A correction issued hard on the heels of the Budget
The guidance sent to local authorities in England on Budget day did not account for the effect of inflation. Business rates* bills must be uprated in line with September’s consumer price index, i.e. 3.5%. Applied as it stood, this mechanism would have gradually eroded the discount enjoyed by the retail, hospitality and leisure sectors.
*Business rates: the closest French equivalent is the CFE (cotisation foncière des entreprises). The taxe foncière (property tax) is also relevant to the comparison.
CFE: the closest match
AdvertisementLike business rates, it is payable by the business occupying the premises, whether it owns or rents them. It is also calculated on the property’s rental value (the cadastral rental value).
It is an occupation tax with an economic purpose, independent of turnover and profit.
Government officials therefore issued new guidance. The discount relative to the national multipliers rises from 5p to 5.2p. The small business multiplier for these sectors falls from 39.7p to 39.5p, and the standard multiplier from 44.7p to 44.5p.
According to the government, the adjustment ensures inflation is applied consistently and honours the original intention of the reform. It did not say whether the issue stemmed from a calculation error or an oversight.
How the tax works
Business rates are payable by the occupiers of commercial premises. The amount due is calculated by multiplying the property’s rateable value, assessed by the Valuation Office Agency, by a multiplier expressed in pence per pound of rateable value.
The lower multipliers apply only to properties with a rateable value below £500,000 (around €595,000). Above that threshold, a higher multiplier applies regardless of sector. Many large city-centre hotels will therefore not benefit from this adjustment.
A real gain, but uneven across businesses
Ryan estimates the additional relief at £33 million a year for eligible businesses. The gain for each establishment will depend on its rateable value, the multiplier that applies to it and any relief schemes it already benefits from.
For pubs, bars and restaurants whose turnover relies mainly on drinks, even a modest reduction in this cost can make a difference when setting budgets, particularly where margins are thin. It adds to the sector’s other demands, notably on VAT, where a study by Dojo puts at £6.28 billion the additional spending that a cut could generate.
Ryan welcomes the correction but criticises the process
Alex Probyn, Practice Leader for Property Tax, Europe and Asia-Pacific at Ryan, said the correction was welcome. In his view, raising the discount protects the relief from inflation, which is good news for retail, hospitality and leisure.
He stressed, however, that stability and predictability start with publishing accurate rates. Businesses and their advisers had already built their forecasts on the Budget-day figures, which were changed a few days later. According to him, the interaction between inflation and a fixed discount was entirely foreseeable, and the correct figures should have been published at the Budget.
One revision among several Budget measures
The Budget also raises the threshold for full exemption under Small Business Rates Relief from £12,000 to £18,000 (around €14,300 to €21,500). More small premises become eligible, including some independent hospitality businesses.
The correction also follows an earlier analysis by Ryan, which found that inflation could add £129 million (around €154 million) to business rates for hospitality, leisure and accommodation from April 2027. The new measure offsets only part of that, while the sector is also facing rising wage costs, the impact of which UKHospitality has already denounced following the 3.9% increase in the minimum wage.
The question of how hotels are valued also remains open. The government has commissioned Jerry Schurder, former head of business rates policy at Newmark, to carry out an independent review of the methodology used to assess hotel rateable values. His findings are due to be submitted to the Treasury by the end of March 2027.
A fixed cost that is hard to absorb
Analysis – For groups and independent operators alike, business rates remain a fixed cost that does not fall when trading slows. November’s correction slightly eases that burden from April 2027 without changing the underlying equation. For hoteliers, the review of rateable values expected in spring 2027 is likely to matter far more than these few tenths of a penny.
At a glance by The Hospitality Tribune
England corrects retail, hospitality and leisure business rates multipliers
Revised guidance issued days after the 28 October Budget to account for 3.5% inflation
Small business RHL multiplier cut from 39.7p to 39.5p, standard RHL from 44.7p to 44.5p
Discount versus national multipliers rises from 5p to 5.2p from April 2027
Ryan estimates £33m in additional annual savings for eligible businesses
Independent review of hotel valuations due to report by end of March 2027
