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Rising inflation leaves restaurant leaders fearing higher business rates bills

Restaurant

This week’s headline rate of inflation of 3.1% signals that gross business rates bills will rise by £23.15m for pubs in England while restaurants and cafes will see their liabilities increase by £21.87m, experts claim.

Forecasts from real estate adviser Altus Group suggest the hospitality industry will be lumbered with higher bills without government intervention at the Budget.

The Consumer Prices Index (CPI) measure of inflation for September determines business rate rises for the following financial year (2022/23) with the Uniform Business Rate (pence in the pound tax rate) increased annually in-line with the headline rate of inflation.

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In 1990/91, when business rates in their current form were first introduced, the standard rate of tax for business rates in England was 34.8p, a rate comparable to other tax rates at that time. UK corporation tax was 34%.

Whilst corporation tax today stands at 19%, in contrast, the standard rate of tax for business rates for the current financial year for 2021/22 is 51.2p, a near 50% increase, resultant from compound inflation.

Altus Group predicts that gross business rates bills next year from 1 April for 2022/23 will increase by £1.04 billion in England based on the current headline rate of inflation of 3.1%.

Financial Covid support measures are also due to come to an end next year with occupied retail, leisure and hospitality premises in England currently receiving £6.1 billion of business rates relief for 2021/22 as the full holiday was extended until the end of June 2021 with the relief then continuing at reduced and capped levels until 31st March 2022.

Robert Hayton, UK president of Altus Group, said: “Our clients tell us that the rates burden act as a disincentive to invest. The Chancellor must use the Budget to set stringent targets for the clearance of tens of thousands of outstanding challenges to facilitate the return of years of overpayments while also ending the ridiculous policy of increasing upwards the tax rates by inflation which are now at an unsustainable level.”

Business rates are devolved to Scotland, Wales and Northern Ireland.

Kate Nicholls, chief executive of UKHospitality, said: yesterday that inflation figures were “extremely concerning” for the sector, with costs for hospitality businesses across all lines rising by 11% to 13%.

“Such rising costs have the potential to seriously derail the sector’s recovery – and its ability to boost national recovery – due to a heady cocktail of substantial increases in the cost of essential goods and services crucial to their businesses.

“Combined with suppressed sales due to labour shortages, it is inevitable that businesses will have no choice but to pass on some of this pressure to their customers through higher prices.

“Consequently, we urge the Chancellor not to compound matters with tax increases in the form of business rates and a return to historic rates of VAT. Locking in the 12.5% rate of VAT for the long term for hospitality will avoid building in more sustained inflationary pressures across the economy.”

Business rates holiday and VAT cut extension essential for hospitality revival, says sector

Tags : Altus Groupbusiness rates
Andrew Seymour

The author Andrew Seymour

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