1st November 2021 – Last week, the Chancellor unveiled his long-awaited Autumn Budget, which contained significant changes to the business rates regime. Ultimately, it was welcome news for many businesses, with a string of updates that will support smaller traders that have been hit particularly hard by the pandemic. However, Sunak still failed to grasp the archaic nature of the current rates system. What were the key changes and will they go far enough?
A UBR freeze
Sunak confirmed that his plans to increase Uniform Business Rates (UBR) will be cancelled. Something that professionals like myself have long been calling for, freezing UBR – although a seemingly small change – will make a significant difference to businesses, particularly larger enterprises with several properties.
According to Sunak, the policy equates to a tax cut of £4.6 billion in next five years. However, given that the UK’s UBR remains the highest in Europe, I would like to see the Government go further than a freeze in due course by reducing UBR to around 30p in every pound.
Extended relief for retail, leisure & hospitality
Secondly, an additional year’s support has been provided to retail, leisure and hospitality businesses, with a 50% rates discount for businesses in these sectors with a total cap in rates payable per business in the sum of £110,000. This will help smaller businesses, as the total rateable value that qualifies for the relief will be approximately £220,000. This results in a tax cut of £1.7 billion and applies for the rate year 2022/2023.
New green and improvement relief
A nice touch from the Chancellor was the new ‘improvement rates relief’, which allows businesses to make property improvements and pay no extra rates on these improvements for an initial 12 months. Real estate extras like bike racks, extensions and air conditioning units can all be installed without tax and applies from 1st April 2023.
Similarly, from April 2023, businesses that have eligible plant and machinery used for renewable energy will no longer be charged rates on these items – a helpful policy that will encourage businesses to adopt green technology in property, including solar panels, wind turbines and electric charging points.
Ultimately, the attention devoted to business rates in this Budget was much deserved. It is a system that has been crippling businesses throughout, and well before, Covid-19. These key reliefs and policies will bring a great deal of support to businesses, particularly smaller ones, attempting to get back on their feet after an incredibly challenging year.
That said, not all has been addressed. It remains to be seen what long-overdue relief will be provided for office-based businesses who have been forced to pay full rates since March 2020 despite rarely using these spaces. Additionally, does anyone remember the announcement of a £1.5 billion fund back in March, aimed at helping businesses with their post-lockdown recoveries? Unlikely, as the Government still has not activated the fund. Why?
Overall, this Budget cut business rates by £7 billion, the single biggest tax reduction in business rates in over 30 years. Its takeaway message must, therefore, be positive, but I wonder whether it is enough. How long will the Government wait until it addresses all of the sectors plagued by the current rates system?
By Martin Davenport, Partner, Hartnell Taylor Cook ([email protected])
Martin Davenport also recently explored the reforms he would like to see made to the business rates system in EG here.