Lower business rates to save high-street pubs, recommend MPs

By Emily Hawkins contact

- Last updated on GMT

Tax proposals: It is unfair that high street businesses contribute more than online ones, the Housing, Communities & Local Government Committee said in a new report.
Tax proposals: It is unfair that high street businesses contribute more than online ones, the Housing, Communities & Local Government Committee said in a new report.

Related tags: High street, Business rates

A committee of MPs has recommended lower business rates for town-centre pubs, warning that without urgent action some high streets could eventually disappear altogether.

The Government was urged to reform the tax system and consider replacing business rates for retailers with a sales tax or an increase in VAT.

Tax contributions

The hospitality sector pays 10% of the total business rates bill and represents 3% of economic activity.

Pubs account for 0.5% of total rateable turnover and pay 2.8% of total business rates.

“We do not believe that the high street is dead but we do agree that a tipping point has been reached,” the Housing, Communities & Local Government Committee said in a new report.

Unfair distinction 

“The Government needs to go further and move faster to level the playing field between online and high-street retailers,” the report, titled High Streets and Town Centres in 2030​, said.

High-street businesses pay considerably more tax than online retailers, with Amazon’s business rates amounting to around 0.7% of their UK turnover, while high street retailers pay between 1.5% and 6.5%.

The burden of business rates on pub businesses was described to the committee as “punishing” and “crippling”, by those giving evidence.

Pubs’ presence on the British high street has diminished, the note reported, with a net loss of 692 sites in the first six months of 2018.

“In recent years, high streets and town centres have faced extremely challenging times. The growth of online shopping has profoundly changed retail in the UK, and the knock-on impact on high streets has been stark," chair of the Housing, Communities & Local Government Committee, Clive Betts MP said.

'Heart of communities' 

Trade body UKHospitality welcomed the suggestion of a rates reduction and MPs’ recognition of hospitality businesses’ roles in the high-street economy.

Chief executive Kate Nicholls said: “Hospitality businesses lie at the heart of communities across the UK and play pivotal economic and social roles on UK high streets. The report gives due recognition to how crucial the sector is to the high street of the future, as they move away from the shopping-focus of the past.

“In the absence of the Government’s promised full review of business rates, this represents the most radical assessment of the state of the rates regime. This is a great starting point for opening up the conversation and beginning to address an issue that has crippled many high-street businesses, not least in hospitality.”

The inquiry concluded that revenue raised from new taxes could support a 12-month holiday for businesses from rates increases.

Nicholls said a tax holiday was a good way to remove the disincentive for investment many businesses experienced, but felt that 12 months was not long enough.

Retail heyday over

Business leaders told the committee the popularity of online shopping signalled a bleak future for the British high street. 

Plans to introduce a digital services tax in April 2020 to address corporation tax avoidance issues do not resolve the discrepancy between online and high-street businesses, the report said.

MPs recommended the introduction of green taxes on deliveries and packaging, in addition to an online sales tax.

“It is likely that the heyday of the high street, primarily as a retail hub, is at an end," said Betts. "However, this need not be its death knell."

“Dated planning policy must be reformed to reflect the needs of modern high streets and town centres. Business rates must be made fair. They are currently stacking the odds against businesses with a high-street presence and this must end," he added.

An online sales tax would need to cover areas such as financial and professional services that have moved away from the high street, said Nicholls. "A new sales tax or increase in VAT for retail and hospitality would need to be pitched significantly lower than the current business rates charge to be helpful," she said. 

John Timothy, chief executive of the Portman Group, said that more could be done to share best practice and to "replicate models of partnership working between police, businesses and other local stakeholders across the country to help create high streets fit for day and night".

Related topics: Property law, Legislation

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