Small retailers in England have been given a boost recently, thanks to a new scheme which offers small and medium-sized businesses a share in tax cuts that will help them to thrive in these unstable times. Whilst council tax, prescriptions, utilities and car tax are all due to go up over the next tax year, small and independent high-street businesses can enjoy a discount on their tax rates bills that should help to keep them afloat.
Chancellor Philip Hammond, announcing the scheme as part of the Autumn Budget, said that the move stood to help “up to 90 per cent of all independent shops, pubs, restaurants and cafes”.
Under the plan, high-street business properties with a rateable value of £51,000 or less will be entitled to a 33% discount on their rates bills for the tax years 2019/20 and 2020/21.
Who is the relief for?
This relief is given to eligible occupied retail properties, where the property is being used solely or mainly as a shop, restaurant, cafe or drinking establishment. According to government guidance, these establishments include, but are not limited to:
- Shops (including florists, bakers, jewellers, off licences, chemists, newsagents, supermarkets, etc)
- Charity shops
- Post offices
- Furnishing shops or display rooms
- Car showrooms
- Petrol stations
- Garden centres
- Art galleries (if art is for sale)
- Hair and beauty services (hairdressers, nail bars, beauty salons, etc)
- Shoe repairs/ key cutting
- Travel agents
- Dry cleaners
- Funeral directors
- Sandwich shops
- Coffee shops
The guidance also states that local councils are granted some choice in who they offer the discount to, making their own rules for eligibility to some degree. However, it is noted that some councils are not publicising the discount, or issuing it automatically, so it is worth businesses checking for themselves whether they are eligible or not and applying if they are.
Who is not eligible for the discount?
Properties which are used to provide a few specific products and services are not eligible for the discount. These include but are not limited to:
- Financial services (banks, bureaux de change, betting shops, etc)
- Other services (estate agents, employment agencies, etc)
- Medical services (doctors, dentists, vets, etc)
- Professional services (financial advisers, insurance agents, etc)
Businesses will also be considered ineligible if their premises are not reasonably accessible to members of the public the majority of the time. This would include those that are involved in membership clubs and schemes, or trade only retailers.
How much can businesses save?
Councils across England have set aside £502 million between them for this financial year to cover the cost of applications. For those who are eligible to take advantage of the discount, real estate advisory firm Altus Group says that the average retailer could see savings of around £3292 in their 2019/20 business rates bills.
The discount works out to ? of the retailer’s business rates bill, after deducting any other reliefs that the business is entitled to, such as small business rate relief. If the business already receives 100% small business rate relief, then there will be no discount available.
Why has the relief been announced?
This is a fragile time for high street businesses and the government recognises that smaller retailers may struggle over the upcoming years.
Two million small businesses are set to encounter possible cash flow issues thanks to the Making Tax Digital scheme, which has been rolled out universally in recent months. All VAT-registered businesses are required by law to comply with the scheme, meaning that those without accounting software have been forced to get their company up to date to ensure compliance, at an average cost of around £564 per business.
Changing consumer behaviour over the past decade has also put a strain on the high street, leaving town centres becoming ever more desolate and run down. This initiative is designed to give these companies a boost, in hopes of helping the high street to evolve and adapt into locations were business can thrive.
How else can you reduce your business rates?
For businesses who are struggling to stay afloat in a difficult economy, there are other options available which may help to lower your business rates.
Small business rate relief
Small business rate relief applies to occupiers of properties with a rateable value under £15,000 and is calculated automatically using the lower small business non-domestic rating multiplier to give a lower tax bill.
The reduction is not available on properties which are currently unoccupied, but for those which are, businesses must have:
- One property with a rateable value under £15,000, or
- One main property and other properties, if the additional properties have rateable values less than £2,900.
The relief only applies to the main property if more than one is occupied, and the combined rateable value of all occupied properties must be less than £20,000.
For properties with a rateable value of £12,000 or less, businesses can get 100% business rates relief. For those with properties which have a rateable value between £12,001 and £15,000, relief rates are worked out as a tapered percentage.
For businesses who are suffering extreme cases of hardship, and whom the local council deem to be particularly worthy or important to the community, a hardship relief scheme is also available.
Under Section 49 of the Local Government and Finance Act 1988, any local council is able to, at their discretion, reduce or remit in full the amount of National Non-Domestic tax which a business would otherwise be liable to pay. This relief is entirely funded by taxpayers, so it is important that the council is satisfied that there is good reason to grant it.
In order to qualify for hardship relief, a business must:
- Prove that they would be in severe hardship were the council not to allow the relief
- Get support from local taxpayers so that the council may consider it reasonable to the interests of the community for this relief to be granted.
The economy is evolving along with the buying habits of its underlying consumers and whether the high street business model has a future is uncertain, and the question of if this measure is too little too late, will only be answered in the years to come.
Here at TFMC we have a great deal of experience with this sector, and as well as offering an “across the board” suite of accountancy products and service, we can help businesses with high level strategic planning and forecasting for the future.
Why not contact us on 0800 470 4820 or email [email protected] to find out more.