Hammond’s bold and ambitious plan to help the retail sector through a near £1 billion business rates cut is likely to be thwarted by European Union state aid rules.
The Chancellor will slash business rates next April by discounting bills by a third for those retail occupied properties with a rateable property value of less than £51,000 for 2019/20 and 2020/21 until the next revaluation comes into effect in April 2021.
This equates to a tax cut of around £450 million in each of these years with the Chancellor saying it will provide an annual saving of up to £8,000 for each property eligible.
However, the Treasury say that the discount will be subject to EU rules which restrict state aid to €200,000 per business over three years meaning that shops, pubs and restaurants that are part of large chains are likely miss out.
Robert Hayton, UK Head of Property Tax at Altus Group, analysed 376 sites in England and Wales occupied by Sir Philip Green’s Arcadia which own the high street retailers Burton, Dorothy Perkins, Evans, Miss Selfridge, Topman, Topshop, Wallis and the out of town chain Outfit.
Hayton says that, of the stores he analysed, nearly 30%, 109 in total, had a rateable value of less than £51,000 and were eligible to the new retail relief but added “most large chains will reach the de minimis regulation limit pretty quickly one way or another and will be precluded.”
Hayton cited the £1,000 discount which was handed to pubs with a rateable value of less than £100,000 during the first two financial years after the revaluation saying “whilst nearly 25,000 pubs met the criteria for that discount, less than 18,000 actually received it”.
Whilst the UK officially exits the European Union on 29 March 2019, before the start of the next financial year, after the transition period, the U.K. proposes to maintain a “common rulebook” on state aid that would “mirror” the EU’s current legal regime and would apply throughout the U.K. and across all sectors of the economy.