EU rules mean more pubs may lose business rates discount

By Nikkie Sutton

- Last updated on GMT

Tax burden: business rates experts say EU rules threaten to thwart the Chancellor's rates relief scheme (image: jax10289/GettyImages.co.uk)
Tax burden: business rates experts say EU rules threaten to thwart the Chancellor's rates relief scheme (image: jax10289/GettyImages.co.uk)
The new retail business rates reduction scheme could be thwarted by EU rules state aid rules, according to advisers.

Chancellor Philip Hammond announced a one third cut in business rates for pubs, shops, restaurants and cafés with a rateable value of up to £51,000 in his Budget​ last month (29 October), which will come into effect next April.

He estimated this would be a saving of up to £8,000 for 90% of hospitality businesses per year. The Chancellor also announced £675m of co-funding to create a Future High Streets Fund to support councils to draw up formal plans for the transformation of their high streets.

However, commercial real estate advisory service Altus Group, stated that the Treasury said the discount will be subject to EU rules, which restrict aid to €200,000 (£174,000) per business over a three-year period.

This means that pubs, restaurants and shops that are part of large groups are set to miss out on the discount.

Robert Hayton, head of UK business rates at Altus Group, analysed 6,728 retail sites (including pubs, restaurants sand shops) in England and Wales of which, 4,676 were occupied by large pub and restaurant chains.

Rateable value

Altus Group research

Pub group                           Sites analysed                    Sites with rateable value under £51,000

Greene King  ​                     812                                        144

JD Wetherspoon ​               784                                         86

Mitchells & Butlers   ​         1,168                                      72

Fuller’s ​                             146                                         30

Stonegate ​                         425                                         99

Hayton said that of those sites analysed, more than one in five – 1,487 of the total analysed – had a rateable value of less than £51,000 and were eligible to the new retail business rates relief but he emphasised “most large chains will reach the [EU subsidy] limit pretty quickly one way or another and will be precluded”.

He also cited the £1,000 discount, which was given to pubs with a rateable value of less than £100,000 during the first two financial years after the revaluation previously and said: “While nearly 25,000 pubs met the criteria for that discount, less than 18,000 actually received it”.

Separate analysis by trade body UKHospitality (UKH) found up to 40% of pubs and 45% of restaurants will be ineligible for the new high street retail relief through a combination of the qualifying ceiling in rateable value and state aid provisions.

UKH chief executive Kate Nicholls said: “About four in 10 of the UK’s pubs and restaurants are ineligible because their rateable value – determined through a faulty system – exceeds the maximum or they fall foul of EU rules.

“This measure, intended to support high streets hammered by business rates, will bring little, if any, relief to a huge chunk of businesses struggling.”

JD Wetherspoon chair Tim Martin slammed the news and argued for tax equality for pubs against supermarkets.

High streets need pubs

He said: “This sort of fiddling by the Government gets the overall licensed trade nowhere.

“What the trade obviously needs is tax equality with supermarkets. Supermarkets pay zero VAT on food sales while pubs pay 20%.

“Pubs pay about 20p per pint on business rates and supermarkets about 2p. Strangely, many MPs are keen to revive high streets and are receptive to the principle of equality – high streets needs pubs.

“Yet the big pubcos can’t be bothered to campaign. [Some] 90% of tenants think their freeholders should campaign. Lions led by donkeys.

“The laziness of big company directors has led to the inevitable decline of pubs. Just to rub salt in the wound, supermarkets are now vigorously campaigning for equality with internet retailers.”

Fuller's property director Peter Turner said the pub group wouldn't have the advantage of the Chancellor's decision for its managed arm but, it would have a positive impact on its tenanted estate.

He added: “While we won’t see the benefit of the Chancellor’s measure on our managed estate due to state aid rules, it will benefit some of our tenants which is good news. While we welcome any move that supports the pub industry, we would still urge the Treasury to conduct a long overdue root and branch review of the whole rates system.”

Related topics: Legislation

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