Tesco has announced it will repay £585 million it saved from the coronavirus business rates holiday after enjoying a sales surge during lockdown.
The decision comes after the supermarket giant was criticised for accepting the business rate relief while paying a £315 million dividend to shareholders.
Chairman John Allan said the board ‘are conscious of our responsibilities to society’ and that the company did not need the saving due to remaining open and trading strongly throughout the pandemic.
In October, the retailer revealed it made a pre-tax profit of £551 million in the six months to August 29 – an almost 29 per cent increase compared with the same period in 2019.
And now, Tesco has announced will work with the government to discuss how it can hand back the £585 million it saved from the business rates freeze.
Tesco is to repay £585 million it saved from the coronavirus business rates holiday after seeing its profits surge
The decision comes as supermarkets face growing calls to hand back the savings which were aimed at helping retailers that were unable to open and struggling to make ends meet.
Chancellor Rishi Sunak introduced a 12-month freeze on business rates as part of a huge rescue package to stave off economic disaster at the height of the pandemic.
Under the freeze, businesses in the retail, hospitality and leisure sectors will not have to pay business rates for the 2020 to 2021 tax year.
Despite initially enjoying the relief, Tesco revealed it would be paying a significant dividend to its shareholders.
Mr Allan said: ‘The board has agreed unanimously that we should repay the rates relief we have received.
‘We are financially strong enough to be able to return this to the public, and we are conscious of our responsibilities to society.
‘We firmly believe now that this is the right thing to do, and we hope this will enable additional support to those businesses and communities who need it.’
In October, Tesco revealed it made a pre-tax profit of £551 million in the six months to August 29 – an almost 29% increase compared with the same period in 2019.
Sales during that period were up 0.7% to £28.7 billion, with sales in the UK and Ireland up more than 8%.
Tesco chief executive Ken Murphy said: ‘Giving this money back to the public is absolutely the right thing to do by our customers, colleagues and all of our stakeholders’
Tesco chief executive Ken Murphy said: ‘We have invested more than £725 million in supporting our colleagues, putting safety first, more than doubling our online capacity to support the most vulnerable customers in our communities, and hiring thousands of additional colleagues at a time of need.
‘While business rates relief was a critical support at a time of significant uncertainty, some of the potential risks we faced are now behind us.
‘Every decision we’ve taken through the crisis has been guided by our values and a commitment to playing our part.
‘In that same spirit, giving this money back to the public is absolutely the right thing to do by our customers, colleagues and all of our stakeholders.’
Early in the pandemic Tesco and rival supermarkets faced criticism for taking the rates relief at the same time as handing out dividends to shareholders.
It did not use the Government’s furlough scheme.
Robert Hayton, head of property tax at business rates specialist Altus Group said: ‘It should have been obvious from the outset that not all businesses would need the same level of taxpayer support through the pandemic.
‘It is great that Tesco has taken the lead and repaid this relief.
‘The Government must now redeploy that revenue to where it is most needed.’
Rates relief was first announced by the Chancellor for retail, leisure and hospitality firms until March 2021.
The data from Altus Group showed that Sainsbury’s is expected to save £498 million from its rates holiday for the year – although Sainsbury’s said it was closer to £450 million.
Last month, Sainsbury’s said it had received a break worth £230 million for the half-year to September in an update which also saw it reveal plans to axe 3,500 jobs.
However, the company came under fierce criticism as it also declared an interim dividend of 3.2p plus a special dividend of 7.3p for shareholders.
In November, the boss of value retailer B&M Bargains, which has stayed open through the lockdowns, paid his offshore family trust £44 million in dividends as it saved £38 million through the rates holiday.
Julian Richer, chief executive of non-essential retailer Richer Sounds, said previously that he was ‘really annoyed’ that the grocery chains had benefited from the tax break as they also saw ‘queues around the block’.
The figures from Altus show Asda is projected to save £297 million, Morrisons around £279 million, Aldi £109 million and Lidl £108 million, for the year.
In Wales, the six major supermarkets still had to pay around £78 million for rates for some stores as a result of devolved business rates.