Non-Domestic Rates in the face of Covid-19
Non-domestic rates, the business equivalent of council tax, can eat into a large part of a business’s income at the best of times, let alone when in lockdown. In light of the hardship posed to businesses by Covid-19 the Scottish Government have announced a package of support.
The Non Domestic (Coronavirus) Reliefs (Scotland) Regulations 2020 (“the Regulations”) which came into force on 31 March 2020 is just one of these support measures. It may be short in legislative terms but it’s massive in terms of the lifeline it could pass to many businesses.
What relief can I receive from rates payments?
Regulation 3 provides that all non-domestic rates payers will automatically receive a 1.6% reduction in the daily gross rates that were to be payable in 2020-21. This reduction will for many reverse the increase in rates they were facing and put them back to 2019-20 levels. For those eligible for the 1.6% relief, this will be applied automatically by your local authority.
For some businesses the Regulations go further in providing a 100% exemption from non-domestic rates for 2020-21. This exemption will apply to airports and those operating in the leisure, hospitality or retail sector. This is a wide ranging definition and Schedule 1 of the Regulations sets out in more detail the type of premises the relief will apply to:
- Bed and Breakfasts, Guest Houses, Hotels, Hostels and self-catering Holiday Accommodation
- Restaurant premises (this includes cafes and coffee shops)
- Retail Premises
- Leisure Facilities such as sports centres, cinemas and bingo halls
- Service providers including hair dressers, car washes or companies who repair domestic electronic goods
- Funeral Parlours
- Travel Agencies
- Letting Agencies
For those operating in any of the above businesses, the relief will be applied automatically by your local authority without the need for any formal application.
What if I had not opened for business before lockdown?
Unfortunately many businesses will be negatively affected by the fact they have signed leases for new premises but did not get the chance to open to customers pre-lockdown whilst fit out works were being undertaken.
Whilst these businesses may be able to show they would fall within Schedule 1 of the Regulations, they would not be able to show occupation of the property. Occupation is necessary to claim the 100% rates relief.
In order to show occupation, the doors must have been opened to customers for trade prior to lockdown. In these cases, the 1.6% reduction will apply instead.
What else can I do?
A number of other options are available to business owners during the Covid-19 outbreak to help businesses cope:
- One off grants depending on your premises rateable value available from your local council
- The option to defer VAT payments for three months whilst there is limited cash flow
- For those on the 1.6% relief, an option to ask your local authority if you can defer payment of rates temporarily until cash flow improves
- Business Interruption Loans
- Financial Support for your employees
The Covid-19 outbreak poses a challenge for businesses greater than seen for some years. The rates relief and package of support announced by government will go some way to mitigating the effects of the outbreak but the picture is changing on a daily basis with the potential for the rules to be refined and amended in the weeks and months ahead. Only time will tell how effective these support measure will be in ensuring businesses can weather the storm.
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