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MPs' report warns 'up to 20,000' pubs could close if business rates not reformed

British pub names explained

A report by a group of MPs has warned that up to 20,000 UK pubs could be at risk of closure if the government fails to reform the business rates system.

Ahead of the chancellor's spring statement on Wednesday (23 March), the All-Party Parliamentary Beer Group (APPBG) said the current system was threatening the future of pubs while online businesses pay less tax. Its report found that the average pub pays 3% of its turnover on rates alone, with some paying up to 10%, while online retailer Amazon paid 2% tax on its 2020 turnover of almost £21b.

The group of MPs is calling for the introduction of an online sales tax and a new and specific rates multiplier for pubs, closer to the 1990s level of 32p per pound of rateable value. It is calling for greater transparency and Valuation Office Agency resources to support the current system of valuation for pubs.

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Tribunal showdown over estimated ã3.5bn pandemic business rates rebates

Tribunal rules fair dismissal for employee with Covid concerns – Employee  Benefits

Businesses facing hefty business rates bills are set for a court showdown over the Government’s decision to strip them of their right to appeal their property taxes in a series of major cases this week. The Valuation Tribunal, an independent judicial body, will hear a series of 26 test cases on May 18 from occupiers of non-domestic properties across the country over changes to the business rates system.

Around 170,000 businesses in England, across all sectors of the economy, sought to argue over the past year that the heavy impact of the pandemic on their operations means that their rateable value, which the property tax is based on, should be reduced. The Government initially allowed more than 55,000 of these businesses to proceed to make a formal challenge with the Valuation Office Agency, an executive agency of HM Customs & Revenue. This would have allowed firms to negotiate “in good faith” on potential reductions, amid an acceptance that working from home and social distancing measures were bona fide grounds to claim a rebate.

Real estate experts have estimated that these rebates could have been worth around £3.5 billion to UK businesses. But as these negotiations were nearing a conclusion in March last year, the Government announced that it would retrospectively legislate to try and stop these reductions.

The Chancellor Rishi Sunak said at the time it “could have led to significant amounts of taxpayer support” for businesses adversely affected, arguing that Covid-19 and the response to it was not an appropriate use of “material change in circumstances” tax rules.

Business rates modernisation 'encouraging' but government needs to go further, firms say

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Hospitality business owners have welcomed ministers' plans to update the business rates system, but have warned that newly-announced moves do not go far enough to help firms struggling with soaring costs and high tax burdens.

The Queen's Speech is always a chance for the government to outline key policy plans. An update to business rates was one of the takeaways for restaurants and bars from the 2022 speech, alongside the permanent scrapping of pavement licensing red tape.

It was announced that in the next Parliamentary session ministers are planning to push forward with a bill aimed at modernising the business rates system. The "Non-Domestic Rating Bill" intends to reform the system where business premises' rateable values will be reviewed every three years rather than every five years from 2023.

The government also reportedly hopes these business rates changes will stimulate investment into the decarbonisation of properties.

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Unresolved business rates appeals divert £2.5bn away from public services

Over 130,000 business rates appeals from 2010 remain unresolved, according to the LGA. In the past eight years, over a million businesses have challenged their business rates bills, but the latest figures show that 133,060 appeals have yet to be ruled on. Although councils do not set business rates or rule on challenges made by businesses, the result of appeals is that they must set money aside, which diverts funding from delivering the services that local taxpayers pay for and expect. The LGA has said that £2.5bn has been diverted away from stretched local services over the past five years to cover the risk of business rates appeals as they have to fund half of the cost of any backdated refunds.

Ahead of today’s Westminster Hall Debate, the LGA called on the government to take the financial risk from business rates away from local government, arguing that government plans to allow councils to keep more of the business rates they collect makes it “even more imperative” for reform of the system to protect councils from the “growing and costly risk of appeals,” because they may become liable to pay back even more of the cost of any backdated refunds.

Council leaders are also recommending a time limit for appeals, except in exceptional circumstances. Scotland already has a six-month time limit for businesses to appeal their valuation. In addition, the LGA is urging the government to review business rates to modernise the way they affect different ratepayers in order to ensure that sectors such as online businesses make a fair contribution, and to tackle business rates avoidance, which it estimates leads to the loss of £230m each year.

Cllr. John Fuller, vice chair of the LGA’s resources board, said: “Ongoing delays in tackling business rate appeals from 2010 are heaping further financial uncertainty and pressure on our local services at a time when every penny counts to give councils the best chance of protecting services over the next few years. “It is right that a business is able to challenge their valuation if they genuinely believe it to be incorrect.” He called the current system, which sees billions of pounds diverted away from stretched local services, such as adult social care, “completely unfair.” “As we move towards a system where councils will keep more of the business rates they collect locally, communities need to be protected from the shifting of resources to address the risk of business rates appeals.  “With local government in England facing an overall funding gap that will exceed £5 billion by 2020, this money is needed to fund vital services and help plug growing funding gaps,” he concluded.

(Public Sector Executive)

Chancellor suggests 'staircase tax' could be axed

The Chancellor, Phillip Hammond, has suggested that the controversial staircase tax could be axed, admitting it adds business uncertainty. He said, during a Treasury Committe hearing today, that he is "certainly looking at" legislative steps to end the staircase tax. "The Court has made a decision and the Revenue is obliged to comply with the rating law. It is open to Parliament to consider changing the law in a way that changes that outcome." 

The Federation of Small Businesses (FSB) has welcomed the Chancellor's comments. Mike Cherry, national chairman, said "The staircase tax has heaped misery on thousands of small businesses that happen to occupy split workspaces. The Chancellor's words will come as welcome relief to the desperate firms who had absolutely no idea that bill hikes were coming down the line. The Chancellor's decision marks a victory for common sense - he's done the right thing. We look forward to his words becoming action at the Budget, if not before."


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