With the news of the measures contained within Chancellor of the Exchequer Rishi Sunak’s recent Budget still being absorbed by many businesses, the exact implications of the announcements are only just emerging in some cases. This would certainly seem to be true of the cut to business rates for shops, restaurants, bars, gyms and similar brick-and-mortar firms in England.
Such businesses have weathered particular challenges amid the COVID-19 pandemic, which meant that Mr Sunak’s confirmation of a temporary 50% reduction in their business rates, subject to a cap of £110,000 per business, was widely welcomed.
However, it is that cap that has also caused consternation in some quarters, as businesses up and down the UK gave an overall mixed response to the Budget.
How did Sunak present the change?
Business rates are charged on commercial property on the basis of the value of the premises, with central Government – rather than local councils – setting the level. The Treasury is only responsible for determining business rates in England, this being a devolved matter for the other UK nations, although funding is allocated by the UK Government to Scotland, Wales and Northern Ireland through a formula.
The business rates system has long been controversial among high-street retailers, which have argued that it places them at an unfair disadvantage compared to online rivals.
And while Mr Sunak declared that promising to abolish a tax that brought in £25 billion every year would be “completely irresponsible”, he did provide support for businesses in the form of the 50% cut, at the same time as scrapping the planned annual increase in rates for 2022 for the second consecutive year.
He said that the 50% discount would become available to firms such as pubs, cinemas, restaurants, hotels and music venues in the 2022-23 tax year, and that it amounted to a tax cut of nearly £1.7 billion.
A ‘tax cut’ that did not entirely convince all observers
Responding specifically to the business rates discount, UK Hospitality chief executive Kate Nicholls stated: “We have been lobbying hard for significant reform of the outdated business rates system and therefore very much welcome the chancellor’s move today to extend the 50% business rates relief for the hospitality and leisure sector for the next financial year.”
However, she also warned that “the cap on the business rates relief, and the fact that it applies to businesses, not sites, will render the measure all but useless for many London businesses, where rates are highest and many of the larger chain companies have many venues.”
Another highly placed retail-industry observer quoted by the Evening Standard said the announcement was “only a win for smaller players, leaving large legacy retailers who are most likely to have excess physical space with the same old headache.”
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