Business rates for companies with a rateable value of less than £51,000 will be suspended for the coming year. The tax holiday is part of the “extraordinary measures” being taken to support the UK economy in the face of the disruption from the coronavirus outbreak.
The measures apply to firms and leisure businesses including shops, cinemas, restaurants, and hotels. The news was delivered in the 2020 budget that was announced this week courtesy of the Chancellor of the Exchequer, Rishi Sunak.
“That is a tax cut worth over £1bn, saving each business up to £25,000,” Sunak said.
Business rates are a tax on properties that are used for commercial purposes, and are charged based on an estimate of what it would cost to rent the property on the open market: the “rateable value”. Sunak described the business rates holiday as an “exceptional step” that would benefit museums, art galleries, theatres, caravan parks, gyms, small hotels, sports clubs and night clubs, all of whom will be hard hit if customers stay away.
The Chancellor has also announced a series of measures designed to assist smaller businesses during this period of uncertainty amid the coronavirus outbreak. One such measure is that businesses with fewer than 250 employees will have the cost of statutory sick pay for any employee off work for coronavirus for up to 14 days refunded – including those who self-isolate.
The chancellor said the business rates system as a whole would be reviewed, with the conclusions published in the autumn. Firms in England have campaigned for several years for the system to be reformed, arguing it makes it hard for bricks and mortar retailers to compete with online rivals.
Commenting on the implications of the Budget for the retail, hotels, hospitality and leisure sectors, Ryan Broomfield, a consumer markets specialist at RSM said: “This was a budget delivered at short notice in an extraordinary period of global uncertainty impacting the consumer sector.
“Concerns over coronavirus are having a major impact on consumers’ confidence, desire and ability to engage with businesses in the sector. In practice it remains to be seen how these changes will help businesses in the short-term facing significant ongoing concerns with risk, principally due to falling revenues due to coronavirus.”
Other Budget measures to support small businesses included:
- Cash grants of £3,000 to very small businesses with rateable values below £15,000
- Government backing for banks to offer loans of up to £1.2m to small and medium-sized businesses
- Businesses with fewer than 250 employees can reclaim the cost of providing Statutory Sick Pay (SSP) to employees off work due to the coronavirus
- Scaling up of HMRC’s “Time to Pay” service, including a new helpline so businesses and the self-employed can arrange to defer tax payments.
As expected, Mr Sunak scrapped a planned cut to corporation tax. The rate of the tax will remain at 19 per cent rather than falling to 17 per cent.
Another change that was widely anticipated was a cut to Entrepreneurs’ Tax Relief. Business owners who sell their firms on were entitled to tax relief on profits of up to £10m over their lifetime. The tax relief has been scaled back rather than abolished, with the lifetime limit reduced to £1m.