Industry bodies have slammed the chancellor's decision not to extend retail relief in his statement today (25 November) which also laid out plans for an apprenticeship levy, devolution of business rates and the decision not to make further cuts to police.
But the lack of retail relief has been strongly criticised by the British Beer and Pub Association.
Chief executive Brigid Simmonds said: “It is very disappointing that the chancellor has not extended retail relief for a further year – this is effectively a £1,500 tax increase for the majority of pubs, and will add £46 million to pubs’ rates bills.
“Retail relief was providing a discount for pubs with a rateable value of £50k or less, which is 75 per cent of all pubs. This is a particular problem in the run-up to the revaluation in 2017 as rates bills have become out of kilter with the value of individual businesses.”
Jerry Schurder, head of business rates at Gerald Eve, added: “Publicans and restaurateurs will be distraught that this relief has been removed, and it is the smallest and most-vulnerable locations on the most down-at-heel high streets that will be affected the most. For these, the £1,500 could be the difference between the life and death of the business.
“With operators in many locations already being hammered by their rates bills, a 12.4% increase could be catastrophic, further endangering businesses and livelihoods. What this shows is just how excessive and inequitable the current business rates system is."
Apprenticeships
The Chancellor also confirmed a levy to raise £3bn a year for apprentices.
Businesses will be required to pay 0.5% of the payroll bill, but the £15,000 allowance means 98% of businesses are too small to be affected.
The ALMR and BBPA welcome the restriction to only large businesses, but there are warnings it may eat into training budgets.
Chief executive Kate Nicholls said: “We are also concerned that the forthcoming apprenticeship levy will place further costs burdens on businesses already facing shrinking margins.”
The ALMR’s Benchmarking Report shows that in labour intensive businesses such as pubs and bars, payroll costs often account for over half of all operating costs and almost one-third of turnover.
“This extra tax is may well have the effect of distorting payroll costs even further and is likely to undermine in-work investment and training in staff,” she added.
The BBPA also fears the levy will be an extra financial burden, and urges businesses to ensure money is spent on supporting apprentices.
Police
It will come as a relief to many that there will be no more cuts to police.
Earlier this month a senior officer told the PMA of fears police cuts would lead to licensing officers falling off the radar, and warned of a huge impact on the late-night economy.
But Osborne announced that there will be no further cuts as “the police protect us, so we will protect them”.
Nicholls welcomed the news: “Any reduction in police budgets or numbers may have seen the licensed hospitality faced with the prospect of covering any security shortfall, with added responsibility for managing the UK’s night-time economy, without any real indication of how this was to be achieved,” she said.
Hopes for the future
Many were hoping for a more drastic shakeup to business rates.
Nicholls said: “This is increasingly a system that sees business relying on multiple discounts and allowances and is a recipe for confusion or avoidance, something the Treasury has already highlighted. The licensed hospitality sector is carrying an enormous burden in the shape of business rates, with pubs accounting for 2.8% of all UK tax receipts; a situation that is plainly unfair and unsustainable for some businesses.
"The Chancellor indicated that the review of business rates will report at next year’s Budget Statement and we are hopeful that it will bring with it good news for the sector.”
And Simmonds added: “Britain’s pubs face a total tax bill of £7.3 billion per year, so we will be keeping up the pressure for further measures, such as more action on both beer duty and business rates, as we move towards the Budget in March.”
Small business rates relief
A small business can benefit from the relief if it’s based in one property or has a rateable value of less than £12,000. The relief has been extended to 31 March 2016.
One third of pubs qualify for the relief. Businesses save 100% of rates, doubled from the usual 50%, with value of £6,000 or less.
The rate of relief will gradually decrease from 100% to 0% for properties with a rateable value between £6,001 and £12,000.
Businesses operating in multiple properties qualify if the rateable value of each of other properties is less than £2,600.
The rateable values of the properties are added together and the relief applied to the main property.
The ALMR has welcomed the extension of business rates relief for another year, but reminded the Government of the need to implement a root and branch reform to bring about a fairer deal for licensed hospitality businesses.
Chief executive Kate Nicholls said: “It is disappointing, however, to see that once again we are in a position of urging the Government to hasten with real and meaningful change to the business rates system and to bring about root and branch reform.”
Devolution of business rates
Osborne confirmed plans laid out in the Conservative Party Conference that uniform business rates will be abolished.
Local government will now have the power to set business rates.
Osborne described the changes as ‘the biggest transfer of power to local government’ in recent history and said it would stop councils having to beg for money from the government.