MP vows action on fairer pub business rates calculations

By Gurjit Degun

- Last updated on GMT

Related tags: Business rates, Business, Business rates in england and wales, Small business

MP vows action on fairer pub business rates calculations
Business secretary Vince Cable’s new parliamentary private secretary has vowed to introduce a bill in Parliament to change the way business rates are calculated for pubs and small businesses.

The promise came in a response to an email from Steve Wilson of the King’s Head in Wells, Somerset, (pictured) encouraging Tessa Munt MP to treat the issue of business rates with urgency.

Wilson saw the rateable value (RV) of his pub increase from £20,000 to £54,500 during 2010. He used to pay £970 per month, but with the new RV he will be paying £2,360 per month next year because of a stepped rise.

The rates payable differ from the RV because the local council will multiply the RV by a figure that is set by the Government.

Munt replied that business rates were one of the first points she raised with Cable, who encouraged her to pursue the issue in Parliament.

She wrote: “It is my belief that if rates for the largest businesses were increased by a fraction, we could remove the burden from our smaller businesses altogether. I have contacted the relevant clerks in the House with regard to laying down a bill.”

The Association of Licensed Multiple Retailers strategic affairs director Kate Nicholls said: “I would be nervous about this unless I saw the fine print of the bill. If you talk to a lot of licensees with pubs in high streets, they pay higher rates than the Tesco next door because of the way business rates are calculated. However, I agree that we need to reassess the burden of business rates for pubs, and the system does need overhauling. RV is such a crucial issue.”

She suggested a standardisation of how rates are calculated for all businesses, be it shops, pubs or underground bars. “Equivalent businesses should be rated in the same way,” explained Nicholls.

Michael Yass, director and ratings agent for Chesterton Humberts, believes that the problem lies in the fact the valuations for the ratings list take place two years prior.

“Historically, if you look back to the 1990s when the five-yearly valuations began, we’ve seen that the economy has been so very different two years earlier,” explained Yass, although he does not think there is enough time for the Valuation Office Agency to conduct more valuations.

Adrian Vickery, associate and ratings agent at Fleurets, said that the Government could consider increasing the RV bands for which rates relief are calculated.

Currently, to be classified as a small business, a pub must have an RV below £17,999, or £25,499 in London. For rural rate relief, the RV needs to be £12,500 or below; and for small business rates relief, the RV needs to be below £12,000.

Business rates calculations
How the Valuation Office Agency calculates business rates for pubs: “We use the fair maintainable trade (FMT) valuation method to assess the rateable value of pubs. We refer to actual rents and turnovers we collect from businesses to arrive at levels of FMT.

“We then apply a percentage to the FMT figure to calculate the rateable value. The percentage ranges we apply are established by analysing pub rents.”

For more information on business rates read the VOA document​ (PDF)

Related topics: Legislation

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