merseyside, including TNB, will meet tomorrow in India Buildings to discuss strategy. Local maritime industry champion Mersey Maritime are also expected to attend.
The meeting has been organised by Kieran Hall, managing director of Denholm Handling, part of marine giant Denholm Group.
Mr Hall said he could name "four or five" companies going to the meeting that may go to the wall when the rates demands are delivered.
One of his main aims is to strike deals with Liverpool, Wirral and Sefton councils to hold off collecting the rates until April next year. Until then, he hopes to challenge the Government both on the revaluation and the backdating of the rates.
Mr Hall said: "We realise that perhaps we have to pay in a new way, business rates going forward.
"What we really object to is the backdating of it to 2005. Going forwards, we can go to the clients and say we have got this new system and we will have to charge more.
But you've got no chance of recovering it going backwards.
"And there's some immense figures here. By the nature of a port, it's a big area of land - the multiplier on that is frightening."
It is possible the companies could be bailed out by the port operators, keen to avoid paying rates themselves for empty lots.
But, since the revaluation, they, too, may face higher tax bills on parts of the ports they occupy. The Daily Post understands Peel Ports, which runs the Port of Liverpool, has seen its tax bill swell from pounds 6.5m to pounds 16m.
A spokesperson for Peel Ports said: "It is absolutely essential that any revaluations are fair and reasonable, taking into account the economic realities facing such a pivotal area of the UK economy.
"That's why we will be working closely with port tenants to ensure that we achieve the best possible outcome in our discussion with the ratings authorities."
Hull was the first port to be hit by the new rates. The P&O Ferries office there says the annual rates bill for 39 tenants was pounds 3m under the old system. But pounds 20m of tax demands have landed since the VOA visited.
P&O received a demand for pounds 5m of backdated rates, plus pounds 2.4m for this year.
A spokesperson for P&O said: "The new bills are so detached from commercial reality that there can be no doubt they'll drive some smaller companies to the wall.
"Unless the Government wants to decimate the shipping and logistics sector, it should call a halt and reconsider the whole sorry mess."
Jason Cross, a director of B&P Commodities, who operate in Hull and out of Liverpool's docks, said: "If they stick to their guns, then we will see a great deal of closures. One medium-sized company has been hit with a pounds 3m bill for one location, which could cause the demise of those companies."
B&P operate just outside the port boundaries in Hull, but are inside Liverpool Docks. They have been revalued by the VOA, but have not received a tax demand yet.
Mr Cross continued: "We're bracing ourselves for it. We've really got no idea - it depends what value they put on your site."
A spokesperson for the VOA said: "It is in the interests of fairness that everyone is properly assessed for the payment of rates.
"Following a review of ports, a number of instances were found where properties that should be separately assessed for rates were either not assessed, or were included in the overall port assessment.
"The VOA has now inspected all 55 large statutory ports, and is in the process of reviewing which occupations warrant a separate assessment. Once the review is complete, any new assessments created will have a rating that will be effective from April 1, 2005. Under current legislation, any nondomestic property that constitutes a separate occupation on April 1, 2005, but were not shown in the Rating List, have to be entered to the List with effect from April 1, 2005, and have any liability going back to this date.
"Liverpool will be notified of any change to its assessment at the beginning of next month."
Andy Nichols in his warehouse at Huskisson Dock, which is currently being used for storing steel Picture: HOWARD DAVIES/hd120908nichols-3; Port-based firms are bracing themselves for a hit; New rates will force Andy Nichols to nearly double his prices