This was the third budget speech delivered by the Chancellor, Rishi Sunak, but only the first delivered outside an immediate COVID-19 crisis. However, his statement acknowledged that COVID-19 isn’t over yet and that it’s been a very difficult 18 months for the retail sector. Smaller retailers will be pleased by the announcement of a temporary 50% business rates relief for retail properties for 2022/23. Eligible properties will receive 50% relief, up to a £110,000 per business cap. This rates relief is unlikely to give any significant benefit to larger retailers, which have a number of bricks and mortar sites.
Retailers should also be pleased by the extension of the £1 million Annual Investment Allowance to March 2023, which makes it easier to claim tax relief on plant, including some shop fit-out and refurbishment costs. This relief is in addition to the super-deduction announced in March 2021, which provides 130% tax relief for certain qualifying capital expenditure.
These reliefs, however, don’t address the structural problems in the business rates. The Chancellor made clear that the amount of revenue raised by business rates is just too significant to allow for this. Business rates will not be abolished, which is what some retailers had hoped for, although some further small changes are expected.
While the Chancellor mentioned global economic pressures arising from pent up demand, there was no recognition in the reliefs offered regarding the serious impact that disrupted supply chains continue to have on retailers. This is particularly worrying as we enter the period up to Christmas, when many would expect to make most of their sales. There was also no real acknowledgement of the challenges of finding staff to hire at a salary that is affordable for the business, especially once you’ve taken account of projected inflation and the 1.25% additional national insurance costs due from April 2022.
Overall, the situation still looks challenging for the retail sector.
For more information on how Crowe can help, contact Jeremy Cooper.
Autumn Budget 2021