Pub industry urged to make most of Budget 2014 benefits
In addition to the headline announcements the Budget included more money for apprenticeships, help for refurbishments, assistance for small firms struggling to get finance and more funding to repair flood defences.
One of the most significant measures for the pub industry was the doubling of the annual investment allowance (AIA) to £500,000.
The AIA allows businesses and individuals to claim tax relief on 100% of “plant and machinery” cost incurred in the course of their business. These costs would typically apply during the purchasing, refurbishment or extension of a pub. Plant and machinery can include electrical systems; water services; lifts; heating, ventilation or air conditioning; sanitary and plumbing; solar installations and data and telephone systems.
Big ticket
Kate Nicholls at the Association of Licensed Multiple Retailers (ALMR) said: “This was the biggest ticket item on offer to the pub trade in the Budget and will arguably be of greater impact for pub operators than a cut in beer duty. This will be a big boost to investment across the pub estate, benefiting thousands of local communities, high streets and town centres. The previous allowance was set too low to benefit most pub and bar refurbs and refits had been due to fall to just tens of thousands of pounds this year. Doubling the threshold and extending the scheme will save pub businesses millions of pounds on capex projects.”
However, Joe Newton, senior tax manager (Capital Allowances) at BDO accountants and business advisors, said the limited lifespan of AIA meant many investors could struggle to get projects off the ground in time. The limit drops dramatically from £500,000 to £25,000 as of 1 January 2016. The basic rate for capital allowances is limited to 8% or 18% of the total value, depending on the plant and machinery to which the allowance relates.
Mr Newton gave the example that if a pub company undertook a massive refurbishment in which £600,000 was identified as qualifying for capital allowances, under ordinary capital allowances it would only be able to claim around £78,00 in the first year. Under the new rate of AIA in the same situation the firm could claim back £518,000 (AIA plus capital allowances).
Mr Newton said: “With the value of capital allowances outside of the AIA being dramatically reduced over the last few years, a real opportunity has been missed to provide a longer term investment incentive to businesses, encouraging them to plan for longer term or ongoing investment or improvement programmes.”
But according to David Bywater, from KPMG, next year’s budget is likely to extend the scheme one again.
He said: “We’ve already seen it extended and is a very popular measure for the Government. If I was betting man I would be putting some money on this being talked about again next year.”
Funding assistance
Other significant measures included plans to match small businesses with alternative lenders, if they are rejected for finance.
Kate Nicholls said: “Many operators have found that traditional funders have not been willing to lend to pubs over recent years - levies, EMROs and other regulatory threats have not helped with this and have made the sector appear more of a risk. Anything which helps access to finance for small businesses will be welcome - after all, the pub trade is made up of thousands of small businesses. Two thirds of the sector is classed as a small business.”
Stephen Owens, director of Christie + Co was pleased to see £140m of new funding for repair and restoration of flood defences.
He said: “While not able to turn back the clock for the beleaguered regions, this is welcome succour for the many pubs by seas and rivers that were affected by the harsh winter. This is especially good news when allied to the freeze on duties on cider, when much of the country’s cider-producing region was underwater.”
The £85m the Government has pledged to help create 100,000 new apprenticeships is also likely to be popular within the industry.
