The government will cut business rates by a third for small retailers with a rateable value of £51,000 or less.
The UK’s ailing High Street was a recurring theme during today’s Budget speech. As physical retailers have continued to struggle in the digital age, the Chancellor offered some respite for Britain’s smallest retailers.
The business rates relief amounts to £900m and they will be implemented immediately. There was some disappointment, however, that the relief was not extended to a long list of struggling retail chains.
Patrick O’Brien, UK Retail Research Director at GlobalData, called the rates relief a “significant boost” but a slap in the face to domestic retail chains “hoping, for once, that they would have their tax burden reduced”.
He added, “Physical retail chains continue to bear a disproportionate burden of business rates, and while the current government included a manifesto commitment to conduct 'a full review of the system to make sure it is up to date for a world in which people increasingly shop online', it continues to avoid tackling the issue head on.”
Ed Molyneux, the founder and CEO of FreeAgent, also criticised the scale of the relief -- but in the opposite direction. He called the Chancellor’s decision to cut business rates for smaller shops, pubs and restaurants - albeit for a short time - “good news” but added there is little else for small business owners to be cheerful about, “especially those running freelance and service-based ventures rather than those on the high street”.
In his speech, the Chancellor said the rates relief will give the High Street more time to evolve and adapt to consumers’ changing shopping habits. He also announced a new digital services tax (DST) aimed at digital platforms like Amazon and Facebook.
From April 2020, the tech giants will be forced to pay tax on the sales they generate in the UK. The government expects this will raise an extra £400m a year and Hammond said it would target “established” businesses and not startups.
Its a trail blazing measure that pre-empts the OECD and the EU’s efforts to implement something similar. Progress which Hammond dismissed as “painfully slow”. But it could well mean the DST would be a temporary measure.
Hammond characterised the DST as a measure to create a fair tax system which enables the government to afford support like rates relief. But again, GlobalData's O'Brien was disappointed that none of this extra revenue would be used to help struggling British retail chains.
“Amazon is being targeted as part of the new digital services tax, where the government expects to raise £400m a year from digital platform giants, but none of that extra tax will be used to lessen the onerous rates bills that the likes of Carpetright, Mothercare or Debenhams struggle with.”