This April, a rates revaluation will take place for the first time in seven years.
However, pubs and restaurants across the UK are calling upon the chancellor to reduce the impact of the business rates hike.
The Association for Licensed Multiple Retailers (ALMR) has written to Philip Hammond asking for relief for the sector:
“We would urge you to consider reviewing the transitional relief of provisions and the introduction of sector specific hospitality retail relief.”
Business rates in England and Wales are being updated to take into account the changes in the property market.
However, the government state that they will place a cap on how much bills can rise and this will cushion the impact for SMEs.
Writing a letter on behalf of their members, the ALMR says that “on average, the pub sector will see a 15% increase and restaurants a 23% increase across the country”
“This will add a further £300m to £500m in additional cost in the hospitality sector”
They also believe that the impact of the extra costs could endanger the positive contribution that the sector makes to the UK economy.
The nemesis of the hospitality trade
Property experts have made predictions that some businesses, particularly in city centres, commercial hubs and those in the South East may see drastic changes to their bills.
Because pubs and restaurants often occupy town and city centres, they are more likely to be affected.
Business rates have become the nemesis of the hospitality trade, particularly in the capital, where business rates are set to rocket by over 20pc.
Many London businesses are stating that they are now paying more in rates than they are in rent to due to ‘archaic property taxes’, but it is only anticipated to get worse this April.
And at a time with rising import costs from the weak pound and rising wage bills, many British retailers and restaurants are saying they may have to increase their prices to cover the costs.
Mark Rigby, Chief executive of business rates specialists CVS said: “Such drastic rises in business rates could leave the capital’s restaurant operators squeezed – and in severe cases – at risk of closure”.
“The worst affected restaurants will see huge increases in their bills in a matter of weeks.”
A statement from the Department for Communities and Local government (DCLG) stated that most businesses, however, won’t face sharp rises in costs.
Stating that the revaluation is designed to be revenue neutral, the planned cap on yearly increases will rise gradually over a five-year period and won’t take place immediately.
“Following the revaluation, three-quarters of properties will see no change or even a fall in their bills, and the small minority of businesses that face an increase will benefit from our £3.6bn transitions relief scheme.”
For now, here’s what you need to know about business rates
What are business rates?
Business rates are charged on the majority of non-domestic properties, such as offices, shops, warehouses, pubs and guest houses.
How are they calculated?
Business rates are calculated based on your property’s ‘rateable value’ by multiplying the rateable value by the correct ‘multiplier’ – the amount set by the central government.
What do you pay and when?
Local councils will usually send you a business rates bill in February or March each year for the following tax year. You can estimate your bill here.
What are relief schemes?
Some properties are eligible for discounts from their local council this is called business rates relief.
Exempted buildings relief and empty buildings relief are automatically applied, however, you do need to apply for certain types of relief such as:
This can be automatic or you may need to apply for it.
What if you work from home?
Usually, you don’t have to pay business rates for home-based businesses if you only use a small part of your home ie. have a spare bedroom converted into an office or sell your goods via post.
However, you may need to pay if your property is a part of your business (you live above your shop), you sell goods/services to people who visit the property, you employ people to work in the property, you have converted a large portion of your home to house your business.
Pubs and licenced trade
For pubs and licenced trade in England and Wales, the Valuation Office Agency (VOA) will work out your relatable value based on your expected annual level of trade (excluding the VAT). This is called ‘fair maintainable trade’ and is based on the type of pub you operate, the area it’s in and the services you offer.
The VOA also looks at rents and turnovers, then applied a percentage to work out the rateable value.