The Government announced yesterday a business rates discount of one third off the overall tax liabilities for those retail properties with a Rateable Value up to £51,000 for 2019/20 and 2020/21, i.e. until the next revaluation takes effect in April 2021.
This equates to a tax cut of around £450 million in each of these years. According to the Chancellor, it provides an annual saving of up to £8,000 for up to 90% of all shops, pubs, restaurants and cafes.
Under small business rates relief rules, qualifying businesses with a Rateable Value up to £12,000 are already completely exempt. This removes 320,000 properties from business rates.
The new 2 year relief will cut the business rates bills by a third for over 160,000 high street type of premises including those currently receiving tapered small business rates relief with a Rateable Value of between £12,001 and £15,000.
The average small shop will see savings of £3,274 in their rates bills next April for 2019/20 whilst the average pub will save £6,064 and the average restaurant will receive a discount of £7,170.
Government say that certain services – such as professional services and estate agents – will not be eligible for the new retail relief and intend to publish guidance by the end of the year.
The relief will be subject to state aid rules as the qualifying factor will be based solely on the Rateable Value of a property.
EU rules restrict state aid to €200,000 per business over a rolling three year period meaning that some businesses may not have access to the relief. Despite leaving the EU before the start of the next financial year, there will be a period of transition.
Whilst only 9.75% of all retail properties in England have a Rateable Value over £51,000 they do account for 68.58% of the total Rateable Value for the entire retail sector.
Despite the ongoing crisis engulfing the high street and the meaningful support for the lower value properties, amidst major large retailers reducing their footprint, the Chancellor offered no help for the medium to large sized high street premises.
Rates bills next April, for 2019/20, for nearly 50,000 retail premises where the Rateable Value is above the £51,000 threshold, and precluded from the new retail relief, will be forced to pay an extra £127.88 million in inflationary rate rises in accordance with September’s headline rate of inflation of 2.4%.
More concerning is the temporary relief does nothing to solve the long term unfairness for those large premises across all sectors of the economy who’s rateable value is above £100,000 and has fallen significantly but are denied the commensurate tax reduction that the removal of downwards transition would have provided.
Furthermore, whilst those high street premises with a Rateable Value of less than £51,000 will share £900 million of rates relief, sadly, the Chancellor completely ignored our manufacturing and services sectors that continue to face the brunt of Brexit uncertainties.