The tax break was announced in the Budget, to help businesses deal with impact of coronavirus.
Companies with a rateable value of less than £51,000 will not pay any business rates in the coming year. The temporary measure will include retail premises, and is part of a package of “extraordinary” measures to support the UK economy in the face of disruption from the coronavirus outbreak.
The business rates holiday is designed to help small businesses with retail premises, which would be seriously affected if customers avoid physical shopping trips due to fear of spreading the virus.
The Chancellor, Rishi Sunak, claimed: “That is a tax cut worth over £1bn, saving each business up to £25,000.”
The government also said 700,000 small businesses already exempt from rates due to their size would receive a £3,000 cash grant to manage their overheads during the coronavirus crisis.
However, larger retailers have not been included in the scheme, and feel they have been let down by the government after the Chancellor failed to overhaul business rates or offer any relief for bigger companies, many of whom are being forced to review their store portfolio and cut jobs.
He did reiterate that the business rates system as a whole would be reviewed later in the year, with the conclusions published in the autumn. The review also promises to look at improving the transitional relief scheme, which many claim forces retailers outside London to subsidise those in the capital. Retailers have long campaigned for the entire business rates system to be reformed, as they battle mounting challenges – as well as coronavirus. They have expressed disappointment at what they perceive as yet further delay to addressing their issues.
Although small retailers are a vital part of the retail industry, the survival of prominent high street names is also an ongoing area of concern.
John Webber, head of business rates at property advisory firm Colliers International, 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.”
Despite only a tenth of shops in England having a rateable value of more than £51,000, those shops pay nearly 70% of sector’s bill, according to real estate adviser Altus Group.
Paul Martin, UK head of retail at KPMG commented: “Retailers are mass employers in the UK and their survival has a very human impact in terms of both employment and the shape of our high streets. For many of these players, rates are the largest operational expense they have to contend with. Some of the changes we are witnessing are the fallout of changing consumer behaviour, but retailers are also contending with myriad pressures, whether it’s Brexit uncertainty or the potential impact of Covid-19.”