There were 2 particular things in this week’s budget that caught our attention; the proposed “online tax” and the cut to Business Rates.
Whilst welcome, the “online tax” is no more than a proposal that would not see light of day until 2020 (possibly when other Countries have developed their own version!).
So, instead, let’s concentrate on the Business Rates proposal:
Any retailer in England with a rateable value of £51,000 or less will have Business Rates under plans to cut the bill by a third.
The Government says this could mean annual savings of up to £8000 for up to 90% on shops, pubs, cafes and (hopefully) live music venues. The Music Venue Trust have already written to the Treasury to establish if the venues are included.
It is clear that the larger retailers will not see the benefit of this saving. Ironically the largest 10% of retailers pay a hugely (larger) disproportionate percentage of the total revenues raised by Business Rates and we are all aware of the store closures taking place by Marks & Spencer, Debenhams, House of Fraser etc.
However, on the face of it, some welcome relief for smaller retailers and we are all waiting to see the actual detail of how this will be phased in.
In the meantime, MIA Business Rates partner, Altus Group offered the following thoughts:
Budget 2018: Comment from Rating Experts Altus Group
Yesterday the Government announced a business rates discount of one third off the overall tax liabilities for those retail properties with a rateable value up to £51,000 for 2019/20 and 2020/21. This equates to a tax cut of around £450 million in each of these years. According to the Chancellor, it provides an annual saving of up to £8,000 for up to 90% of all shops, pubs, restaurants and cafes.
Under small business rates relief rules, qualifying businesses with a rateable value up to £12,000 are already completely exempt. This removes 320,000 properties from business rates. The new 2 year relief will cut the business rates bills by a third for over 160,000 high street type of premises including those currently receiving tapered small business rates relief with a rateable value of between £12,001 and £15,000.
The average small shop will see savings of £3,274 in their rates bills next April for 2019/20. The relief will be subject to state aid rules as the qualifying factor will be based solely on the rateable value of a property.
Whilst only 9.75% of all retail properties in England have a rateable value over £51,000 they do account for 68.58% of the total rateable value for the entire retail sector. Despite the ongoing crisis engulfing the high street and the meaningful support for the lower value properties, amidst major large retailers reducing their footprint, the Chancellor offered no help for the medium to large sized high street premises.
More concerning is the temporary relief does nothing to solve the long term unfairness for those large premises across all sectors of the economy who’s rateable value is above £100,000 and has fallen significantly but are denied the commensurate tax reduction that the removal of downwards transition would have provided. Whilst those high street premises with a rateable value of less than £51,000 will share £900 million of rates relief, sadly, the Chancellor completely ignored our manufacturing and services sectors that continue to face the brunt of Brexit uncertainties.
If any MIA member would like to talk with our partners at Altus about their business rates liability, contact firstname.lastname@example.org and we will get them to contact you (no obligation discussion). Altus have saved many of our members THOUSANDS of pounds off their rates bills and are the biggest team of experts in the UK.