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U.K. Grants Property Tax Breaks to Businesses Hit Hard by Virus

Posted on Mar. 18, 2020

The U.K. government will grant a business rates holiday to all businesses in the retail, hospitality, and leisure industries as part of a £20 billion package of measures to soften the COVID-19 pandemic’s economic blow.

Chancellor of the Exchequer Rishi Sunak on March 17 announced that all businesses in the three sectors, which the coronavirus crisis has hit particularly hard, will not have to pay property tax, also known as business rates, for a year, regardless of their ratable value. Those businesses will also receive extra cash injections of £25,000 each to help them get through the crisis, he said.

The business rates holiday goes beyond what Sunak announced March 13 in the 2020 budget, which included emergency measures to support U.K. businesses against the backdrop of the coronavirus outbreak. At that time, Sunak had said the holiday would apply only to retail, hospitality, and leisure businesses with a ratable value of less than £51,000.

The U.K. government’s latest package of measures includes an initial £330 billion of guarantees — amounting to 15 percent of the country’s GDP — to help keep affected businesses afloat, according to Sunak. The government plans on offering a new lending facility and extending a new business interruption loan scheme if demand exceeds that initial amount of guarantees, he added.

“The measures I have announced today are part of a comprehensive, coordinated, and coherent response to what is a serious and evolving economic situation,” Sunak said, adding that he will soon announce more measures. “We have never faced an economic fight like this one. But we are well prepared. We will get through this, and we will do whatever it takes.”

Chief Secretary to the Treasury Steve Barclay announced late March 17 that reforms to the off-payroll working rules, also known as IR35, would be delayed by one year to April 6, 2021, because of the public health crisis. Barclay’s announcement was an about-face after Lindsey WhyteHM Treasury's director of personal tax, welfare, and pensions, told the House of LordsFinance Bill Subcommittee March 16 that the coronavirus crisis wouldn’t delay the reforms.

Jumping Into Action

The U.K. government’s announcements came as other countries, including Austria, France, and Germany, took action to mitigate the deleterious economic effects of the outbreak.

The German government on March 17 announced a raft of measures to support its businesses, including state-backed loans and guarantees and liquidity assistance under a €460 billion federal budget framework, which can be increased by up to €93 billion. Germany plans on adopting tax policies to help with corporate liquidity, including waiving enforcement measures and late-payment penalties until the end of 2020 for companies directly affected by the coronavirus crisis.

The German tax authority will also be able to defer tax debts, the government said. Customs and tax authorities will work with taxpayers subject to such taxes as air traffic taxes, energy taxes, insurance tax, and sales tax, according to the announcement.

Austria’s Federal Ministry of Finance on March 16 confirmed that affected companies can easily apply for tax relief to ensure liquidity. These reliefs included a reduction in advance corporate and individual income tax payments to zero; the postponement of tax payments, or the payment of tax debts in installments; and the waiving or reduction of late-payment surcharges.

French President Emmanuel Macron announced dramatic measures during a March 16 televised address, declaring that the country was at war with the virus that causes COVID-19. The measures include establishing a special system allowing companies to defer tax and social charges, as well as offering state guarantees of €300 billion to ensure liquidity, he said. Small companies facing financial hardship won’t have to pay tax or social security contributions, Macron added.

For its part, the European Union on March 17 proposed temporarily relaxing state aid rules to support businesses affected by the coronavirus crisis.

On the other side of the world, New Zealand introduced its own spending package March 17 to curb COVID-19’s economic effects, including wage subsidies to affected businesses, and NZD 2.8 billion (about $1.7 billion) in business tax changes. The changes include the ability to write off interest on late tax payments; a provisional tax threshold increase; and the reintroduction of depreciation on commercial and industrial buildings. Other tax measures comprise immediate deductions for low-value assets, increasing the asset threshold from NZD 500 to NZD 5,000 (about $298 to $2980) for the 2020-2021 income year.

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