In response to the Coronavirus outbreak, the Government has announced that it will launch an Expanded Retail Discount Scheme, providing 100% business rates reliefs to certain businesses in 2020/21, regardless of their rateable value. Please note that this applies to England only.
Properties that will benefit from the relief will be occupied hereditaments that are wholly or mainly being used as: shops, restaurants, cafes, drinking establishments, cinemas and live music venues; assembly and leisure; hotels, guest & boarding premises, and self-catering accommodation.
Based on the HMRC guidance on the Expanded Retail Discount, the hereditaments operated by charities are likely to include: charity shops, museums, galleries, historic houses, sport charity facilities, theatres, public halls, tourist attractions and clubhouses, clubs and institutions. See below for a full list of eligible properties. Charities providing certain types of private childcare provision(including nurseries) may also benefit from similar rates relief under a separate scheme.
The Government has notified the EU of this proposal and it is expected to become a notified State Aid. Authorities should prepare to award the discount ignoring de minimis limits, although it seems likely that the total limit will be €800,000. Unfortunately this may seriously impact on the practical value of the reliefs to charities, as any charities with a larger number of properties could quickly exceed this limit. On 25 March, CTG and the CRA co-ordinated a call with over 20 affected charities to discuss practical implications for charities. To receive briefing on this issue and/or to be involved in a future call, please contact [email protected].
It is important to note that the Retail Discount should be applied after charity reliefs (mandatory and discretionary) have been applied. CTG and the Charity Retail Association have previously secured counsel’s opinion that state aid is not relevant to mandatory and discretionary business rates relief allowed to charities occupying and using buildings for charitable purposes.
Example: An occupied charity shop with a rateable value of £40,000
- Gross rates (before any reliefs) = £40,000 x 0.512 = £20,480
- Net rates after charity relief: = £4,096
- Expanded Retail Discount (100%): = -£4,096
- Rates due (after charity relief and Expanded Retail Discount): = £nil
Charities that benefit from this Retail Discount relief, with eligible hereditaments with a rateable value <£51k should also receive a cash grant of up to £25k per property. Full details of the Retail, Hospitality and Leisure Grant Fund can be found here.
Retail Discount Guidance
The Government has published guidance to authorities about the operation and delivery of the policy (2019/20 guidance and 2020/21 guidance). The below is reproduced from the guidance issued in response to the current Coronavirus outbreak.
Retail Discount How will the relief be provided?
As this is a measure for 2020/21 only, the Government is not changing the legislation relating to the reliefs available to properties. Instead the Government will, in line with the eligibility criteria set out in this guidance, reimburse local authorities that use their discretionary relief powers under section 47 of the Local Government Finance Act 1988 (as amended), to grant relief. It will be for individual local billing authorities to adopt a local scheme and determine in each individual case when, having regard to this guidance, to grant relief under section 47. Central government will fully reimburse local authorities for the local share of the discretionary relief (using a grant under section 31 of the Local Government Act 2003).
Central government will reimburse billing authorities and major precepting authorities for the actual cost to them under the rates retention scheme of the relief that falls within the definitions in this guidance. Local authorities will have completed their NNDR1 for 2020/21 already. Therefore, billing authorities will shortly be asked to provide a further and separate estimate of their likely total cost for providing the 100% extended relief in 2020/21. The Government will provide payments to authorities to cover the local share, as per the usual process.
Which properties will benefit from relief?
Properties that will benefit from the relief will be occupied hereditaments that are wholly or mainly being used as: shops, restaurants, cafes, drinking establishments, cinemas and live music venues; for assembly and leisure; or as hotels, guest & boarding premises and self-catering accommodation.
The Government consider shops, restaurants, cafes, drinking establishments, cinemas and live music venues to mean:
- Hereditaments that are being used for the sale of goods to visiting members of the public: shops (such as: florists, bakers, butchers, grocers, greengrocers, jewellers, stationers, off licences, chemists, newsagents, hardware stores, supermarkets, etc), charity shops, opticians, post offices, furnishing shops/ display rooms (such as: carpet shops, double glazing, garage doors), car/caravan show rooms, second-hand car lots, markets, petrol stations, garden centres, and art galleries (where art is for sale/hire).
- Hereditaments that are being used for the provision of the following services to visiting members of the public: hair and beauty services (such as: hair dressers, nail bars, beauty salons, tanning shops, etc), shoe repairs/key cutting, travel agents, ticket offices e.g. for theatre, dry cleaners, launderettes, PC/TV/domestic appliance repair, funeral directors, photo processing, tool hire, and car hire.
