Pub Business Rates – How are they calculated?

According to the Valuation Office Agency (VOA) business rates assessment data, there are around 52,351 pubs and bars paying business rates in England and Wales. The business rates amount payable for each ratepayer owning or occupying a pub or bar, is based on the property’s rateable value. Rateable value is a value ascribed to a domestic or commercial building and for pubs and bars it is calculated according to size, location, turnover, and other factors. The rateable value along with the Uniform Business Rates Multiplier set by the Chancellor each year, determines the business rates payable for the ratepayer that year, before transitional relief, local discretionary relief, Small Business Rates Relief, Expanded Retail Relief and various other business rates reliefs and discounts (if applicable) are deducted.

Rateable value for licensed premises is calculated by looking at a combination of turnover and rent. Normally a commercial rent for a pub or bar is agreed between a landlord and tenant after what is known as the ‘fair maintainable receipts’ has been established. Fair maintainable receipts is the yearly level of trading receipts that a pub could reasonably be expected to achieve based on the trade figures from previous years. 

The Valuation Office Agency (VOA) assessors when calculating business rates valuations include turnover from drink (wet), food (dry) and accommodation receipts. The rateable value is then multiplied by the NNDR multiplier to give the total payable business rates for the year. The Small Business Multiplier is 49.9p and the Standard Multiplier is 51.2p from 1 April 2021 to 31 March 2022. The Business Rates Multiplier is used to calculate the business rates payable for any commercial property with a rateable value.

To ensure the accuracy of pub and bar business rates valuations in the rating list, the Valuation Office Agency holds meetings with representatives of the pub industry to gain insights into the state of trade and any material change of circumstances within the hospitality industry. 

The Valuation Office Agency also classifies pub business rates assessments into ‘valuation schemes’ of supposedly comparable and local properties so that their assessors can more accurately assess the correct business rate charges by calculating the correct rateable value. CPRA’s own in house database suggests thousands of pubs and bars have been wrongly assessed for business rates and many of those ratepayers have still not appealed since their business rates valuations first came into effect in April 2017. Pubs and bars are often placed in the wrong valuation schemes and estimates of rent and turnover are often wildly inaccurate, costing some ratepayers small fortunes. Once the current rating list ends in March 2023, many ratepayers who have overpaid will not be able to recover full refunds. Currently, the most effective way to correct an inaccurate assessment of a pub’s rateable value is to appeal the business rates assessment via the Check, Challenge, Appeal process which can be accessed via the Government Gateway portal for business rates.

Pubs and bars are essential to many communities by offering entertainment, food, drink, and employment to many. Pubs are a fantastic British tradition which many feel should be protected and preserved. Business rates are one of the biggest overheads for the hospitality industry, so ensuring that a fair and correct rateable value assessment is in the rating list for each property is important. For properties which have been over-assessed for business rates, refunds, small business rates relief, outstanding NNDR credits, business rates cash grants and other business rates reliefs must be applied for. A business rates review of each pub and bar should be carried out by an experienced and qualified rating surveyor at least once per rating list. For properties with large rateable value assessments, a historic audit of the owner or occupier’s business rates accounts is imperative if those pubs and bars are to survive long term.

CPRA are specialists in hospitality and licensed premises business rates reviews. Our business rates surveyors are second to none in correcting business rates valuations where fair maintainable turnover has been used to calculate the business rates for a pub or bar. Please feel free to contact our business rates department on 020 7770 8000 or email info@cpragroup.com for some no obligation advice concerning the rateable value of your pub, bar or any other type of licensed premises.