Businesses feeling the relief from business rates freeze
This article was co-authored by Bibiana Lachkovicova, Trainee Solicitor, Manchester.
Business rates, especially for the retail sector, have always been a concern as they constitute one of the largest overheads. Sometimes, they can also be more than the rental value payable for a property.
On 16 March 2020, the government outlined the drastic change to its COVID-19 response plan, which brought about the need for immediate social distancing. This step undoubtedly represents a significant hit to the retail, hospitality and leisure industries as the public is actively being encouraged to refrain from pursuing any unnecessary social activities. As a result, the Chancellor jumped into action to deliver on his promise to do ‘whatever it takes to support our economy’ amid the COVID-19 crisis.
On 17 March 2020, the Chancellor announced a wide-ranging expansion to the business rate discount set out in the Spring Budget 2020. The expansion takes the form of a tax holiday without any restrictions, whereby starting from 1 April 2020, all shops, pubs, theatres, music venues, restaurants and any other business in the retail, hospitality or leisure sectors will pay 0% of business rates for 12 months. Most importantly, this new measure will apply to these businesses irrespective of their properties’ rateable value, ensuring that all businesses (as opposed to mostly SMEs) within these industries have the same government support to manage and survive the COVID-19 crisis.
Currently, the situation has moved on and the country is now in lockdown.
The small print – be aware
Business rates relief holiday will apply to occupied properties only, with the exception of properties which closed temporarily in line with the government’s advice on COVID-19. These properties will be treated as occupied for the purposes of the relief. Businesses which qualify for the relief and occupy more than one property will benefit from the business rates holiday for each of their eligible properties. The eligibility for the discount as well as the discount itself will be calculated on a daily basis. This means that there is a possibility that occupiers will only receive a proportion of the discount in the event that a business undergoes a merger, split or change of use of the property in the financial year 2020/2021 that results in it being ineligible for the discount going forward.
How to get relief
Do nothing. The business rates holiday will be taken into account in the business’ next rates tax bill in April 2020. However, given the timing on this, it’s likely that the rates demands will have already been issued without taking into account the current relief available. Accordingly, direct debits/standing orders should be cancelled if the relief is available. Businesses that are unsure whether they qualify for the business rates relief holiday are advised to either contact their local authority to confirm the position as soon as possible or to review the Government’s guidance for local authorities here.
The business rates holiday will provide welcome relief to businesses in this unprecedented climate where outgoings are currently outweighing income and will assist with cash flow at a time when it is needed the most.