Chancellor Rishi Sunak has said that the business rates holiday will be extended until the end of June for hard-hit retail, hospitality and leisure firms before shifting to a two-thirds discount for the rest of the year.
Mr Sunak also told MPs that current VAT cuts for hospitality firms will also be extended for another six months, before tapering back to the previous tax rate.
Non-essential shops and hospitality venues have been particularly heavily hit by the impact of the pandemic and remain shut in the face of the nationwide lockdown.
Retail, hospitality and leisure firms will now see the current business rates holiday – which was due to expire at the end of this month – extended until the end of June, when restrictions are intended to be wound down.
Mr Sunak said: “This year, we’ll continue with the 100% business rates holiday for the first three months of the year – in other words, through to the end of June.
“For the remaining nine months of the year, business rates will still be discounted by two-thirds, up to a value of £2 million for closed businesses, with a lower cap for those who have been able to stay open.”
The business rates holiday for the current financial year has cost around £11 billion, although more than £2 billion was handed back to the Treasury by supermarkets and other essential retailers which have traded throughout lockdown measures.
Shortly after the Chancellor’s speech, Asda said it would not accept the rates relief offered and will pay the tax in full for 2021-22.
Supermarket rivals Morrisons, Tesco and Sainsbury’s followed suit by confirming they will not take advantage of the tax break.
Up to £758 million in tax savings have been offered to essential retailers for the period to June through the Chancellor’s policy extension, according to real estate adviser Altus Group.
Mr Sunak also told MPs that the current temporary 5% rate of VAT on food and soft drinks, hotel accommodation and leisure attractions will be extended until September 30.
The Chancellor added: “We’ll have an interim rate of 12.5% for another six months, not returning to the standard rate until April next year.
“In total, we’re cutting VAT next year by almost £5 billion.”
Alcohol duty will also be frozen for the second year in a row, although this fell short of calls from hospitality leaders to cut beer and spirits duties.
High street and hospitality firms are also set to benefit from a £5 billion grant scheme designed to aid the recovery of these sectors following the heavy impact of the pandemic.
The Chancellor said the grants would be worth as much as £18,000 per firm and will help them through the easing of lockdown measures.
Hospitality companies will be able to claim up to this maximum, with non-essential retailers limited to £6,000 through the scheme to reflect their early reopening date.