The importance of sourcing an ethical rating specialist

Why is it important for hospitality firms to mitigate costs as much as possible?

Controlling overheads and costs is always a key part of building a successful, viable business. After two years of disrupted trade due to the pandemic and with rising inflation hitting every area from energy to staffing, cost control has never been more important and more of a challenge for hospitality operators.

How does partnering with the firm’s new rating specialist aid this?

Anything that can be done to mitigate costs is essential for hospitality venues right now, particularly on goods and services that are not customer-facing or that are not essential to the smooth operation of the outlet. Business rates are a prime example. They are one of the hospitality industry’s highest overheads and are often used to determine other costs such as water bills and the late-night levy, too. Even a relatively small reduction can make a big impact on profitability without detracting from the customer experience.

Throughout this year, the Valuation Office Agency is reviewing the rateable value of every hospitality venue in England and Wales and setting new rates for 2023 onwards. In Scotland, the Scottish Assessors are doing the same. As assessments are based on turnover, and trade has been inconsistent due to the pandemic, the likelihood of erroneous valuations being set on the new rating list is real. Star Pubs and Bars is therefore partnering with rating specialist Dunlop Heywood to help ensure that its leased and tenanted pubs are not excessively assessed and overcharged. The new service will help licensees who are concerned that their current rates payable are too high to challenge them, preventing any errors continuing onto the 2023 list.

In addition, Star will assess all of its pubs’ 2023 ratings valuations as they are received and alert any licensees it believes should seek a review. Draft rating valuations are expected to start arriving at pubs later this year.

Dunlop Heywood was appointed after an extensive tendering process. With cost control in mind, Star has used its buying power to secure a comprehensive service at highly competitive rates for its licensees and will receive no financial benefit from the partnership.

The rating system is now so complex that any kind of appeal needs to be carried out by an expert. Unfortunately, some advisors in the market charge high upfront fees and fail to deliver results. Star’s partnership with Dunlop Heywood gives licensees the reassurance of being able to access trustworthy advisors should they need them.

How can firms be charged ‘excessive’ business rates?

The business rates payable are based on the rateable value, which is assessed by the Valuation Office Agency or the Scottish Assessors, depending on the venue’s location. If their opinion of value differs from how the pub trades, the rates can be too high and so cost the operators more than necessary.

How much money can be expected to be recouped?

Successful challenges to their current rates payable can see hospitality operators receiving savings backdated to as far as 2017 in England and Wales. One-off payments alone can amount to thousands of pounds. The Bull in Warlingham was one of the first pubs to trial Star’s new service with Dunlop Heywood. It has resulted in a rebate of £13,800 and cut the pub’s rateable value by more than 25%, leading to reduced bills ongoing.

Where else can this money be placed?

Money that is not tied up in rates can be invested back into a business to make it more sustainable. Rebates and ongoing savings on rates bills can fund improvements – such as adding a new covered outdoor space or refitting a kitchen – that will immediately generate more trade for the business. At a time of high inflation, reduced rates are also helpful for offsetting increases in other bills.

What is Star’s take amid the new VAT figure?

It is unfair that pubs and licensed venues such as bars and restaurants – which are already over taxed – are required to pay VAT on food, whilst other retailers, like takeaways and supermarkets, are not. Star would like to see the temporarily reduced 12.5% VAT rate brought in during the pandemic become permanent on all food and drink sold in pubs to bring them more into line with other food businesses. Increasing the VAT rate back up to 20% in April as proposed will only hinder the recovery of the hospitality sector and the country as a whole.

Why is it paramount that hospitality is aided during this time?

The hospitality industry is essential to society and the UK economy, but it has been one of the worst hit by the pandemic. It is only just emerging from two years of closures and restrictions. Government support could make a huge difference to hospitality operators trying to rebuild their businesses and also finally address the unfair tax burden that hospitality operators have faced for many years. In addition to making the temporary 12.5% VAT rate permanent, a complete overhaul of business rates is required. As a percentage of turnover, pubs pay five times more than the average of other sectors. Lower, more equitable rates for hospitality venues are long overdue. We are continuing to lobby the Government for reform, and would urge everyone across the trade to get behind the ‘Long Live the Local’ campaign.