Budget 2021: Relief extended for businesses on rates and VAT

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Pub in Haworth, YorkshireImage source, PA Media
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Pubs are among business allowed a loan of up to £18,000, as they are among last to open

Pubs, restaurants and other non-essential retail businesses have been given further help in the Budget.

Measures include extending the VAT cut for the hospitality sector, seen during the Eat Out to Help Out scheme.

Gyms and other non-essential retail premises in England will also see the year-long business rates holiday extended for another three months.

Hospitality businesses including restaurants and pubs have been hit particularly hard by the pandemic.

The Chancellor, Rishi Sunak, exempted them from paying business rates last year, but that tax holiday was due to end this month.

They will now be exempt until the end of June. After that they will be discounted to one third of the normal charge for the rest of the financial year, up to a maximum of £2m for closed businesses.

The chancellor called it "a £6bn tax cut for businesses".

Major supermarkets and other retailers which had been allowed to stay open as essential businesses said they would repay the rates relief they received last year, giving back £2bn of the estimated £11bn it cost the Treasury.

Asda, Tesco and Sainsbury's said they would do it again this time.

Sainsbury's said in a statement: "Despite significant ongoing costs associated with protecting colleagues and customers from Covid-19, we expect that the vast majority of Sainsbury's stores will remain open this year.

"We will therefore forgo the business rates relief on all Sainsbury's stores again this year. We will also forgo the business rates relief on all standalone Argos stores once they reopen."

Image source, PA Media

The VAT discount to 5% for food and drink sold in pubs and restaurants will last until the end of September. After that it will increase to 12.5% - which is still below the normal rate of 20% - for a further six months.

Mr Sunak pointed out there were 150,000 hospitality and tourism businesses employing 2.4 million people.

Other measures announced in the Budget include a business restart scheme, which allocates a total of £5bn in funding for small business grants of up to £18,000.

Under the scheme, non-essential retail businesses will receive grants of up to £6,000 per premises, as they will be allowed to open first. Hospitality and leisure businesses, including personal care and gyms, will get grants of up to £18,000, because they will stay closed for longer and will be more affected by restrictions.

Mr Sunak said some businesses would still need loans despite the restart grants. He said he was introducing a new recovery loan scheme which would allow businesses of any size to apply for loans from £25,000 up to £10m.

Christian Mole of business services group EY said the industry still faced serious challenges, even once it opened up fully in May: "Outdoor services will only be profitable for a small portion of the sector.

"Even after the scheduled 17 May full reopening, social distancing measures are likely to continue to limit operating capacity in restaurants and pubs. Across all hospitality, many operators also face significantly increased debts and deferred rental obligations.

"Hospitality businesses will need ongoing government support as long as these challenges remain in place, so it is encouraging to see the sector-specific support being offered."