Hospitality trade bodies demand business rates overhaul as sector overpays by billions

25-Aug-2021 - Last updated on 25-Aug-2021 at 09:49 GMT

Related tags Business rates Business rates revaluation

Hospitality trade bodies have called on the Government to introduce business rates reform amid claims the current system causes the sector to overpay by £2.4bn each year.

Responding to the Government’s Business Rates Revaluations Consultation, which closed yesterday (24 August), UKHospitality and the British Institute of Innkeepers (BII) stressed the need for wide-ranging reform to redress the 'unjust and imbalanced' current system, and the need to move taxation away from property.

The Government’s consultation has proposed that business rates revaluations take place every three years instead of five, which the trade bodies have said they support, however, they added that this cannot come at the cost of extra reporting, restrictions on appeals and penalties.

Under the current system, they claim the hospitality sector overpays by 300% relative to its turnover, which equates to £2.4bn, and, following the pandemic, have warned that this will put further pressures on heavily indebted businesses as they begin to rebuild and repair balance sheets.

The trade bodies are also concerned about a number of further proposals included in the consultation, which they said will put a 'significant administrative burden' on hospitality businesses,

Alongside the move to more frequent revaluations, they are calling for a broader review of business rates that's designed to reduce, not increase, the burden on ratepayers.

They propose that businesses are not to be asked for more information than they currently are at revaluation, and that businesses should not be charged for challenges, nor should there be fixed windows in which to bring a challenge.

The Valuation Office Agency should enhance its technological systems to facilitate data returns at valuation, and the Government should consider minimising the time between the AVD and the new list to 18 months or lower, they say.

In a joint statement the trade bodies say: “The current business rates system has long been unfit for purpose and puts an unfair burden on pub and hospitality businesses. It’s extremely encouraging that the Government is proposing to increase the frequency of revaluations, something for which we have been calling for some time. However, the proposals are severely undermined by administrative burdens, limits on appeals and penalties.

“It’s vital that Government reforms match the severity of this issue. This proposal is helpful but does not redress the wide-ranging issues with the current system that will severely hamper the sector’s ability to recover from the pandemic if not addressed.

"We urge the Government to work closely with the sector to implement wide-ranging reform that will empower hospitality businesses, to rebuild and repair revenues, create jobs and be at the forefront of the economic recovery.”

Reform 'essential' for future of pubs

The British Beer & Pub Association (BBPA) has also put out its own call for an overhaul of the current rates system, claiming that pubs overpay their fair share of business rates by £570m a year.

According to the trade body, the pub sector in the UK pays 2.5% of all business rates, despite accounting for just 0.5% of rateable turnover.

In its response to the consultation, the BBPA says the multiplier (the rate in the pound that is then multiplied by the rateable value of a property to produce its annual rates bill) has increased to a ‘staggering’ 51.2p today from 34.8p in the early 90s.

“Pubs overpaying on their business rates is fundamentally wrong," says a BBPA spokesperson.

"Especially as they were one of the most affected sectors by Covid and lockdowns. The Government should be supporting pubs’ recovery, not punishing them.

“As our sector begins its recovery, now is the time for radical reform of business rates.

“While increasing the number of business rates revaluations to every three years would be helpful in principle, the proposals from Treasury would mean rate payers have to pay in order to access a better tax regime, which isn’t right.

“Root and branch reform of business rates is essential to the future of our sector, which is why we are supporting the Long Live The Local campaign calling for reform of Business Rates in addition to reforming VAT and Beer Duty.”

Calls for reform from the hospitality sector come after the British Property Federation (BPF) proposed the Government introduce annual business rates revaluations, having described the current system as 'broken'.