Budget Update: Biz rates relief

The Budget delivered in November 2018 contained some good news for Britain’s charity retailers.

Most notably, following a year-long campaign with our partners, the government agreed to cut red tape by allowing charity retailers to only write to their donors every three years when Gift Aid claims total less than £20.  Read more here.

Furthermore, the government announced business rates relief for small businesses.  Specifically, the Treasury will provide a business rates retail discount scheme for occupied properties with a rateable value of less than £51,000.  This will come into force for the tax year 2019-20 and will continue in 2020-21.

The good news is that this discount will apply to charity shops, however there may be some state aid issues for our larger members.  More information about this policy is summarised below.

Application
To benefit from the relief, a property must have a rateable value of less than £51,000, and be wholly or mainly being used as a shop, restaurant, cafe or drinking establishment.  The test is on use and not ownership, so if a property is owned by a charity but not used as a shop it will not qualify.

The exact legal definition of these qualifying premises is as follows:

  • Hereditaments that are being used for the sale of goods to visiting members of the public: Shops (such as: florists, bakers, butchers, grocers, greengrocers, jewellers, stationers, off licences, chemists, newsagents, hardware stores, supermarkets, etc); Charity shops Opticians; Post offices; Furnishing shops/ display rooms (such as: carpet shops, double glazing, garage doors); Car/ caravan show rooms; Second hand car lots; Markets; Petrol stations; Garden centres; Art galleries (where art is for sale/hire).
  • Hereditaments that are being used for the provision of the following services to visiting members of the public: Hair and beauty services (such as: hair dressers, nail bars, beauty salons, tanning shops, etc) Shoe repairs/ key cutting; Travel agents; Ticket offices e.g. for theatre; Dry cleaners; Launderettes; PC/ TV/ domestic appliance repair; Funeral directors; Photo processing; Tool hire; Car hire
  • Hereditaments that are being used for the sale of food and/ or drink to visiting members of the public: Restaurants; Takeaways; Sandwich shops; Coffee shops; Pubs; Bars

There is no relief available for properties with a rateable value of £51,000 or more.

In some areas local authorities will use their discretionary powers to offer additional discounts to businesses or charities, but overall this kind of support is becoming less common.  Read more here.

Value
The value of discount will be one third of the bill, after mandatory reliefs and other discretionary reliefs have been applied.

Wider guidance on this relief has been published by the government here, they expect local authorities to include further information about the scheme when they write to all rate payers at the start of the 2019-20 year.

A relief for a typical small commercial retailer therefore would work as follows:

An occupied shop has a rateable value of £40,000
Its gross business rates are calculated as follows: £40,000 x 0.491 = £19,640
It receives the one third discount as per the scheme = -£6,547
Rates due = £13,093

A relief for a typical small charity retailer therefore would work as follows:

An occupied shop has a rateable value of £40,000
Its gross business rates are calculated as follows: £40,000 x 0.491 = £19,640
It receives the 80 per cent mandatory rate relief = £3,928
It receives the one third discount as per the scheme = -£1,309
Rates due = £2,619

State aid concerns
Tax reliefs, including on business rates reliefs, must comply with EU law on state aid.  In this case no single business can receive a retail discount totalling more than €200,000 per year.

Therefore, charity retail chains with several shops receiving a discount will be in danger of tipping over the threshold.  We therefore advise all of our members to monitor the total amount of rates discount they are receiving across their retail estate, and if they are in danger of exceeding the threshold to contact the government as a matter of priority.

More information
Our members only policy guidance page: https://www.charityretail.org.uk/members/guidance/

Charity Tax Group: https://www.charitytaxgroup.org.uk/tax-update/guidance-business-rates-retail-discount-scheme-charity-shops/

Ministry of Housing, Communities and Local Government: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/760973/Retail_Discount_Guidance.pdf

1 Shares