British BIDs' response to the Chancellor's Budget

12 March 2020

British BIDs' response to the Chancellor's Budget 

For many months British BIDs (Bb), alongside other membership organisations for retail businesses, has been pressing Government for a reform of the business rates system. The amount of business rates payable is calculated as a proportion of the rateable value (RV) of each property which, in turn, reflects its likely rental value. Historically, RVs have been reassessed every 5-years to reflect changing rental values (although Government has recently made this more frequent), businesses with RVs of less than £12,500 have been exempt, and those with RVs of less than £50,000 have been given some concession. In 2019, our Chief Executive, Professor Chris Turner, gave evidence to an All Party Select Committee, and suggested that a thorough review of the system was required. Primarily, this was in the light of the clear challenges across UK high streets, and the costs of occupying town centre space as compared to operating out-of-town or online. As part of its ‘levelling up’ agenda, the Government confirmed its intention to conduct the wide-ranging review requested and to report on findings in the Autumn.

In preparation for the Budget, the new British BIDs Advisory Board, chaired by Nic Durston of South Bank BID, discussed their policy response in their role of leading the BID industry.

Accompanying a 0.5% cut in interest rates, the Chancellor announced in yesterday’s budget a range of stimulus measures to assist businesses in the light of the Coronavirus. One such measure was to exempt any business occupiers - such as shops, bars, cinemas, restaurants and hotels - with a RV of less than £51,000 from liability for business rates for the next financial year. During his announcement, Mr Sunak said “this is a tax cut worth over £1bn”.

On hearing the news, Chris Turner said “this is, indeed, good news and will offer some, mainly smaller, businesses with much needed relief at a difficult time. However, it does not tackle the much wider reform that is needed and does not assist larger retail chains that are carrying the majority of the burden. It must, therefore, remain a welcome short-term measure to help boost the economy, rather than a trial for any longer-term solution.”

Since the announcement, Bb has received and responded to numerous questions from members which have included:

Q: If one of my BID businesses is now paying no business rates, does that mean they also pay no BID levy?

A: It will depend upon your own levy rules, but most BIDs charge levy as a % of rateable value and so nothing changes.

Q: If my local authority is now receiving less in business rates, will that mean that they will be able to do less in the BID area?

A: Business rates are charged locally, but paid up to central government, in return for which each council receives an annual grant settlement. Therefore, your council’s budget is unlikely to be affected, although it will continue to depend upon the amount of their grant and their own internal budgeting.

Q: Does the announcement affect my next BID budget?

A: It shouldn’t directly. However, given uncertainties in the wider economy, you may feel that it is prudent to budget more cautiously.

Q: Is the Chancellor’s announcement good news for BID businesses?

A: For those with RVs of between £12,500 and £51,000, it will lower their costs compared to the current year. However, for businesses with RVs of over £51,000, nothing changes and they may see themselves as having been comparatively penalised.

Q: Should the change alter my intended projects and services next year?

A: Assuming that your BID has an alteration policy, you should constantly be adjusting delivery to suit changing business need. Your immediate delivery may need to take account of the possible effects of coronavirus and the impacts that it may have on consumer visits and spending.

Q: How do I distinguish business rates from BID levy?

A: BID levy is a local charge on businesses following their adoption of a business plan via a ballot; therefore, it is locally charged and locally spent. Business rates is a system of taxation on businesses that is paid up to Government and merely collected locally.

Q: What challenges does the announcement present for my BID?

A: Arguably, the most likely is that businesses who now find themselves on a business rates ‘holiday’ will ask why they are still being charged BID levy. This is where all BIDs will need to be able to clearly explain (a) the difference between business rates and BID levy, and (b) the return on investment that each levy payer gets for their BID levy.

British BIDs remains available to members to answer any queries and we will continue to represent the industry throughout the forthcoming review of business rates.