Government Initiates Review of Business Rates for England and Wales Pubs, Hotels

The government has commenced a review of how business rates are calculated for pubs and hotels in England and Wales. This action could result in fundamental changes to the existing valuation system for hospitality properties.

Business rates are currently determined by the Valuation Office Agency (VOA), an executive agency sponsored by HM Revenue & Customs. The VOA assigns a 'rateable value' to non-domestic properties, which theoretically represents their annual rental value on the open market.

The review will specifically examine the ‘fixed percentage’ method used by the VOA to calculate these rateable values for hospitality venues. This method has drawn criticism from industry bodies who argue it disproportionately affects pubs and hotels, particularly smaller, independent businesses. Critics contend that the current system fails to adequately reflect the fluctuating economic conditions and unique operational challenges faced by the sector.

Proponents of reform suggest that the existing framework, based on a fixed percentage of turnover rather than actual market rental values, places an undue burden on businesses already contending with high operating costs and evolving consumer habits. The outcome of this review is anticipated to inform potential legislative changes aimed at creating a more equitable and sustainable business rates system for the hospitality sector.