Budget 2021: bring businesses back from the rates cliff edge
1 March 2021: Extending the business rates holiday for struggling companies in the retail, hospitality and leisure sectors should be a key announcement in next week’s Budget speech, a poll of chartered accountants has found.
Just one in four members polled working in retail, hospitality and leisure said their companies would be able to pay their rates in full at the end of the year-long holiday on 31 March, according to ICAEW’s February 2021 Business Pulse Survey.
ICAEW said it hoped the Chancellor would listen to these companies and extend the rates holiday into the spring when he delivers his Budget speech on Wednesday. As well as highlighting the need for an extension, ICAEW also outlined that fundamental, long-term changes need to be made to improve business rates as part of the Treasury’s ongoing review, so the system is fit for the future.
“The Chancellor must listen to the calls from hard-pressed companies who cannot afford to make their business rates payments and currently face a cliff-edge in April”, said John Boulton, ICAEW Technical Policy Director.
Accountants working in retail
Just 1% of ICAEW chartered accountants who work in practice said all their clients in retail, hospitality and leisure would be able to make payments in full if the rates holiday concludes at the end of March. Some 40% said their clients could make the payments with a negative impact on their cashflow, and 59% said some of their clients would not be able to pay in full.
Of those chartered accountants working for retail, hospitality and leisure businesses, a quarter said they would not be able to make rates payments in full once the holiday ends. Half said they could make the payments but with a negative impact on cashflow, and a quarter said they could make the payments.
ICAEW has suggested that the multiplier used to calculate business rates should be reduced, which would immediately decrease the amount businesses are charged.
In its submission to HM Treasury’s call for evidence on the business rates system, ICAEW added that a clearer link between rates and current market values would help make it less problematic for businesses. The use of more timely data, and clearer information about rates calculations, could also improve the system.
Previous call for business support
A previous ICAEW Business Pulse Survey conducted in mid-October 2020 found that 62% of respondents said a reduction in business rates would help boost the recovery of the UK economy. The study of 401 chartered accountants also found that 76% of respondents’ businesses had accessed a coronavirus loan or support. 63% had furloughed staff and 48% had deferred VAT payments.
Boulton concluded: “These businesses need breathing space until they can re-open and are making money again. And as we consider the end of this lockdown, the time is right for a fundamental rethink of business rates, to build a system fit for the high street of the future.”
The survey was opened from 28 January to 2 February. 298 responses were received in total (153 from members in business and 145 from members in practice).
The Chancellor will deliver Spring Budget 2021 on 3 March 2021. Keep up to date with the latest by visiting ICAEW’s Budget page or subscribing to the ICAEW Daily email by clicking the ‘Daily’ option in your preference centre.
- ICAEW’s February Business pulse check: informing the 2021 UK Budget
- ICAEW’s recommendations for business rates reform
- ICAEW’s October 2020 business pulse check: Are businesses surviving the pandemic?
- The Treasury review of business rates