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The need for sustainable business rates

On 25/04/13

Business rates are a major cost burden to pubs in the UK and although the Government has recognised this pressure, there is more that could be done. The problem, to put it simply, the country’s 50,000 pubs pay nearly £1 billion in rates and with increased cost pressures and a stubbornly sluggish economy this cost can have a major impact on the profitability of a pub. Unlike other taxes, business rates are not flexible - they don’t take the changing fortune of premises into account (except at revaluation time).

The Government has to an extent recognised the pressures that business rates put on small businesses and has taken action to alleviate these. This year Small Business Rate Relief was extended for another year to reduce the cost to publicans. Rural rate relief was also introduced to help pubs in small communities, often where they are the last remaining community asset, to survive.

These moves are welcome as part of the Government’s commitment to be ‘pub-friendly’. However there is more that should be done. Pubs’ business rates are based on their turnover, and re-assessed every five years. The current business rates are set using the performance from 2008, which was, frankly, a different world from the one we are currently living in.

The Government’s decision to delay the revaluation of Britain’s businesses has exacerbated this problem. Pubs that have struggled in this period are therefore paying rates above what is affordable (whilst conversely, and perversely, pubs that have thrived are benefitting).

The BBPA is keen that pubs are allowed to have their rateable value reassessed more frequently, so that their tax rate reflects their turnover. This was previously possible through a regulation known as Section 20 (2) (c) but was later abolished. The reinstatement of this little-known line of legislation would be a huge boost to helping pubs that have hit hard times.

In addition BBPA will be asking for a further extension of Small Business Rate Relief. This has been a lifeline for thousands of small pubs across the country. Keeping it in place up to the General Election of 2015 would reduce costs and provide greater certainty to thousands of licensees providing a fantastic service to Britain’s pub goers in difficult circumstances.

Rural rate relief has also proved useful but the level of take-up is not measured, and is thought to be fairly low. Local authorities and the industry itself have an obligation to promote this benefit, and make sure that local pubs are able to reduce the burden of taxation they face. This will help preserve the tradition we have in the UK of having pubs at the heart of communities.

There are many pressures facing pubs in the UK, and a reduction of the business rate burden on pubs would be a welcome step for the Government to take. Let’s hope, as The Chancellor suggested, the Budget measures were just the beginning of industry support from the Treasury.


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