Debt recovery lawyer warns Budget rates relief is no guarantee customers will pay their bills

Businesses supplying the retail, leisure and hospitality sectors should not assume customers receiving Budget Business rates relief will be able to pay their bills more quickly, a debt recovery specialist has warned.

Claire Twells, Partner and Head of Debt Recovery and Business Development at Smith Partnership, said: “Lower overheads could free up cash to pay suppliers, but it will vary from business to business.

“As a supplier, you should not assume that a customer is financially healthy simply because its operating costs have fallen.”

The Autumn Budget announced higher Small Business Rate Relief thresholds for qualifying retail, hospitality and leisure properties in England from 1 April 2027. Full relief will extend to a rateable value of £18,000, with tapered relief ending at £21,000.

“I think ‘qualifying’ is a really important word here,” Claire said. “We had experience during the Covid period where certain hospitality businesses thought they qualified, but didn’t, and it caused them quite a lot of problems.

“It comes down to interpretation, so certainly take advice on whether you qualify for those reductions.

“I have seen situations in the past where councils have charged business rates to businesses that shouldn’t have been charged. It is advisable to get professional advice on what business rates you should or should not be paying.”

The business rates package also includes a cap on bill increases at CPI inflation for qualifying properties in 2027/28 and 2028/29. However, businesses will face other changes to their costs, with the National Living Wage increasing by 3.9% from 1 April 2027.

“Many hospitality businesses employ people at the lower end of the wage and salary scale,” Claire said. “They may qualify for a business rates reduction, but their wage bill will also increase. What the government gives with one hand, it can take away with the other.

“If their margins are already squeezed and they get a little bit of business rate relief, that may then be taken away by the increase in costs. Couple that with their customers paying them late and, even if it’s a profitable company, you could find there are some issues.”

Alongside the rates measures, the Budget reiterated the government’s commitment to tackling late payments to support small-business cash flow.

“Successive governments have encouraged bigger businesses to pay smaller suppliers on time and within reasonable timeframes,” Claire continued.

“One late payment from a large organisation can be the difference between a smaller business being able to pay its staff and suppliers, having to borrow money to bridge that gap, or, in the worst case, going bust.

“Practical steps are what small businesses need to ensure they get paid on time. If they are not paid on time, what are the consequences for those bigger businesses?

“The important thing is to look beyond the headlines and consider what the announcements mean for your individual business’s cash flow. You can have a profitable business and a healthy order book, but if your customers aren’t paying you, you can still be in financial difficulty.

“The Budget doesn’t remove the need for effective credit control and early action on overdue invoices. There are some benefits in there, but nothing is a silver bullet. Businesses ultimately need to act early.”

To find out more about Smith Partnership’s business debt recovery services, visit:smithpartnership.co.uk/business/business-debt-recovery-services