Budget 2021: Chancellor extends business rate holiday; new grants for reopening

Budget 2021: Chancellor extends business rate holiday; new grants for reopening

Business rate holiday extended another three months and reduced for the rest of the fiscal year

As part of today’s Budget announcement, the business rates holiday in England which was implemented in last year’s budget, will be extended three more months until the end of June for those in retail, hospitality and leisure.

“This was to be expected given that they’re still closed and required to be closed,” says Gerry Biddle specialist business rates consultant at Deloitte. He adds that rate relief beyond that point “gets a bit more complex”.

From July, business rates relief will be reduced from 100 percent to 66 percent until March 2022. However, to be eligible for this relief, businesses must have been affected by the third national lockdown – meaning those which were required to close on January 5.

“Up until the end of June, the current system applies,” says Biddle “July 1 onward, it becomes property targeted towards those who were forced to close.”

This new relief will be capped at £2m per business. The cap is a clear sign that the measure is targeted towards smaller businesses, says Biddle.

“The £2 million cap is aimed at targeting the smaller businesses who obviously benefit significantly from this [relief]. It is sensible to help these struggling small businesses.”

Combined with small business rate relief, many firms in the retail and hospitality sector will see rates reduced by 75 percent for most of the year. Overall, market participants are pleased that the business rate holiday is being extended in line with the government’s plan on easing lockdown restrictions.

“This is welcome news for many businesses, as restarting business rate charges while they are unable to trade would have been the final straw for many,” said Phil Vernon, head of business rates at PwC in a statement.

As part of last year’s budget, the Chancellor initiated a “fundamental review” of business rates. The review has been delayed until the autumn with the government citing wishing to wait for “more economic certainty”. An interim report of the findings will be published on March 23.

One of the reasons for reform is that business rates are calculated based on rental rates. Currently, this is around 50 percent of annual rents based on rental values in April 2015. The next adjustment is meant to be calculated based on rents as of April 2021 and rates readjusted to this in 2023.

“At the moment with the pandemic, there’s no real market evidence as to what values are. That’s a bit of a problem,” says Biddle. “The aim of the fundamental review is to have more frequent revaluations, so you don’t get these big gaps because the current rates are based on 2015 values.”

The government also announced a restart grant as part of the recovery budget. Non-essential businesses can claim £6,000 per premise and those business who are unable to open in April like those in hospitality will be eligible to receive a grant of £18,000.

Like the new rate relief from July onward, Biddle says these grants are targeted towards small businesses.

“Again, [these grants] are aimed at struggling small businesses and rightly so. They are the ones that are really needing help at the moment.”

 

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