The eligibility criteria the government is using for these grants is a disaster. It is effectively issuing grants indiscriminately – giving generous handouts to organisations not facing financial hardships; in many instances, grants have been given to businesses that have continued to trade strongly throughout the crisis. Yet large numbers of businesses whose income has been cut to zero for months but continue to incur regular ongoing costs, have received nothing.
The government has used a business’s rateable value (RV) to determine eligibility for these grants. It’s crude, clumsy and doesn’t work.
There are four big problems:
1. It’s been set at an arbitrary £51,000 and is an ‘all or nothing’ cut off point.
If your RV is £50,999, you’ll get the full £25,000. If it’s a pound more at £51,000, you won’t receive a penny.
2. No consideration has been given to financial situation of the business or its current circumstance.
Shops such as bike shops and takeaways that have traded strongly throughout lockdown have received £10,000 or £25,000 grants.
Other businesses in low RV premises, some of whom have traded throughout lockdown have received grants. Many of these businesses are financially comfortable and are somewhat bemused to discover large cash deposits arriving in their bank accounts.
3. It assumes that rateable values are indicative of how deserving a business is of support, and that businesses with an RV of £51,000 or more don’t need support. This, in itself, is patently not true.
The problem is exacerbated by the fact that rateable values are routinely set incorrectly, meaning a small businesses of the type you would think the government had in mind to support, are wrongly being given rateable values over the £51,000 threshold and therefore missing out on vital support.
Situations exist where two essentially identical businesses are getting huge advantages/disadvantages compared to each other due to inconsistencies in their rateable values. This is creating massive inequities in the trading landscape.
4. The government has said that grants will not be awarded retrospectively should a business successfully win an appeal which lowers their RV below £51,000. This is grossly unfair and arguably unlawful as it denies the aid a business would otherwise have been eligible for if their RV had not been set incorrectly.
In winning an appeal that lowers a RV under £51,000, the appeal tribunal is recognising that they were set incorrectly in the first place. Denying any business that falls in this category is plain wrong, as they ultimately meet the threshold criteria, albeit only by way of appeal.
Aid packages should not result in providing a financially comfortable business with a boost to its profits; they should be there to ensure the survival and post-covid viability of businesses who are hardest hit.
For businesses who miss out on grant aid, the only option is to take on a mountain of debt in order to survive – whereas their competitors are given a helping hand.
If your RV is £51k or more, not only do you now miss out on these vital cash grants, but you will have also missed out on the one third discount on last year’s rates bill. The same discount that your sub-£51k competitors would have enjoyed (the government offered a one third discount relief for pubs with a rateable value of less than £51,000 in 2019-20).
Have a look at the following illustration:
Over the last 12 months, Pub B will be £34,000 worse off than its competitor even though its rateable value is just £1,000 more.
Having faced a far higher rates bill than its competitor, Pub B needs the cash grant more, yet receives nothing.
Tell us, Rishi Sunak, is this fair?
Please note: The views and opinions expressed in this article are the author’s own.