UK: BNP Paribas Real Estate
Budget 2018: High Street reform pledged with a little relief in business rates
At the despatch box this week the Chancellor of the Exchequer pledged measures to rejuvenate the High Street, reducing “independent” retailers’ rates bills by one third for two years, up until the next revaluation in April 2021.
It will not have gone unnoticed that the Chancellor was keen to stress “independent shops, restaurants and cafes”. In 2014 Retail Rate Relief could be claimed by all retailers – ‘large’ and ‘small’ – and the qualification criteria extended to retailers operating from non-retail premises. This time the Chancellor’s choice of words indicates that the relief will be eligible to ‘small’ retailers with a ‘frontage’ and the relief looks set to be more generous with an average saving of £8,000 per annum for a qualifying retailer whose shop has a rateable value of less than £51,000. In 2014 the relief was capped at £1,000 and in 2015 it was capped at £1,500.
Previously the relief was subject to EC states aid rules, although with Brexit scheduled three days before the relief comes into effect it could be the case that these rules will not apply.
This measure was introduced alongside a £675m fund aimed at rejuvenating the High Street and a relaxation of planning controls concerning a change of use from retail and offices to residential, in order to increase footfall whilst tackling the housing shortage.
Those seeking wholesale reform of the business rates system will be disappointed, as the Chancellor took the opportunity to confirm that the next revaluation (in England and Wales at least) will be in 2021 with premises’ rateable values based on rental levels prevailing at 1 April 2019. However, also delivered alongside these pledges is the UK Digital Services Tax, which is aimed at levelling the playing field between on-line and bricks ‘n mortar retailers.
We look forward to more detail; however, what is clear is that it will not be a sales tax borne by consumers, but rather a 2% tax on UK revenues from digital platforms operated by tech companies with global revenues in excess of £500m.