Andy Burnham has unveiled a 20% business rates cut for nearly 32,000 pubs, clubs and live music venues, in one of his first acts as prime minister.
PM Andy Burnham
The reform, set to come into force next April, will “save the typical business an estimated £1,100 the next financial year”, the government said.
The discount will not be available to the largest music venues, while no mention was made of support for restaurants.
There had been fears Burnham would fund a hospitality tax cut by raiding large warehouses. But instead, Downing Street said the plans, which will cost around £100m annually, will be fully funded by a review of tax reliefs currently given to businesses that “do not make a positive contribution to local communities, such as vape shops.”
The government will also crack down on businesses that sell through online marketplaces but do not comply with their tax obligations. It is undertaking a consultation on measures to make online marketplaces more responsible for preventing non-compliant sellers from avoiding their tax obligations.
Pubs will benefit from a 20% business rates cut
“For too long, governments have stood by while cherished venues have disappeared from our local high streets,” the prime minister said.
“This government will back the businesses that people want to see in their communities. I said I would protect pubs and local high streets – the beating heart of our communities – and that’s what we will do.”
Dominic Curran, head of communications, Real Estate:UK, welcomed a cut to the “onerous burden” of business rates, but added “what’s really needed is a cut for all businesses, alongside fixing the tax rate to make bills more predictable, and changes to empty property relief that actually reflect the time taken to relet properties.”
“The biggest question is how these cuts will ultimately be funded,” said Damien Clarke, head of business rates UK at Knight Frank. “The government has pointed to withdrawing relief from businesses such as vape shops and tackling tax avoidance by sellers using online marketplaces, but it remains unclear how much revenue this will realistically raise, or how such measures will be administered and enforced.”
Simon Green, co-head of business rates at property adviser Newmark, added that the funding plans “suggest we should expect the long-anticipated consultation on a General Anti Avoidance Rule [for tax], originally anticipated before the last election, following the direction of the governments in Scotland and Wales, which have already introduced such measures”.
The government also confirmed today (23 July) that it will “return to our commitment to reform the wider business rates system, including small business rates relief, at the budget”.
Alex Probyn, practice leader for Europe and Asia-Pacific property tax at global tax firm Ryan, said: “The risk is that business rates reform becomes an exercise in redistribution rather than reduction when the yield is already far too high and the highest of any developed economy.
“Reducing liabilities for one part of the economy by increasing them for another does not reduce the overall tax burden. It simply shifts it. Higher property taxes ultimately increase the cost of occupying and investing in commercial property. That can influence investment decisions, constrain expansion, affect job creation and reduce attractiveness to invest.”
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