Reduce business rates or more pubs and shops will disappear, warns hotelier
- Credit: Archant
Leading businessman says the current business rates system for the hospitality sector needs reform as it is a “tax on success”.
Paul Milsom operates a number of well-known hospitality businesses in Essex and Suffolk including Kesgrave Hall in Ipswich. Le Talbooth in Dedham and the Pier in Harwich, and says in recent years he has challenged the amounts he has been asked to pay in business rates because he feels they are too high. But, he says, it is becoming increasingly difficult to do so.
"We've been in business for years - up until the year 2000 business rates were not an issue but since then they have been ramped up and are now a stealth tax on business," he said.
"We won a victory in 2004 and had to renegotiate our position in 2010 and then there was a huge uplift in 2017 - but they have changed the system, so it is more complex and difficult to challenge. It's a scandal that they take a lot of money in tax but have scaled down the operation at the Valuation Office dealing with it, so there are less people looking at queries, making it more difficult to challenge."
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Mr Milsom says unlike many industry sectors where business rates are calculated using the market rental value of a business premises, in the hospitality sector, business rates are based on a business' turnover - an approach that, he says, is "a tax on success".
"It's an odd one with restaurants and pubs - if you invest in your business and improve what you doing - and that's nothing to do with making your building bigger - you can end up paying more in business rates. You could have two pubs next to each other and if one is doing double the turnover, the business rates could be double."
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He added: " We already have a tax on success and that is called Corporation Tax - but that is less damaging than business rates. Corporation Tax is paid annually six to nine month after the year end and is based on your profit whereas business rates have to be paid on the first day of each month before you start trading - its an 'open the door tax."
Mr Milsom urged the government to think again on business rates but said it is an issue that isn't getting the attention it deserves from politicians because all the focus is on the Brexit situation.
He said: "We have a government that says it champions a low tax economy but then we have seen seen massive hikes in business rates.
"If you have chosen to work for yourself and set up a small business and you are doing quite well, and then you experience a huge increase in business rates - that is directly off your bottom line - some people will look at it and think they are better off going back to work for someone else in the market.
"That's why pubs and shops are closing, and they won't get replaced."