For the first thirty years of my life, I don’t think I entirely knew what tax was. Initially, it was just a small amount that vanished from my payslip each month. When I became self-employed, it became a bigger amount that vanished from my bank account every January. But then when we launched into this ol’ running a business fandango, I suddenly found a large chunk of those sales that we were cultivating kept vanishing all over the place. (And not just because I’m incredibly clumsy and lose a great many things on a frequent basis, I’ll have you know.)
As a business owner I quite quickly had to get my head around corporation tax and quarterly VAT bills; employees’ national insurance contributions and income tax codes. I wasn’t paying a great deal of attention during school, but I’m pretty certain they never told me about this during maths class, when I could have been figuring it all out instead of trying to decode algebra.
But this isn’t just about being a slightly naïve new business owner: this is a specific tax issue that being a publican brings up. Thanks to the Unholy Trinity that is Beer Duty, Business Rates and VAT, it turns out that one in every three pounds spent in a pub goes straight to the taxman.
That amounts to an average of £140,000 per pub every year.
“How can that be?!” I hear you cry. Well…
Beer duty is a tax paid when producing and selling beer, and is calculated based on the strength of the alcohol. Beer duty has increased by 60% over the last 17 years and now the UK has one of the highest rates of duty in Europe. With seven in every ten alcoholic drinks served in pubs being a beer, Beer Duty increases have a big impact on pubs and it’s set to rise every year for the foreseeable future; as it is linked to the Retail Price Index (RPI) which all but guarantees annual increases.
Business rates are taxes paid on non-residential properties like shops, offices, factories, and pubs. Rates are generally calculated based on a property’s rental value, usually on a square footage basis. However for pubs it is a calculation based on ‘fair maintainable trade’ as determined by an independent assessor.
The way the business rates system works has a disproportionate impact on pubs compared to other types of business (e.g. on-line businesses), the average pub today pays a business rates bill of £15,000 meaning around 4% of it’s turnover is paid in Business Rates alone.
Following recognition of the unfair burden faced by pubs, a new pub-specific relief for smaller pubs was introduced in 2017 in the form of £1,000 of their annual tax bill, but this is set to end in March 2019, further increasing the pressure.
VAT is added to most goods in the UK and has a flat rate of 20%. Pubs, along with other licensed venues such as restaurants and bars, have to pay VAT on all food and drink they sell. However (and here’s the kick in the crotch you’ve been waiting for), this is not consistent with other food outlets, as food sold through supermarkets, convenience stores and takeaways (including cafes) do not pay VAT on most food products.
7 out of 10 alcoholic drinks sold in a pub are beers, so Beer Duty clearly has a big impact on local pubs. The UK is right up there in the top three for Beer Duty rates in Europe. In fact, we pay almost 40% of all Beer Duty across the EU, whilst drinking only 12% of the beer.
According to Britain’s Beer Alliance, “The beer and pub industry contributes greatly to our economy, generating £23bn towards UK GDP each year and supporting over 900,000 jobs. 44% of those employed by pubs are 16-24 year olds, providing vital job opportunities for young people.”
Now, I have looked at the wonderful world of social media comments to get some balance on this situation because obviously I, as a person with a non-scientific calculator and a vested interest in the subject, feel pretty hard done by. Surely the state of the industry can’t be that bad? Surely someone must be standing up for us!
I see the naysayers claiming that Beer Duty is not our problem because it’s the astronomical prices charged by breweries causing pubs to closed. That’s definitely a very significant problem and one which the MRO (Market Rent Only) agreements has yet to solve. But I’m pretty sure if I was put on a fair footing with other establishments selling food and beverages, I’d be a lot less annoyed about the cost of my barrelage.
I see the do-gooders claiming that tax on alcohol should increase because the cost to the NHS for treating alcohol abuse is greater. I would argue no one has ever left Lowsonford in an ambulance having their stomach pumped from imbibing too many WKD’s too quickly. The NHS is actually dealing with the ramifications of people preloading cheap drinks from supermarkets (which, lets remember, aren’t paying the same rates on them like some of us) rather than being the fault of any pub.
I see the misguided souls saying we have bigger things to worry about in the world and yes, we really do. But when this isyour world – your livelihood, your life and your home, as well as the livelihoods of all your staff for whom you’re responsible, this does become quite a pressing issue.
I see the righteous folks claiming that the only people who will care about this issue are alcoholics. Except, of course, alcoholics are far more likely to buy in bulk (on the cheap, at those supermarkets I may have already mentioned…) and drink alone, thus escalating their alcoholism because there’s a) no one monitoring their intake and b) no community around them to deescalate the problem.
So here’s the thing: if you love your local, or even if you don’t but you think it is a valuable asset to your community as a small business enterprise, a local employer and a driver of visitors to your area, then head over to the great Long Live the Local campaign to find out more and pop your name down on the petition to cut the beer tax before the Autumn budget. If you feel really invested in this issue (and frankly, why wouldn’t you when I’ve outlined the issues so intelligently for you) then you can even write to your MP using a template on their website.
The reality is that pubs are closing at a rate of 18 per week right now. There have been occasions when we have had to seriously consider it as an option over the past four years. As the business owner it’s disheartening to see margins ever tightening, but as a member of our local communities I can’t even imagine what these lovely villages would be like without a pub at the hub of them.
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Slowly but surely you helped to breathe life back into the place. You filled it up with love and laughter. You have dragged it back from obscurity to place it back into the heart of the community.
Like so many others, we got into this trade because we love sharing these little boltholes with others and watching you enjoy them and make memories to cherish between these walls. We do it because we like a bit of banter whilst pouring a beer. We’ve always believed in doing the best we can with the circumstances we’ve got.
Time to whip up a quick homemade soup with whatever veggies you’ve got in your fridge.