The British Beer and Pub Association (BBPA) has responded to the Treasury’s call for evidence on business rates as new data reveals more than 1,000 new rates appeals per day in last six months.
In its response to the Treasury on 29 October, the trade association said a much-improved system is required if pubs are to survive and thrive in a post-pandemic world.
As part of this, the BPPA has urged the Government to consider a digital sales tax to ensure that companies who primarily or exclusively operate online are paying their fair share in tax, thus enabling the business rates multiplier to be reduced.
The trade association has also expressed that extending the 100% business rates holiday beyond March 2021, introducing a lower business rates multiplier for pubs, investment relief to boost growth, extending small business rates relief and more regular revaluations by the Valuation Office Agency (VOA) could also enhance the current system.
The BBPA’s response comes after new research found that independent small brewers can be paying as much as fifty times more per pint in business rates compared to international beer brands and follows calls from London Mayor Sadiq Khan to extend its business rates holiday for retail, hospitality and leisure businesses by a further year amid fears of tens of thousands of job losses in September.
Pubs overpaying by half a billion
The beer and pub body’s calls also come after more than 300 pubs were revealed to have been permanently closed, set to be demolished or converted for other uses during the 34 weeks and six days to 1 September 2020 according to data from real estate adviser Altus Group.
“A fair and sustainable business rates system is critical to support our sector both now and into a strong recovery,” BBPA chief executive Emma McClarkin explained. “Pubs overpay on business rates by some £500m.
“Given the current circumstances they find themselves in over Covid-19, and the fact they are a vital community hub, that is simply not right or fair.
“Companies that operate overwhelmingly online businesses must also pay their fair share, which is why we are calling for a digital sales tax that levels the playing field with more bricks and mortar-based businesses.
“A much-improved business rates system is required too. It is on an unsustainable path for our sector right now and must change if pubs are to survive Covid-19 and thrive after it.
“We are also calling on the Government to give a firm indication soon that they will extend the current rates holiday and other rates relief to the sector.”
‘Radical’ approach
According to the latest figures from the Government’s "Check Challenge Appeal" business rates appeals system there has also been an unprecedented spike in the number of appeals caused by “material change of circumstance” following the Covid-19 pandemic.
The VOA's monthly figures show that around 38,960 new checks were registered in England throughout July, August and September.
On top of the 144,900 checks registered in the previous three months, this means that 183,860 checks have been initiated since Covid-19 lockdown began – significantly more than the 158,930 three-year figure announced in the period between 1 April 2017 and 31 March 2020
This equates to, on average, more than 1,000 new appeals per day in the last six months according to commercial real estate company Colliers International.
“Covid-19 has led to the biggest material change of circumstance the country has seen in rating history and the system has been around for over 400 years.” John Webber, head of business rates at Colliers explained. “You could say we are on a wartime footing- and at the moment there is no end in sight.
“Businesses are claiming material change of circumstance either as a result of the impact of the initial lockdown and/or on the impact to businesses as they have tried to re-open and then experienced further lockdowns.
“With social distancing and consumer and worker fears about returning to the shops or offices to work, few businesses in the country are operating on pre-Covid levels,” he added. “There is no doubt that their circumstances have changed materially. Footfall has reduced massively, and many offices, shops and restaurants remain closed or on reduced capacity – these are all valid reasons to reduce the rating assessments.
Webber advocates a “radical” approach to deal with the crisis. “We believe most of the material change of circumstance appeals will succeed,” he continued. “Covid-19 has brought about an unprecedented disruption.
“The trouble is the time lag between a business paying its rates bill now and receiving rebated funds back from the VOA on a successful appeal. This could take a year – and many businesses may simply not be around then.
“We therefore recommend the VOA gives a rates discount now and ‘cuts out the middleman’ – so that businesses pay fair bills they can afford and ultimately would be paying anyway once the appeal rebate is taken into account. This will be essential if businesses are to plan ahead and hopefully work through this crisis."
