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Budget 2021: Cap on business rates discount makes support ‘drop in the ocean’ for large firms

·2-min read
People walk along the high street in Loughborough (Mike Egerton/PA) (PA Archive)
People walk along the high street in Loughborough (Mike Egerton/PA) (PA Archive)

One part of the business rates support announced in the Budget will be “all but useless” for a number of London companies, tax and hospitality commentators have warned.

Chancellor Rishi Sunak unveiled various measures to help firms, many of which were applauded, such as more frequent rates revaluations – every three years, from the current five.

The government also said over 90% of retail, hospitality and leisure groups will receive at least a 50% reduction in their business rates bills in 2022-23, when taken together with small business rates relief. However, the 50% discount is subject to a £110,000 cash cap per business.

Kate Nicholls, chief executive of trade body UKHospitality, said: “The cap on the business rates relief, and the fact that it applies to businesses, not sites, will render the measure all but useless for many London businesses, where rates are highest and many of the larger chain companies have many venues.”

Nicholls warned: “London’s venues have been hit hardest and longest, and while the Chancellor clearly has good intentions with the relief, it will fail to hit the mark for so many of the capital’s hospitality venues.”

High street tenants have long complained about the rates tax, which is linked to the underlying value of a property, but currently based on values from April 2015.

Some companies have warned that does not reflect how values, particularly in the retail sector, have been hit by factors such as the Covid-19 crisis, and competition from online rivals.

Aidan Sutton, a tax partner at PwC, said: "Rishi's 50% business rate discount is capped at £110,000 per business so it appears bounteous for small businesses, but it's a drop in the ocean for the larger chain retailers."

Paul Martin, UK head of retail at KPMG, said the announcement “is only a win for smaller players, leaving large legacy retailers who are most likely to have excess physical space with the same old headache”.

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