Yesterday (25 March), the Government announced a new business rates relief fund that will be targeted at companies that have been unable to benefit from the existing £16bn business rates support, such as those in the hospitality supply chain.
Alongside the new fund, though, was an announcement that Ministers plan to stop appeals against bills for the property-based tax because of disruption during the Coronavirus crisis.
Many of those ineligible for rates relief have been appealing for discounts on their bills, arguing the pandemic represented a ‘material change of circumstance’ (MCC).
However, the Government has said that market-wide economic changes to property values, such as from Covid-19, can only be properly considered at general rates revaluations, and will therefore be legislating to rule out Covid-19 related MCC appeals.
Instead the Government will provide a £1.5bn pot across the country that will be distributed according to which sectors have suffered most economically, rather than on the basis of falls in property values.
Funds will be allocated to local authorities based on the stock of properties in their area whose sectors have been affected by Covid-19.
The Government said 170,000 companies have made claims for business rates relief due to a material change of circumstance.
However, property agent Colliers said that more than 400,000 companies have started the appeals process against their bills.
John Webber, head of business rates at Colliers, strongly criticised the Government’s announcement, saying it was a 'staggering response'.
"The Government is ripping out the rule book retrospectively," he says. "It is the wrong thing to do on every level."
According to Webber, the Government’s Valuation Office Agency negotiated with the agents of rate payers late last year on the impact of Covid-19 and its effects on businesses, following the Government’s working from home and social distancing policies, and agreed these constituted a MCC by which businesses would be able to claim a rebate on their rates bills.
"To now deny this is a MCC retrospectively, because the numbers are too high, is deeply shocking," he adds.
UKHospitality welcomed the announcement of the new rates relief fund, saying it should benefit hospitality supply chain businesses.
However, the trade body also warned that thousands of pubs, restaurants, coffee shop, hotels and leisure attractions will be left paying full rates from July as a result of the rates relief cap.
Kate Nicholls, UKHospitality chief executive, says: “This is a positive development for hospitality businesses, specifically those in the supply chain.
“We had been banging the drum for hospitality supply chain businesses, as they have struggled to access reliefs even though many have faced catastrophic drops in sales. It was absolutely critical that they received financial support, to save jobs and businesses and eliminate a threat to the recovery of the sector.
“However, the worrying issue of the rates relief cap could still inhibit the recovery of hospitality businesses. Almost 8,000 businesses employing nearly 350,000 people will be paying full business rates in July. This is going to undermine viability and could prompt cost cutting, site closures and scare away investment. The problem needs addressing.
"[This] announcement potentially compounds this problem as it prevents these businesses from readjusting their valuations – even where Covid has caused a fundamental shift in their local market, such as in city centres.
“Should the Government delay the lifting of social distancing measures or make it dependent on some criteria being met such as a vaccine passport, this will present another substantial barrier to reopening and viability. It would need to be met with a further extension of the business rates relief for the hospitality sector to mitigate the inevitable damage.
"Extending the full rates holiday to September now would provide Government and industry with much-needed breathing space.”