Calls for last orders on ‘draconian pub tax’

By Nikkie Thatcher contact

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Action required: the Government has been urged to reform the business rates system for pubs (image: Getty/shih-wei)
Action required: the Government has been urged to reform the business rates system for pubs (image: Getty/shih-wei)

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The Government has been called on to urgently address the businesses rates iniquity, which threatens the future of pubs, a new report has stated.

The Levelling the Bar: reforming outdated business rates for pubs’ survival​ report was produced by the All-Party Parliamentary Beer Group (APPBG) with evidence from a cross section of sector leaders.

It noted pubs contribute 2.5% of the total tax collected in business rates but the sector generates less than 0.5% of rateable turnover – equating to an overpayment of £570m​ each year.

The average pub pays 3% of its turnover in just rates (some up to 10%) while Amazon paid a total of 2% on its 2020 turnover of almost £21bn, the report revealed.

It also went on to state doe to an ever-increasing ‘multiplier’ since the tax was introduced in 1990, business rates are now one of the biggest fixed overheads faced by pubs.

Furthermore,  the APPBG outlined one in 10 licensees believe their business is unviable and estimated if support is withdrawn without a more equitable tax replacing it, up to 20,000 UK pubs could be at risk.

Ahead of the Chancellor’s Spring Statement this week (23 March), the group made a number of key recommendations to the Government, which include:

  • Swift measures to introduce an online sales tax so the digital sector bears its fair share of the tax burden, with funds raised used to reduce the costs borne by bricks and mortar high street businesses
  • A new and specific rates multiplier for pubs – closer to the 1990s level of 32p per £1 of rateable value, to reflect the wider contribution pubs make in sustaining and investing in communities
  • Greater transparency and VOA resource to support the current valuation system for pubs
  • Small business rates relief should be increased to include more community pubs to benefit in light of rising utility costs

Disproportionate burden

On the publication of the report, the British Beer & Pub Association (BBPA) echoed calls for business rates reform.

BBPA chief executive Emma McClarkin said: “The current business rate system places a disproportionate burden on pubs and brewers, which is stifling their recovery and return to sustainable growth.

“Reform is needed to create a fair system that accounts for how the economy functions in the modern day.

“We welcome this timely report from the APPBG following our submission to its inquiry and hope its recommendations are seriously considered by the Chancellor ahead of this week’s Spring Statement.

“Pubs and brewers are at the heart of our communities and will help to foster social cohesion as we reconnect and recover from the pandemic and so now it is critical our sector received the support it needs so we can deliver jobs and additional economic value across the UK, to ensure the entire country is levelled up.”

APPBG chair Mike Wood said British pubs are at the heart of the community, emphasised by the pandemic when their fundamental place in society has been pivotal.

Fighting chance needed

He added: “The onus of business rates falls disproportionately on pubs in a valuation system mired by complexity and opacity where online giants are not paying their fair share.

“Urgent action is needed and I call on the Chancellor in his Spring Statement, to help us level the playing field and turn back the clock on years of stealth increases to business rates, which theatre to bring a sector so critical to economic and social recovery to its knees.”

Licensee of the Gate Hangs Well in Syston, Leicestershire Cassie Davies gave oral evidence to the inquiry.

She added: “I’m sure many thousands of licensees across the country are joining me in urging the Government to act swiftly on this report’s findings.

“Too many of us have accepted our business rates as being a necessary evil and a disproportionate fixed cost for too long.

“It’s time for pubs to be recognised, not penalised, for our continuing physical presence in our communities.

“As the pandemic has shown so clearly, not everyone prospers in a virtual world. We know our customers need us and we need a fighting chance to deliver for them.”

Related topics: Property law

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