If you run a pub or a hotel right now, you already know the odds are stacked against you. Business rates have long felt like a penalty tax on bricks and mortar, crushing hospitality operators while digital giants sit comfortably in low-tax warehouses. Now, the government has finally ordered an independent review into how these valuations are calculated for pubs and hotels. It is a welcome shift, but it raises an obvious question: why did it take this long to notice the system is broken?
The Problem With Fair Maintainable Trade
Most commercial properties are assessed on a rental value basis. Pubs and hotels live under a different set of rules entirely. The Valuation Office Agency calculates their rateable values using something called Fair Maintainable Trade (FMT). Read more on a connected topic: this related article.
This means your tax bill is tied directly to an estimate of how much money your business might turn over if operated in a reasonably efficient way. It accounts for your location, your food sales, your wet sales, and any income you squeeze out of guest rooms.
On paper, that sounds fair. In practice, it punishes success and ignores the soaring costs of running a physical venue. If you manage to drive up your turnover through sheer hard work, marketing, or by absorbing higher supply costs, your rateable value shoots up at the next revaluation. You end up penalised for doing well in an industry where margins are razor-thin. Further journalism by Business Insider delves into comparable views on this issue.
Why the Recent Revaluations Hurt
Pubs and hotels absorbed massive increases in their rateable values following recent revaluation cycles. While the post-pandemic years saw temporary relief, the return to standard assessments exposed a brutal mismatch between official valuations and ground-level trading realities.
Energy bills skyrocketed. Minimum wage increases pushed labor costs higher. Food inflation squeezed kitchen menus until the pips squeaked. Yet, the valuation system kept looking at outdated turnover metrics that failed to capture how much of that revenue was actually eaten up by overheads.
Industry leaders like the British Beer and Pub Association and UKHospitality have spent years pointing out that pubs were paying a disproportionately high share of local taxation. When thousands of pubs are closing across the country due to unmanageable cost pressures, you cannot tinker at the edges anymore. The entire calculation methodology needs a structural reset.
What the Independent Review Must Fix
The Treasury has tapped Jerry Schurder, a seasoned business rates expert and former property consultancy head, to lead the investigation and report back. His mandate is to figure out how to make valuations fairer and more transparent ahead of the 2029 revaluation.
To make a real difference, the review has to tackle three core flaws:
- The lag in data: Valuations are based on historic trading evidence that often fails to reflect sudden economic shocks or rapid changes in consumer habits.
- Operating cost neglect: FMT models focus heavily on turnover without properly scaling down for the catastrophic rise in utility and supply expenses facing hospitality venues.
- Structural inequality: High street pubs and independent hotels face heavy local taxes while competing against online businesses with zero physical footprint overheads.
What Hospitality Owners Should Do Right Now
Reviews and consultations take time. Schurder is expected to report to the Treasury, with changes potentially materializing down the line, but your tax bills are landing today.
Do not sit back and assume your current rateable value is set in stone. Check your property details against actual local trading conditions. If your occupancy rates have dropped, if local footfall has dried up, or if your operating style has had to shift just to keep the lights on, gather your trading figures. Talk to a specialist rating surveyor who understands hospitality assets. Challenge inaccurate assessments before minor over-assessments compound into thousands of pounds of wasted capital over the next few years.
