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The UK government has said the hospitality, retail and leisure sectors, all hit hard during the pandemic, will be given a 50% discount on business rates for one year.
Business rates are charged on most non-domestic properties. In this case pubs, music venues, cinemas, restaurants, hotels, theatres and gyms are all included.
Overall, it's a tax cut worth £1.78bn ($2.4bn), the biggest single-year cut to business rates in 30 years, outside of emergency COVID-19 reliefs.
In his Budget and Spending Review announcement, chancellor Rishi Sunak said getting rid of business rates completely would be irresponsible, as they raise £25bn for the economy.
But to make them fairer, they will be re-evaluated every three years and a new investment relief will encourage investment in technologies like solar panels.
Eligible properties will receive up to 50% off their bill, subject to a £110,000 cash cap per business — more than double the relief that was announced pre-COVID-19 for the 2020-21 financial year.
He added this was done in keeping with recommendations from the Confederation of British Industry (CBI) and the British Retail Consortium.
"On business rates, the chancellor made real strides in making the system more palatable for businesses in the shorter term," said Tony Danker, CBI director-general.
"But the hard truth is that wholesale reform to unlock investment was rejected today. The government missed the opportunity to truly reform a business rates system that diminishes Britain’s high streets and factories."
Danker believes the government’s commitment to innovation will be a central cog to the UK’s prospects to leading in the industries of the future. In order to be globally competitive the government must stick to these targets in the coming years, he said.
Watch: What are the key takeaways from Rishi's budget?
"This budget alone won’t seize the moment and transform the UK economy for a post-Brexit, post-COVID world. Businesses remain in a high tax, low productivity economy with concerns about inflation. But the Budget will have a positive impact across the economy and makes several changes that will be welcomed by UK businesses.”
Last month the CBI had backed Labour's plans to scrap business rates if the party is elected.
Subject to the £110,000 per business cash cap, the average convenience store with a rateable value of £28,500 will receive support worth over £7,000, or 50% of their rates liability for the year.
The average pub with a rateable value of £21,000 will receive support worth over £5,200, or 50% of their rates liability for the year.
And the average cinema with a rateable value of £95,500 will receive support worth over £24,000, or 50% of their rates liability for the year
In a tweet, Sunak said the move was "a tax cut worth almost £1.7bn and with Small Business Rates Relief over 90% of all these businesses will see a discount of at least 50%. Taken together, today we cut business rates by £7bn".
A new one year 50% business rates discount for retail, hospitality, & leisure sectors.
A tax cut worth almost £1.7bn and with Small Business Rates Relief over 90% of all these businesses will see a discount of at least 50%.
Taken together, today we cut business rates by £7bn. pic.twitter.com/DTQPvO3s3B
— Rishi Sunak (@RishiSunak) October 27, 2021
"We’re taking steps to ease the burden of business rates and boost our high streets," he said, adding that from 2023, every business will be able to make property improvements and pay no extra rates for 12 months.
He also said: "Without action millions of businesses would see their tax bills going up next year because of inflation. So I’ve decided that next year’s planned increase in the multiplier will be cancelled. That’s a tax cut for business worth £4.6bn over the next five years."
The government is also introducing a new relief to support green technologies — until 2035, plants and machinery used onsite for renewable energy will be exempt from business rates altogether.
Back in August, small firms had said the UK's business rates are a major disincentive to invest in measures such as net zero environmental pledges and employee wellbeing.
Mike Cherry, national chair of the Federation of Small Businesses, had said at the time: “This is a levy that hurts small firms trying to do the right thing: if you put solar panels on the roof to aid your transition to net zero, or install ventilation to support the wellbeing of your staff, the Valuation Office Agency will advise your local authority that you should be paying more in business rates.”
Earlier this month it was revealed that the UK's hospitality sector outpaced the rest of the economy for the first time in more than nine years during September, according to data from Lloyds Bank.
Jeavon Lolay, head of economics and market insight at Lloyds Bank Commercial Banking, said: “We are now firmly in an economic phase of recovery where big leaps in activity won’t happen every month.
“As the UK economy continues to inch towards its pre-pandemic peak, logistical challenges, higher energy prices and uncertainty relating to the path of the virus as we head into winter are key risks."
He believes going forward "policymakers will need to tread carefully in order to safeguard the recovery, with important fiscal and monetary policy decisions due in the coming weeks and months.”