Insight

Retail Relief Scheme may be lifeline for small independents

Hard-pressed independents, particularly in the hospitality sector, may save more than £10,500 after 1 April thanks to the retail discount being applied for 2020/21 business rates.

The business rates’ retail relief scheme applies to occupied retail properties with a rateable value of less than £51,000 in the 2020-21 financial year. The value of relief should be half of the bill, applied after mandatory reliefs and other discretionary reliefs funded by Section 31 grants have been taken into account.

Properties that will benefit from the relief will be occupied hereditaments with a rateable value of less than £51,000, that are wholly or mainly used as shops, restaurants, cafes and drinking establishments.

As an example, an average small independent restaurant could save £10,624 in tax during 2020/21 – a possible lifeline for many after a dismal two years that has seen thousands of outlets closing nationally.

Overall, the number of casual dining restaurants that closed last year was less than in 2018, despite 2019 seeing the likes of Jamie’s Italian, Patisserie Valerie and Giraffe closing dozens of outlets. The number of branches shutting shop for good fell from 1,188 to 922, according to data from the Centre for Retail Research.

In 2018, Gourmet Burger Kitchen, Carluccio’s, Prezzo, Chimichanga and Byron all pulled down the shutters with a total of 622 chain-operated restaurants closing. As the chain market has contracted so significantly over the past two years, further closures are now likely to come from independents which may lack the resources to reinvest or be radical with their business model.

The hotel sector is also being hit at the moment with insolvencies at their highest level for five years. A slowing UK economy is seeing firms spending less on corporate away days and conferencing, alongside minimum wage hikes, business rates and competition from AirBnB all taking their toll.

According to figures from UHY Hacker Young accountants, UK hotel insolvencies rose 60 per cent year on year to hit 144 in 2019. Hospitality margins have also been squeezed due to more competition affecting room rates. Last year 15,500 rooms were added to the market and a further 19,300 are set to be opened this year.

All eyes will now fall on Chancellor Sajid Javid who is set to deliver his first real meaningful budget on March 11, to see if there is more in the pot to help small businesses and retailers beyond 2021.

 

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