The government has announced a £1.5b business rates relief fund that could be made available to hospitality supply chain businesses in England that have so far missed out – however it has also announced that it will be legislating to rule out Covid-related rates appeals.
The new fund is meant for businesses outside the retail, hospitality and leisure sectors that have not benefitted from the business rates holiday over the last year, and could be made available by local authorities to hospitality supply chain businesses that have been excluded from relief and support. The new funds will be distributed by local authorities according to which sectors have suffered most economically.
Around 170,000 businesses ineligible for relief have been appealing for discounts on their rates bills, arguing the pandemic represented a ‘material change of circumstance' (MCC).
However, the government has now said that market-wide economic changes to property values, such as from Covid-19, can only be properly considered at general rates revaluations, and it will therefore be legislating to rule out Covid-19 related MCC appeals.
John Webber, head of business rates at Colliers, described it as a "staggering response" that "would not be out of place in a Banana Republic" and said £1.5b would "not even scratch the surface" for businesses struggling to pay their rates bills from last year.
"The government is ripping out the rule book retrospectively. It is the wrong thing to do on every level," he said. He explained that the government's Valuation Office Agency (VOA) had already agreed that the impact of Covid-19 and its effects on businesses constituted an MCC, by which businesses would be able to claim a rebate on their rates bills. He said that to deny this retrospectively because the numbers were "too high" was "deeply shocking".
He added: "After three months of refusing to negotiate with us, to introduce retrospective legislation 12 months after rate payers first presumed they would see some hope of reduction and to change the rules like this makes a mockery of the whole appeals process and indeed the business rates system. It's unprecedented and deeply concerning."
UKHospitality chief executive Kate Nicholls said the new fund was a positive development for hospitality businesses, specifically those in the supply chain.
However, she also said that the rates relief cap could still inhibit the recovery of hospitality businesses.
She said: "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.
"Today's 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."
The devolved administrations in Scotland, Wales and Northern Ireland will receive an additional £285m through the Barnett formula.