Plans to permanently cut business rates must 'level the playing field'

18-Nov-2024 - Last updated on 18-Nov-2024 at 10:13 GMT

Bigger picture: Plans to permanently cut business rates must level the playing field for hospitality firms (Credit: Getty/Minerva Studio)

Industry leaders warn measures to permanently cut business rates must be part of a “bigger picture” to reduce the “unfair tax burden” on the sector.

Last week the Government released draft legislation to permanently cut business rates for hospitality, retail and leisure firms from 2026.

The cut will be funded by a tax rise for the “very largest business properties”, such as online sales warehouses, the plans detailed.

In addition, the Government also introduced legislation to increase the Employment Allowance from £5,000 to £10,500, meaning 865,000 employers will not pay employer National Insurance next year.

British Institute of Innkeeping (BII) CEO Steve Alton told The Morning Advertiser (MA): “While we welcome the formalisation of the Government’s promise to fundamentally change the business rates system, any reform needs to reflect the huge, disproportionate impact it currently has on bricks and mortar pub businesses in high streets and towns across the UK.

“Our members are also concerned about the expected increase in their rateable values through the revaluation for 2026, meaning the impact from the reduced multiplier will be lessened.”

Unfair taxation burden

Until the legislation is formally introduced, firms will receive a reduced rate of 40% relief off their business rates bills up to £110,000 per business, as announced in the autumn Budget, alongside a freeze to the small business multiplier.

However, industry leaders voiced concerns in the wake of the Budget, which detailed plans to increase the National Living Wage and Employer National Insurance Contributions alongside the reduction in business rates relief.

Some 25% of independent pubs are at risk of closure according to a BII poll earlier this month.

In addition, earlier this month, commercial real estate intelligence firm Altus Group said the plans to reform business rates in 2026 had been “ill-thought-out”.

“Even when we see the real detail around the proposed reform, any support must be part of a bigger picture of reducing the unfair taxation burden on small business and micro entities in our sector.

“In the meantime, many pubs will not be able to weather the cost increases to their businesses”, Alton added.

Lack of information

London-based operator Young’s last week estimated the measures announced in the Budget would cost them £11m.

Meanwhile recent figures from trade body UKHospitality (UKH) estimated firms faced a £3.4bn hike in cost increases following the Budget.

UKH chief executive Kate Nicholls told The MA: "I am pleased the Chancellor is implementing UKHospitality’s recommendation for a permanently lower level of business rates for hospitality, which will benefit almost all of the sector.

“Levelling the playing field in this way recognises the importance of the high street and the role it plays in our communities and economy.

"However, we understand some hospitality properties will fall above the proposed £500,000 level and will be concerned that they won't receive the lower tax rate.”

“While there is still a lack of information about what those tax rates will be, we will be campaigning hard to the Government to ensure that all hospitality businesses receive the support they desperately need."