As the effects from COVID-19 continue to ripple out across the globe, the measures set out by the Government to help UK businesses are also being rolled out, one of which relates to business rates. Here we provide an explanation of the latest guidance.
Business rates are a devolved power and so the rules for rates vary between the different countries within the UK.
In the latest Budget the Chancellor announced an extension to the Retail Discount scheme from 50% to 100% for occupied retail, leisure and hospitality premises with a rateable value of less than £51,000 for the financial year 2020/21.
These proposals have subsequently been revised to include all retail, leisure and hospitality properties irrespective of their size.There is no upper rateable value limit and payments will not be subject to EU State Aid rules.
Retail, Hospitality and Leisure Definition
Retail, hospitality and leisure use is determined by the actual use of the property and if the property has mixed uses it will be determined on whether the property is wholly or mainly used for a relevant purpose. The definition was most recently up-dated on 25 March 2020 to include some uses previously excluded.
Retail, leisure and hospitality are split into various groups as follows:
• Properties used for the sale of goods to visiting members of the public – including most shops, post offices and petrol stations;
• Properties used for the provision of services to visiting members of the public – including hair salons, travel agents, rental shops, estate agents and funeral parlours;
• Properties used for the sale of food and drink – including pubs, restaurants, cafes and take-aways;
• Leisure properties – including sports venues, gyms , museums, cinemas, theatres and casinos;
• Properties used for assembly of the visiting public – including public halls and clubs;
• Properties used for accommodation – including hotels, holiday homes and caravan parks.
As well as retail properties an additional rates holiday scheme has been introduced for private, voluntary and independent nurseries as recognised by Ofsted’s Early Years Register.
The list of uses produced by Ministry of Housing, Communities and Local Government is detailed but isn’t exhaustive. Local authorities will have some discretion when deciding which properties qualify and which don’t.
However there are some properties which are specifically excluded, namely financial services (such as banks), medical services (including vets) and professional services (such as solicitors, accountants, etc.)
There are two grant schemes available. Both schemes are set against a base line of 11 March 2020. The qualifying criteria are those relevant at that date including both the rateable value and the eligible person.
Small Business Rates Relief and Rural Relief Schemes
A grant of £10,000 will be made to ratepayers receiving either Small Business Rates relief or Rural Relief, irrespective of the use of the property. However properties used for personal and not business use, as well as car parking spaces will not qualify, nor will companies which are in liquidation or which have been dissolved.
Retail, Hospitality and Leisure grants
Ratepayers eligible for the 100% relief scheme will also be eligible for a grant, as long as the Rateable Value of the property is below £51,000. There are two levels of grant, payable per property:
• For properties with a Rateable Value up to £15,000 the grant will be £10,000 (in line with the Small Business Relief grants).
• For properties where the Rateable Value is greater than £15,000 but less than £51,000 the grant will be £25,000.
The same exclusions apply to this scheme as to the small business relief grants, namely property held for personal use and car parks are excluded from the scheme. Additionally, the Government appears to have imposed an €800,000 limit under the new measures, which had been previously lifted for the retail relief (subject to EU approval).
Changes after 11 March 2020
- The baseline is set according to the local authority's records at 11 March 2020. Any changes after that date are not relevant, so settlement of a rating appeal bringing a property below the £15,000 or £51,000 thresholds will not change the eligibility to a grant. However, the local authority will need to verify the name of the ratepayer.
- The local authority will have the discretion to give or withhold grants to properties where it was clear that at 11 March 2020 the Rateable Value was incorrect and about to be changed, either removing the eligibility or bringing the property into the eligible range.
- It is also important to note that while any new tenancies or assignments granted on or after 11 March 2020 would still qualify for grant assistance, the eligible person for the grant was the ratepayer at this date. This should be taken into account when drafting leases so that the grant money can be transferred to the incumbent occupier.
The Welsh Parliament has announced that it will provide support in the same way as that given in England. There are however some differences in the definition being applied for retail, hospitality and leisure premises.
Retail, Hospitality and Leisure Definition
The general definition is very similar to that for England but certain uses are not included in the Welsh definition. For example, betting offices and bingo halls, referred to in the English definition as being included in the definition of retail are not mentioned in the Welsh Guidance. As well as this, casinos and gambling clubs which are included in England are specifically excluded in Wales.
There is also a cap on the eligible properties in Wales; only properties with a Rateable Value of £500,000 or less are included in the 100% relief scheme.
Further details are awaited but it was announced that a similar scheme will be put in place in Wales as that introduced in England. However, the Small Business Relief Scheme is for properties with Rateable Values of £12,000 or less.
The Scottish Parliament has passed regulations setting out the rates relief for business in the wake of the pandemic.
All properties will have a reduction in rates liability for 2020/21 of 1.6%. In addition for the larger properties, with rateable values of more £51,000, the surcharge will effectively be removed.
In addition airports, retail, hospitality and leisure properties will receive 100% for 2020/21. The list of properties qualifying as Retail Hospitality and Leisure is quite prescriptive.
- Sales of goods to the public (for consumption elsewhere;
- Sale of services to the public including hair and beauty, shoe repairs, letting agencies, travel agents and funeral parlours.
- Public houses and night clubs;
- Restaurants, cafes, coffee shops and the like.
- Theatres and box offices;
- Music venues;
- Museums and galleries;
- Clubhouses, sports clubs, centres and recreation grounds;
- Bingo halls;
- Tourist attractions and facilities.
Unlike England and Wales there are no specific exclusions.
Details of the grant scheme are still awaited. These are expected to mirror England and Wales but the divide between those receiving the higher and lower grants is expected to be above and below a rateable value of £18,000.
The Finance Minister has announced a three month rates holiday for all ratepayers. In addition there will be grants similar to those announced for England. Businesses eligible for Small Business Rates Relief (NAV up to £15,000) will receive grants of £10,000. Properties used for retail, tourism, or hospitality with NAVs between £15,000 and £51,000 will receive grants of £25,000. Further details are to be provided.
The Government’s latest guidance states that State Aid limitations will not apply to the rates relief schemes.
What should you do next?
Grants will automatically be paid by the local authorities based on their list of ratepayers as at 11 March 2020. Local authorities also have to produce details of each grant given and so may require input from the ratepayers before the payment is made. Unfortunately there are no set timescales for doing so.
How can we help?
The situation and Government guidance is still evolving and we will continue to update our clients as more details are unveiled. In the meantime, should you have any specific concerns or requests please don’t hesitate to get in touch with one of our qualified Rating experts and we will do our utmost to provide you with the best advice during these unprecedented times.
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