Rates relief for retail, hospitality and leisure businesses

Updated 22nd November 2023

Following this year’s Autumn Statement, what do the Chancellor’s announcements mean for retail, hospitality and leisure businesses?

To find out how the announcements made will impact you, visit our dedicated Autumn Statement hub.  From tourist attractions to pubs, bars, hotels and restaurants, the hospitality sector is at the heart of the South and South West’s economies, providing jobs and bringing millions of visitors to the region each year.

Business rates relief

Covid-19 rates relief ended for the period beginning 1 April 2022. This meant that businesses started taking on the burden of natural cost pressures of business rates without any relief.

During his Autumn Statement last year, the chancellor brought about a Business Rates Relief Scheme for retail, hospitality and leisure properties. He has now announced that the scheme will be extended alongside a business rates support package worth £4.3 billion over the next five years.

The support package includes the rollover of the 75% relief for 230,000 properties and a freeze to the small business multiplier, which will protect around 90% of eligible ratepayers up to a maximum cash cap of £110,000 for a fourth consecutive year. This will continue to help high street businesses as well as small businesses that are the backbones of communities.

Implications of corporate tax

There is effectively 25% for the relief, which is significantly higher than it was previously. Ironically, this is due to the increase of corporate tax from 19%. Nevertheless, this means that investing in your business whilst corporate tax is at 25% is more valuable at all levels. So, anyone looking at large capital expenditure in the next few years should consider advancing this while corporate tax rates remain relatively high compared to recently historical levels.

The announcement of permanent full expensing for companies within the charge to corporation tax investing in plant and machinery is particularly good news for hotels. This measure is designed to stimulate business investment in plant and machinery by increasing the tax relief available in the accounting period in which the expenditure is incurred. The amount of expenditure that can qualify for this measure is uncapped, which means that the more that is invested, the greater the potential tax savings.

Pressures on recruitment

A lot of the legislation coming through is to encourage employment in the leisure and tourism sector. Increasing the national minimum wage, including for 21 and 22-year-olds, a 2% reduction in national insurance contributions, and mandatory service charges being passed to employees.

This will still likely cost a lot for hospitality and leisure businesses, but there should be a significant reduction in recruitment pressures as these jobs now look far more attractive. It is probably a case that these businesses should be looking for quality of workforce rather than quantity in their employees.

For more analysis, visit our Autumn Statement hub.