After winning the 2019 General Election on the 12th December 2019, Boris Johnson's Government announced in the Queen's Speech on the 19th December 2019 that business rates would be cut with the objective of reviving the high street retailers, pubs, and other small businesses. The measures were formally confirmed by the Financial Secretary to the Treasury, Jesse Norman, in a written statement on the 27th January 2020, who confirmed that they would come into force from the 1st April 2020. Nevertheless, as part of his Budget on the 11th March 2020, the Chancellor of the Exchequer, Rishi Sunak, enhanced the rate cuts due to come into force from the 1st April 2020, as part of a wider package designed to mitigate the impact of the coronavirus pandemic. At the same time, the Chancellor announced a fundamental review of business rates with the objective of a longer term revival of the high street, which is due to report in the Autumn of 2020.
1st April 2020 Changes
The business rates changes that came into effect from the 1st April 2020 were as follows:-
- On the 27th January 2020, it was announced that the retail discount was to be increased from one-third of the net business rates bill after all other reliefs, to 50 per cent for the financial year 2020/21, and was to be extended to include cinemas and music venues. However, in the Budget, the Chancellor announced that it would be increased to 100%, and would also be extended to hospitality and leisure businesses
- The discount of £1,500.00 for office space occupied by local newspapers has been extended by 5 years until the 31st March 2025
- Under the 27th January 2020 announcement, eligible pubs with rateable values of less than £100,000 in the financial year 2020/21 were to receive an additional discount of £1,000.00 on top of the retail discount, which would apply once the retail discount had been made. In the Budget, the Chancellor announced that the additional discount would rise to £5,000.00.
The Treasury estimate that as a result of these measures, around 45% of commercial properties in England will receive 100% business rates relief for the 2020/21 financial year.Â
Business Rates Review
The Chancellor of the Exchequer, Rishi Sunak, announced in his Budget that there would be a fundamental review carried out into business rates, with the objective of reviving the high street. The aim is to address the decline of high street retail due to competition from online retailers, who operate out of lower value out of town warehouses. An illustration of the problem is that in 2018, Amazon's turnover (£8.8 billion) was twice that of Next, but Amazon had a business rates bill of just £63.4 million compared to the approximately £100 million that Next had to pay. It is little surprise therefore that 180,000 jobs were lost in high street retail in the 16 months to March 202o, as a result of record store closures, with 12% of high street properties now lying empty.
The review into business rates is due to report in the autumn of 2020. Details of the review can be found here.
Reaction
The head of business rates at Colliers International, John Webber, criticised the lack of help for larger retailers. He said: "we are now destined to see more shop closures and job losses on the high street in the months ahead.....While helping SMEs is to be applauded, there is nothing in the budget that tackles the issues of the larger businesses – and these are the ones shedding the jobs." Moreover, the former chief executive of Beales, Tony Brown, points out that "business rates are having a catastrophic effect on the high street.......The system we have got at the moment is absolute lunacy." He told the Guardian that it was ultimately his company's £2.8 million business rates bill that thwarted any attempt to rescue Beales and its 23 stores from insolvency, with the loss of around 1000 jobs
