Monday, December 08, 2008

Pubs can Claim


Date: 7th December 2008
Release date: Immediate
Subject: Swale’s pubs could claim rate relief – but don’t know it!

Local Parliamentary Candidate, Gordon Henderson, this week warned that local pubs are being denied business rate cuts by the Government. Pub landlords could be paying thousands of pounds over the odds in tax, but are being kept in the dark by Government tax inspectors who want to avoid paying out tax refunds.

Mr Henderson’s warning follows a revelation earlier this year that tax inspectors were hiding the fact that hundreds of thousands of homes could be paying too much council tax. The tax officials kept quiet about the information to save money and save face.

· Five pubs closing every day: The British Beer & Pub Association has estimated that pubs are now closing at the rate of 36 a week - five a day and a number of local licensees have complained about a dramatic fall in income. Pubs are paying a heavy price for the smoking ban, fragile consumer confidence, higher beer taxes and increased competition from supermarkets.

· Government guidance on taxing pubs: Parliamentary Questions have brought to light unpublished internal guidance by the Valuation Office Agency (an arm of HM Revenue & Customs) on how local firms should be charged business rates. It admits that they have been giving out the wrong advice to firms on the effect of the smoking ban. Until recently, tax inspectors refused to give any business rate reduction for the loss of custom due to the ban. Their latest guidance now admits – thanks to advice from top lawyers – that the smoking ban represents a ‘material change’. Pubs can use this to make a claim for a lower ‘rateable value’ and so cut their yearly rates bill. For example, a £5,000 reduction in rateable value would save publicans £2,300 a year in tax.

· Local firms kept in the dark: Pubs can only apply for this tax cut if they make an appeal and fill out complex paperwork. The Government has made no announcement about potential refunds to local pubs across England and Wales.

Mr Henderson said:
‘Local pubs are a vital part of our social fabric and community life. Whilst big pub chains may be making money out of Labour’s new drinking laws, small everyday pubs are suffering from the combined onslaught of higher beer taxes, a weakening economy, supermarkets selling alcohol below cost price and the smoking ban.

‘Whatever people’s views on the smoking ban, it has had a major impact on many pubs. The Government’s own tax inspectors have now admitted that pubs may be eligible for refunds on their business rates, but Swale’s pub owners are being intentionally kept in the dark about this U-turn. This is yet another tax cover-up from the same inspectors who have conspired to hide council tax errors.

‘The least the Government could do is let people know when they can legitimately claim rate relief. Business rates are the third biggest cost to local firms after rent and staff costs. ’

Any local publican who wants more information can contact Mr Henderson on 01795 665251.
Notes to Editors – see below


Parliamentary Questions by Conservatives have forced the Government to publish its previously secret guidance on the effect of the smoking ban, and how premises should be rated for business rates.

“Mr. Pickles: To ask the Chancellor of the Exchequer if he will place in the Library a copy of the Valuation Office Agency’s non-domestic rating guidance, RAT IA, as amended to include advice on the smoking ban.

Mr. Timms: A copy of the Valuation Office Agency’s Rating Instruction and Advice reference 260106, which was updated to include advice on the Smoking Ban in June 2008, has been placed in the Library.”

Hansard, 28 October 2008, col. 888W.

Full document:

Unlike council tax, business rates are based on the ‘rateable value’ of the property. For every pound that this rateable value is increased, the final business rates bill will be increased by 46% (the ‘multiplier’).

The Valuation Office Agency will consider a change in a firm’s rateable value if there has been a ‘material change of circumstance’. This guidance outlines to what extent the smoking ban constitutes such a material change:

“It was not considered that this change [the smoking ban] could constitute a MCC [material change of circumstance] and earlier versions of this advice reflected this. Advice from counsel now shows this view to be wrong that the ban on smoking can be a matter affecting the physical enjoyment of a hereditament” (Valuation Office Agency, MCCs and physical manifest, para 5.14)

“The previous CEO advice was that the ban does not represent a matter affecting the physical enjoyment of the public house because it can still be physically enjoyed as a public house. Smoking being merely an incidential activity by customers and not something which went to the heart of the beneficial use of a public house which would be the sale of alcohol for consumption on the premises. However counsel advises that this is not the test.” (para 5.16)

“Given the ban affects the physical enjoyment of the premises, it would seem to follow that whilst it does not affect the physical state of other properties, i.e. those in the locality, it must, as if affects the physical enjoyment of the premises also be physically manifest there. In considering smoking ban proposals, VOs [valuation officers] need to envisage what rent would be have been paid for the hereditament at the AVD [original valuation date] assuming the ban was then in place affecting both the subject premises and other premises “ (para 5.18).

“Proposals citing the ban on smoking should be re-examined to see if they satisfy the general requirement for validity (including sufficient wording to identify the nature and date of the change, and, if so, it is recommended invalidity notices should now be withdrawn allowing discussions to proceed with a view to resolving the proposals” (para 5.19)

Hence, if a pub’s rateable value was decreased by, say, £5,000 due to the effect of the smoking ban, then the business rates bill would fall by £2,300 a year.

The British Beer & Pub Association has warned that pubs are now closing at the rate of 36 a week (BBPA press release, 8 September 2008).


Earlier this year, it was revealed that Labour Ministers and the Valuation Office Agency were intentionally hiding council tax banding errors to save money and save face. The delayed council tax revaluation exercise flagged up that many homes were currently wrongly banded and are paying over the odds (so-called ‘consequentials’). These errors could be corrected without a revaluation (as already happens if someone actively makes a council tax appeal).

Yet Ministers covered up this information – as the Government would lose money and have to pay tax refunds, and since it would generate “adverse press coverage” for Labour “in the current climate”. Blacked-out minutes, uncovered by Conservatives, explained:

“MJ questioned what action should be taken by Groups on consequentials identified following data enhancement. Concern was expressed about the possible knock on implications for billing authorities and adverse press coverage this could generate in the current climate. Action Point – TE to establish potential numbers involved with GVOs. Action will then be agreed with ODPM and Ministers”. (This item has been redacted, as it remains an ongoing policy issue).

Valuation Office Agency's Council Tax Revaluation Programme Board (England) of 22 November 2005.

Obtained via Hansard, 19 February 2008, col. 613W.

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