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Business Rates - Spring Budget Update (and rant)

Published: 04/03/2021 By Jeremy Day FRICS

So was it worth the wait?

We had been told for some time that the Chancellor would provide an update on Business Rates Relief and Grants in the Spring Budget, and yesterday we heard that the current 100% relief, to businesses in retail, leisure, hospitality, and now nurseries, will be extended for a further period of three months, until the end of June 2021.

Thereafter, it gets a bit more complicated, but for most small and modestly-sized businesses there will be continued relief, to the tune of 2/3 of rates payable, through the remainder of the 2021/2022 rates year (to 31st March 2022).

For businesses that have been fully locked down, for example hospitality, pubs, most retail, personal care, and others, the limit will be £2m of overall support, at business level. Let us hope these chains will soon be able to open and trade, so they can bridge the gap between the £2 million cap and their full business rates liability.

For those larger businesses who have been able to trade through the most recent lockdown, the further support will be limited to £105,000 at business level. We estimate this is likely to be any business with more than c. 3-5 modestly-sized outlets, for example chemists, cafes, bike shops, etc.

There is still no help for vacant properties, unfortunately.

We are concerned that these policies introduce yet more complexity, where it remains to be determined how larger businesses will in practice gain access to these reliefs, when their portfolio of outlets spans multiple Local Authorities (LA). We understand that there will be a form of self-certification or declaration, which businesses will need to make with each LA. This sounds cumbersome, and given our experience with several LA’s close to us, who are already deeply confused by the complexity of grants and reliefs to date, we are not sure it bodes well.

We remain concerned that the promised overhaul of the Business Rates system continues to languish in long grass. We are promised the review in the Autumn.

We recognise the complexity of this, where business rates yield some £25 billion of tax revenue that will need reallocating - and the simple suggestion that it should now be borne mainly by Amazon is obviously politically complex.

However, the current system is itself now ridiculously complex, with valuations out of date, and the tranching, with small business relief below £15,000 RV, and the upper bracket at £51,000 RV, creating major anomalies at the margins.

As a reminder, all retail properties below £51,000 RV already benefited from 33% relief - and were going to get 50% in Boris/Rishi’s first budget (pre-Covid). Sure, they now have a 66% discount (up to the enterprise-level caps) for 2021/22, but what happens next? Full rates? 33% discount? 50% discount? Revaluation?

Why should Rates payable on a shop with £52,000 RV be a third or even 50% higher than it’s near neighbour at £50,000 RV? Tax is meant to be progressive surely? There is a gulf between the small and medium-sized premises that desperately need help, and the supermarkets (who have themselves acknowledged they don’t need help by returning the government cheques).

We urge the Treasury to come forward with a simpler and fairer Business Rates system just as soon as they can.

For any questions regarding Business Rates liability please contact Whitman & Co Commercial.