Commercial surveying news from the Beattie Partnership

New “Pub Code” Shines Light on Business Rates Dilemma

In recent months there has been one of the biggest shake ups of the publican industry for a generation, with new freedoms for landlords to choose suppliers and question rents.

But with the new “Pub Code” transforming the finances of some pubs, how will this affect the rateable value of their business?

Until recently, “tied pubs” were contracted to buy their supplies from the breweries and Pub Co’s that owned them.

Often this meant lessee/tenants paying more for their beer than freehold pubs nearby, as they couldn’t shop around.  New rules, to be introduced as part of Parliament’s new “Pub Code” legislation, cast these practices aside.

“There are many issues that the Pub Code throws up,” explains Paul Giness of the Beattie Partnership, a ratings specialist for businesses across the UK.

Paul commented “First: if a pub is granted a lease at open market rent without tie, how will this impact the new rateable values as we approach the next revaluation in 2017? With the valuation date of 1st April 2015; could the new rating assessment be based on the rent?  Another issue is turnover: if a pub suddenly starts making more money when un-tied from their landlord, how could this impact their business rates?

With the potential changes in income and rents for some pubs, the Pub Code further complicates a thorny issue that has plagued pub ratings for over a decade:  just how do you value a pub?

“It used to be simple,” Paul continues.  “When pub were just pubs, their rateable value was calculated according to their turnover.  Restaurants, generally, were rated on their square footage, like more conventional property types, such as shops.  But pubs now often serve as much food as they do drink.  And restaurants, increasingly, have bars.  The line is blurred and the Pub Code is going to make it even trickier.”

A lack of standardisation across the UK has made the issue even worse, with many pubs and bars rated differently, depending on how different Valuation Offices have decided to classify them in the Rating List.

“Getting advice and help has never been more important if you think that your rates are too high.  Changes in the Pub Code could change your rateable value in ways that are unexpected: getting the right advice really could be very beneficial”.

Article originally published on Business Aspects Manchester, 20th March 2015.