MP Greg Mulholland calls on Treasury to investigate level of tax credits paid to tied licensees

The MP has asked Ministers to conduct a Treasury study into just how much money the taxpayer provides to subsidise the pubco business model.

Mulholland said that tax credits would not be necessary if, as the Government intends, “the tied licensee is not worse off than the free of tie licensee” which the statutory code of practice is currently consulting on.

Mulholland said many licensees are struggling resulting in them being being subsidised by the taxpayer, through tax credits, to the tune of millions of pounds.

This follows work done by Chris Wright of the Pubs Advisory Service (PAS), who was the first person to highlight this issue. Wright has pointed out that the cost to the taxpayer – of loss of tax income to national and local Government when a business fails as well as the costs of insolvency to HRMC – is also huge. PAS has estimated that the level of tax credit support for tied licensees could be around £2 million a week.

Mulholland said: “It is time that the Treasury got to grips with just how much the taxpayer is funding the discredited leased pubco model. The reckless borrowing against inflated values of pubs, which is akin to some of the scandals in the banking sector, left the large leased pubcos in billions of pounds of debt and with each pub shouldering some of that debt, many licensees are being routinely overcharged in both inflated beer prices and excessive rents.

“This inevitably means that tax credits paid to licensees of the large pub owning companies will be at much higher levels that they would otherwise be and this amounts to a taxpayer subsidy for the pubcos running into millions of pounds”.

Chris Wright, who runs the Pubs Advisory Service which said: “It is quite incredible just how many publicans I meet are claiming or qualifying for full tax credits despite running very busy pubs. The level of reward they receive from their pubs is wholly inconsistent with the efforts put in. The volume of business required to avoid reliance on tax credits is staggering, it cannot be right to have businesses turning over £500,000 only to leave so little profit that the operators have to claim tax credits just to make ends meet."