LONDON (Reuters) - British finance minister Rishi Sunak scrapped business rates for small firms in an “exceptional step” to help them get through disruption caused by the outbreak of coronavirus.
The measure, announced in his first annual budget speech on Wednesday, means that over the next year nearly half of all business properties in England will not pay a penny of business rates.
It came hours after the Bank of England cut interest rates and outlined support for bank lending, saying it had acted after seeing a “sharp fall” in trading conditions in the last week, particularly in the retail sector and anything driven by discretionary spending.
Business rates, a particular burden for retailers, are taxes to help pay for local services, charged on most commercial properties. They are currently calculated according to the rentable value of a property and have an annual inflationary uplift, or multiplier.
“Our (party political) manifesto promised that for shops, cinemas, restaurants, and music venues with a rateable value of less than 51,000 pounds we would increase their business rates retail discount to 50%,” Sunak told parliament.
“Today I can go further and take the exceptional step for this coming year of abolishing their business rates altogether.”
Sunak also scrapped the tax for 2020-21 for tens of thousands of other businesses in the leisure and hospitality sectors.
These include museums, art galleries and theatres; caravan parks and gyms; small hotels; sports clubs; night clubs; club houses and guest houses.
Sunak said these businesses could potentially be some of the hardest-hit from the spread of coronavirus.
He said the tax cut was worth over 1 billion pounds and could save each business up to 25,000 pounds.
But while the small firms benefited, all larger firms got was a promise of a “fundamental review” into the long-term future of business rates. This will be concluded by the autumn.
“A restructure of business rates to reduce the disproportionate burden on retail chains looks further away than ever,” said Patrick O’Brien, research director at GlobalData.
Britain’s retail sector has for years complained that the current business rates system is archaic, unfair and needed reform.
Lobby group, the British Retail Consortium (BRC), points out that the industry is the largest private sector employer in Britain, employing about three million people. While it accounts for 5% of the UK economy, it is burdened with 10% of all business taxes, and 25% of business rates.
The BRC argues this disparity is damaging Britain’s high streets, causing shops to close and harming the communities they support.
Reporting by James Davey and Andrew MacAskill; editing by Kate Holton