Since March, hospitality and retail businesses have benefited from a business rate holiday. This is due to expire in April 2021. The government has provided no guidance on what will happen post-April, so it looks increasingly likely that business rates are coming back.
Business rates are a tax on properties that are being used for commercial properties. This charge is based on an estimate of what it would cost to rent the property on the open market – the rateable value. Current rateable values are based on rents from April 1, 2015.
As we’re still in the midst of Brexit and a worldwide pandemic, many businesses are desperate to have their business rates decreased. According to property consultants Colliers International, nearly 170,000 businesses have appealed the rates they are having to pay.
Part of the reason why HMRC has been swamped with appeals is that there has been little clarification on what will happen next year. If you’re a pub, restaurant or bar, you want the rate to be the lowest it can be, so it needs to be challenged in light of rates returning in 2021.
As a business owner you will be assuming that rates are coming back and you’ll also be assuming that you’ll be paying the full amount. This is what has resulted in all the challenges, as many businesses are now appealing on the grounds of Material Change of Circumstances (MCC).
The coronavirus pandemic is completely unprecedented and probably counts as the biggest material change of circumstance in history. This makes it very likely that these appeals will be successful.
Another issue is that even though these appeals may win, there is a significant lag with rebates. Businesses that are successful with appeals often have to wait as long as a year before they see any money returned into their account.
The government needs to announce whether rates are returning or not. This will give the hospitality industry some guidance at a very uncertain period of time. Uncertainty is very bad and will inevitably lead to more job losses and businesses shutting down.
Many business groups are calling for rates to be frozen for the next two years and reduced to reflect our new economy. However it looks far more likely that business rates will return in 2021. If so, the government should give businesses a discount so that they can pay what they can afford. This would reduce the amount of challenges as businesses would be paying what they would win at appeal anyway.
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