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From April, important changes will affect business rates reliefs for the retail, hospitality, and leisure sectors. Businesses across these industries will need to rethink their financial plans to adapt to the new rules. As a result, many businesses might face new challenges while trying to stay afloat in a changing economy. Tim Pinkney, the Director of Professional Standards at the Institute of Financial Accountants (IFA), looks closely at the current relief framework and the imminent changes.
The Retail, Hospitality and Leisure Relief (RHLR) scheme, introduced to support businesses post-pandemic, offered a 75% reduction in business rates for the year 2023/24, with a limit of £110,000.
The extension of the support scheme has helped many businesses like pubs, cafes, hotels, and shops stay afloat. However, starting from 1 April, the rate will drop to just 40%. This change could greatly impact business finances, making it important for accountants to guide their clients through this transition. By preparing businesses for the changes, accountants can help them plan better for the year ahead amid ongoing uncertainty.
“By now, most accountants should have had discussions with their clients about how these changes could affect their financial plans and budgets for the next year. This proactive approach not only builds trust but also helps clients better prepare for the adjustments they need to make,” says Pinkney. “Preparation is also very important for businesses; those which deal with these challenges early on usually have a better chance to adapt and succeed, even when things are moving quickly.”
He adds: “It’s certainly prudent for clients to carefully review their current financial situation and think about possible outcomes for the coming year. By doing this, they can identify potential risks and opportunities, helping them make smarter decisions and stay ahead in a changing environment. This will help them find ways to save money and see if they need to cut back on certain parts of their operations, as well as identifying opportunity for innovation and positive changes.”
Pinkney believes that with the upcoming decrease in business rates relief, it’s important for accountants to get clients to take a closer look at their property portfolios. “It could be a question of whether staying in their current location will work for them in the future. For others, it might be wise to renegotiate their lease terms or explore other locations that offer better conditions. An evaluation can help businesses make sound decisions that benefit them in the long run.”
Encouraging clients to think about long-term planning is key. This means they could consider offering different services, exploring online shopping options, and enhancing what makes their business unique. “By adopting this forward-thinking approach, clients can better protect their businesses from financial challenges in the future. It can also help them stay successful in a tough market.”
“As the new rules for the RHLR scheme are implemented, accountants have an opportunity to really show their worth and come into their own”, comments Pinkney. “They can help their clients understand these changes with practical advice and smart solutions. It’s an opportune time for innovation on both sides and can help turn challenges into potential areas for growth.”
Pinkney also points out that by advising clients to be proactive rather than reactive, businesses can better navigate these transitions and take advantage of the opportunities that arise from them. “Clients will depend a lot on their accountants’ skills to help them understand and follow the new rules, improving their operations by finding new ways to save money and work more effectively. It’s not just about making changes but also about thinking creatively to adapt to these new challenges.”
This year brings new obstacles for the industry as businesses face many more legislative changes. However, this can be an exclusive opportunity for accountants to prove their value as trusted advisers. By helping SMEs understand the often-complicated tax system, accountants can guide them in making informed decisions. This allows business owners to concentrate on what they do best: running their companies. With the right support, accountants can make a real difference for these businesses during tough times.
