Business Rates Update

HU WINS REDUCTION IN RATES FOR PUBS SERVING FOOD

AND CONTINUES TO FIGHT FOR REDUCED RATES AND INCREASED RELIEF FOR WET-ONLY PUBS AND RESTAURANTS

Following intense negotiations with Land and Property Services (LPS), Hospitality Ulster has successfully negotiated a new approach for valuing pubs serving food. Food turnover will be valued separately and at a lower percentage than previous, resulting in savings of up to c33% on previous NAVs.

But LPS have refused to move on ‘Wet Only Pubs', citing that the majority already receive small business rates relief of 20% on their NAV - nor can they implement the 33% rate relief presently enjoyed by pubs and restaurants in GB, with an NAV of £51k or below.

Colin Neill, CEO Hospitality Ulster said:

“Having previously fought and secured small business rate relief (20%) for licensed premises with a NAV of £15K or less, in the face of government plans to exclude them, Hospitality Ulster welcomes the move by LPS on Pubs serving food - recognising the lower profit margins and higher costs that come with food service.”

“However, we continue to make the case for reduced rates and increased relief for Wet Only Pubs and Restaurants. Both of which face similar challenges, albeit they have two different rating models.”

“LPS had also intended to increase the percentage in each banding for alcohol sales against turnover but we were able to make a strong case against it and the bands have remained the same, which is an important win.”

Business rates are crippling the Northern Ireland hospitality sector who are paying some of the highest rates in the UK with little in the way of rates relief schemes experienced by GB counterparts.

Hospitality Ulster has also welcomed the announcement by Sue Gray, the Permanent Secretary of the Department of Finance to reform business rates in Northern Ireland. The long-awaited review was triggered after lobbying by including Hospitality Ulster and our partners in Trade NI (Retail NI and Manufacturing NI).

A series of consultation events are now taking place which included a two-day Department of Finance Policy Lab at which Hospitality Ulster stated that fixing business rates was a top priority for the hospitality sector.

Colin Neill, Chief Executive of Hospitality Ulster who has taken part in the recent consultation sessions added:

“We are now on a roadmap for change after successful lobbying of the Department after a number of years. Due to the Stormont impasse this issue has been kicked down the road, much to the detriment of local business.”

“We now want to see radical change to an antiquated and not fit for purpose system of business rates which is a major burden for our members.”

“With our members experiencing huge uncertainty with Brexit, rising costs of running their business and slow economic growth, the last thing they need is to continue to pay more business rates. We are keen that the process is a swift one with the right outcomes and hope this process will lead to a publication of an action plan to ensure that the next Finance Minister has options to make immediate changes.”

“At the very least our pubs and restaurants must receive the 33% rate relief enjoyed by our counterparts in GB, this money is already in the NI Executive coffers as a result of the ‘Barnett formula’ that is used to calculate the NI Budget and should be used for the purpose it was intended.”

 

CALCULATING RATES ON PUBS SERVING FOOD: HOW WILL THE NEW APPROACH WORK?

 

Current Approach by LPS:

The Fair Maintainable Trade (FMT) is multiplied by a percentage of 5-8% dependent upon the level of FMT.

 

TO	FMT%	NO. OF H
Below £250,000	5	834
£250,001 - £500,000	6	227
£500,001 - £750,000	7	107
£750,000 and above	8	109

 

 

 

 

 

 

 

Food is weighted as follows:

• The first £40,000 of income is disregarded due to the lack of profitability
• The next £40,000 of income is taken at 75%
• Income between £80,000 and £350,000 is taken at 100%
• Income above £350,000 is taken at 85%
  
  
  THE NEW APPROACH FOR REVALUATION 2020
  SECURED BY HOSPITALITY ULSTER
• Drink & Food Income to be separated
• Food (regardless of the threshold) is to be taken at 5%
• To ensure low food income generators are not penalised the initial two steps of weighting will still apply
• The first £40,000 of income is disregarded due to the lack of profitability
• The next £40,000 of income is taken at 75% (combined these steps mean the first £50,000 of food income is disregarded in the calculation of NAV)
• Drink income is to be treated as before i.e. 5-8%
• Once the appropriate percentages have been applied to wet & dry income – the combined amount equates to the 8th List NAV

 

FMT/TURNOVER	% RATE TO BE APPLIED   (WET / DRINK)	% RATE TO BE APPLIED   (DRY / FOOD)
Below £250,000	5	5
£250,001 - £500,000	6	5
£500,001 - £750,000	7	5
£750,001 and above	8	5

 

 

EXAMPLE A

'Pub A'

INCOME STREAM	FMT
On Sales	£230,000
Food	£810,000

 

Valuation Example (Old Scheme)

INCOME STREAM	FMT	WEIGHT	WEIGHTED FMT
On Sales	£230,000	1	£230,000
Food	£40,000	0	£0
	£40,000	0.75	£30,000
	£270,000	1	£270,000
	£460,000	0.85	£391,000
		TOTAL FMT	£921,000
	TOTAL FMT	PERCENTAGE	NAV
	£921,000	8%	£73,680

 

Valuation Example (New Scheme)

INCOME STREAM	FMT	WEIGHT	WEIGHTED FMT
On Sales	£230,000	1	£230,000
Food	£40,000	0	£0
	£40,000	0.75	£30,000
	£730,000	1	£730,000
		TOTAL FMT	£990,000
INCOME STREAM	TOTAL FMT	PERCENTAGE	NAV
On Sales	£230,000	0.05	£11,500
Food	£760,000	0.05	£38,000
		NAV	£49,500

 

EXAMPLE A: RESULTS IN APPROXIMATE REDUCTION OF 33%

 

EXAMPLE B

'Pub B'

INCOME STREAM	FMT
On-Sales	£400,000
Food	£400,000

 

Valuation Example: Old Scheme

INCOME STREAM	FMT	WEIGHT	WEIGHTED FMT
On Sales	£400,000	1	£400,000
Food	£40,000	0	£0
	£40,000	0.75	£30,000
	£270,000	1	£270,000
	£50,000	0.85	£42,500
		TOTAL FMT	£742,500
	TOTAL FMT	PERCENTAGE	NAV
	£742,500	7%	£51,975

 

Variation Example: New Scheme

INCOME STREAM	FMT	WEIGHT	WEIGHTED FMT
On Sales	£400,000	1	£400,000
Food	£40,000	0	£0
	£40,000	0.75	£30,000
	£320,000	1	£320,000
		TOTAL FMT	£750,000
INCOME STREAM	TOTAL FMT	PERCENTAGE	NAV
On Sales	£400,000	0.06	£24,000
Food	£350,000	0.05	£17,500
		NAV	£41,000

 

EXAMPLE B: RESULTS IN APPROXIMATE REDUCTION OF 21%