Pubs in line to save £40m thanks to a business rates tax cut

By Nikkie Sutton

- Last updated on GMT

Money saving: a change in the business rates system could save pubs millions
Money saving: a change in the business rates system could save pubs millions

Related tags Business rates Taxation in the united kingdom Consumer price index Treasury

Proposals to change the indexation for business rates calculations could save pubs and restaurants £40m in the first three years of the change, according to rates experts.

Business rates and rent specialists CVS claims the Treasury admitted the change would save businesses £1bn in the first three years of the change, which would represent a £40m saving for pubs and restaurants.

The Government Finance Bill allowed the Treasury to specify the indexation link that is used to set non-domestic rating multipliers.

These in turn are used to set business rates by multiplying a business’s rateable value. Currently, the uniform business rate multiplier (UBR) is linked to the retail prices index (RPI) inflation rate.

The Government announced in the 2016 Budget that it wanted to change this to indexation in relation to the consumer prices index (CPI) inflation rate by 2020 and the Bill was designed to enable that. The Bill however never proceeded due too the calling of the general election.

Committed to change indexation

CVS said ministers had been considering dropping the change to the inflation rate used to determine business rates, alongside other Budget commitments, in order to help fund public-sector pay rises.

However, the Treasury has bowed to pressure and said: “We are committed to switching business rates indexation from RPI to CPI from 2020 and will introduce legislation in due course.”

CVS chief executive Mark Rigby called for the Treasury’s purse strings to be loosened and for property taxes such as business rates to be competitive.

He said: “The Chancellor has moved quickly and decisively to quell speculation. Reneging on the switch would have been a double whammy for business with higher than forecast inflation this year and its compound effect.”

Taxes need to be competitive

Rigby added: “The purse strings at the Treasury need to be loosened as property taxes are already the highest of any G7 and EU country.

“They need to be competitive, especially when we leave the EU, and the switch in uprating goes some way to working towards that.”

Meanwhile, a coalition of trade bodies have joined forces and written to the Secretary of State for Communities & Local Government, Savid Javid to demand immediate and thorough reform of business rates.

The joint letter, co-authored by the Association of Licensed Multiple Retailers, British Beer & Pub Association, British Institute of Innkeeping, Campaign for Real Ale and the Society of Independent Brewers, outlines how a “crippling” business rates regime “unfairly and disproportionately” punishes pubs and calls for an immediate reform.

The trade has long-campaigned for a change in the way rateable values for pubs are calculated and campaigners have argued that the current system – based on the annual level of trade a pub could be expected to achieve if it was operated in a reasonably efficient way – is unfair.

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