The GMB has written to the Government asking why the Valuation Office Agency (VOA) uses a different method to calculate rent for rateable value purposes than pubcos use.
The trade union had been attempting to show that pubcos were over-charging on rent — by as much as four-fold — but experts have warned it may have simply opened the door for a rates increase at some pubs.
The 1988 Local Government Act states that the rateable value should be equal to the open market rent but the VOA calculates rateable values on pubs as a percentage of turnover rather than using the profits method adopted by the pubcos.
It has detailed the rates and rents paid by three Enterprise pubs, two Punch pubs, one Admiral and one Everards pub.
The GMB has written to HM Treasury requesting that they ask the Valuation Office Agency (VOA) to explain the discrepancy.
"There is something seriously wrong here," said GMB's Hayley Brennan, of the Punch leased Strand Bar in Portsmouth, who claimed her rateable value is £8,000 and dry rent paid to the pubco £29,000.
"My pub is typical of the discrepancy between what VOA assess is a fair open market rent and actual dry rents charged by the pubcos. The GMB survey shows actual pubco dry rents to be up to four times higher than the VOA assessed fair rents."
Rates hike
But one well placed source warned the GMB had been naive and "extraordinarily stupid" in highlighting pubs that had been incorrectly assessed for rateable values. "When your rates are too high, you appeal them but when they are too low, you keep quiet."
Rent review expert Garry Mallen said: "I think more than a few tenants will be substantially worse off when the VOA actually start looking at some of their own valuations.
"Some of the GMB members may well have a shout for a fairer rent, and if they do, then there are channels for securing such an agreement. I'm not sure the GMB is serving its members well by bringing into question the VOA valuations."
Ratings expert Michael Yass pointed out that the rent paid by tenants "could include amounts for work or other costs incurred by the pubco, by agreement with the licensee".
Chartered surveyor David Morgan, who trained with the VOA, agreed. "The VOA will always act on evidence of the open market rent. If they are shown as incorrect in their calculations the option exists to correct that upwards."
Denial
The British Beer and Pub Association rebuffed suggestions it had formulated a policy with the VOA on how best to calculate rent for rateable value, saying such an accusation from the GMB was "devoid of both credibility and substance".
Director of pubs and leisure Martin Rawlings said: "The accusations from the GMB have no substance. All pubs are assessed for rates by the Valuation Office using the same principles as for all other commercial properties.
"The VOA is an executive agency of HM Revenue & Customs. To even suggest they have in some way colluded to artificially manipulate the valuation of pub properties in order to reduce the taxes payable to the tax authorities is devoid of both credibility and substance.
"While the rateable value is derived from the commercial market rent, it is not the same as the commercial market rent and this applies to all commercial property.
"The BBPA has not agreed any formula with Valuation Office Agency (VOA) for the calculation of rates. It would be entirely inappropriate to do so."
VOA response
The VOA said it had held discussions with representatives of the Association of Licensed Multiple Retailers, The Guild of Master Victuallers and the Federation of Licensed Victuallers Associations before agreeing the "Approved Guide to the Valuation of Public Houses" with the BBPA.
A spokesman said: "Rental value underlies the basis — it is not a case of applying a formula. It must be remembered that when comparing rents and rateable values there is a whole variety of factors that need to be considered, since it is quite possible that the basis of the rent is at variance with the assumptions used for the purposes of determining rateable value."