- Hereditaments that are being used for the sale of food and/or drink to visiting members of the public: restaurants, takeaways, sandwich shops, coffee shops, pubs, and bars.
The Government considers live music venues to mean:
- Hereditaments that are being used as live music venues: live music venues are hereditaments wholly or mainly used for the performance of live music for the purpose of entertaining an audience. Hereditaments cannot be considered a live music venue for the purpose of business rates relief where a venue is wholly or mainly used as a nightclub or a theatre, for the purposes of the Town and Country Planning (Use Classes) Order 1987 (as amended).
- Hereditaments can be a live music venue even if used for other activities, but only if those other activities (i) are merely ancillary or incidental to the performance of live music (e.g. the sale/supply of alcohol to audience members) or (ii) do not affect the fact that the primary activity for the premises is the performance of live music (e.g. because those other activities are insufficiently regular or frequent, such as a polling station or a fortnightly community event). There may be circumstances in which it is difficult to tell whether an activity is a performance of live music or, instead, the playing of recorded music. Although the Government would expect this would be clear in most circumstances, guidance on this may be found in Chapter 16 of the statutory guidance issued in April 2018 under section 182 of the Licensing Act 2003.
The Government considers assembly and leisure to mean:
- Hereditaments that are being used for the provision of sport, leisure and facilities to visiting members of the public (including for the viewing of such activities). This includes: sports grounds and clubs, museums and art galleries, nightclubs, sport and leisure facilities, stately homes and historic houses, theatres, tourist attractions, and gyms.
- Hereditaments that are being used for the assembly of visiting members of the public, including: public halls, and clubhouses, clubs and institutions.
The Government considers hotels, guest & boarding premises and self-catering accommodation to mean:
- Hereditaments where the non-domestic part is being used for the provision of living accommodation as a business: hotels, guest and boarding houses, holiday homes. caravan parks and sites.
To qualify for the relief the hereditament should be wholly or mainly being used for the above qualifying purposes. In a similar way to other reliefs (such as charity relief), this is a test on use rather than occupation. Therefore, hereditaments which are occupied but not wholly or mainly used for the qualifying purpose will not qualify for the relief. For the avoidance of doubt, hereditaments which have closed temporarily due to the government’s advice on COVID19 should be treated as occupied for the purposes of this relief.
The list set out above is not intended to be exhaustive as it would be impossible to list the many and varied uses that exist within the qualifying purposes. There will also be mixed uses. However, it is intended to be a guide for authorities as to the types of uses that the Government considers for this purpose to be eligible for relief. Authorities should determine for themselves whether particular properties not listed are broadly similar in nature to those above and, if so, to consider them eligible for
the relief. Conversely, properties that are not broadly similar in nature to those listed above should not be eligible for the relief.
The list below sets out the types of uses that the Government does not consider to be an eligible use for the purpose of the retail relief. Again, it is for local authorities to determine for themselves whether particular properties are broadly similar in nature to those below and, if so, to consider them not eligible for the relief under their local scheme.
- Hereditaments that are being used for the provision of the following services to visiting members of the public: financial services (e.g. banks, building societies, cash points, bureaux de change, payday lenders, betting shops, pawn brokers), other services (e.g. estate agents, letting agents, employment agencies), medical services (e.g. vets, dentists, doctors, osteopaths, chiropractors), professional services (e.g. solicitors, accountants, insurance agents/financial advisers, tutors), post office sorting offices, casinos and gambling clubs.
- Hereditaments that are not reasonably accessible to visiting members of the public.
How much relief will be available?
The total amount of government-funded relief available for each property for 2020/21 under this scheme is 100% of the bill, after mandatory reliefs and, with the exception of the 2020/21 pubs discount, other discretionary reliefs funded by section 31 grants have been applied, excluding those where local authorities have used their wider discretionary relief powers introduced by the Localism Act which are not funded by section 31 grants.
This should be calculated ignoring any prior year adjustments in liabilities which fall to be liable on the day. Ratepayers that occupy more than one property will be entitled to relief for each of their eligible properties.
Whilst the UK left the EU on 31 January 2020, the Withdrawal Agreement negotiated by the Government and the EU provides that during a transition period State aid rules will continue to apply as now and will be subject to control by the EU Commission as at present.
The Government has notified the EU of its intention to bring forward an immediate change to the UK’s tax treatment of non-domestic property, in response to the ongoing Covid-19 emergency, and to seek clearance under Article 107(3)(b) of the Treaty on the Functioning of the European Union. Subject to this approval, the Expanded Retail Discount scheme will become a notified State Aid. Authorities
should prepare to award the discount ignoring de minimis limits and MHCLG will inform them of the outcome of the notification as soon as it is known.