Business Rates Are a Turnover Tax on Hospitality — How to Run a Challenge That Actually Wins

For pubs, hotels and much of the licensed trade, the rateable value is derived from trade. That makes rates behave like a tax on turnover — payable whether or not the site makes money. Here is how a challenge is won, and what has to be in place before the Challenge button is pressed.

Why rates bite hospitality harder than almost anything else

Most taxes take a share of something you have already made. Business rates take a fixed sum whether the site trades well, badly or not at all. For a hospitality operator that is the difference between a bad quarter and a closed site.

And for large parts of the sector the assessment is not really a property tax at all. The Valuation Office Agency's rating manual values public houses by reference to fair maintainable trade — the level of trade a reasonably efficient operator would expect to achieve — rather than by simply measuring the floor and applying a rate per square metre (VOA Rating Manual). Hotels are approached on a similar receipts-and-expenditure logic. Restaurants and cafés are more often valued on zoned rental comparison, but the practical effect is the same: a fixed annual liability that does not flex when trade does.

So when a founder says "business rates are a turnover tax", that is not rhetoric. For a pub or hotel, the number in the rating list is literally derived from an assumed level of trade. If that assumption is wrong, you are paying tax on turnover you never earned — every day, for the life of the list.

That is why Dinmore Bell treats a rates challenge as a priority item for hospitality clients rather than a background admin task. It is one of the few fixed costs a founder can materially reduce without touching headcount, menu or rent.

The numbers you are actually arguing about

The bill is rateable value multiplied by a multiplier, less reliefs.

For 2025/26 in England the standard multiplier is 55.5p and the small business multiplier 49.9p (GOV.UK). So every £10,000 of rateable value you remove is roughly £5,000 a year off the gross bill, before reliefs — and it is backdated where the alteration takes effect from an earlier date (GOV.UK).

Reliefs help, but they are capped and they are not permanent. Retail, Hospitality and Leisure relief for 2025/26 is 40% of the bill, subject to a cash cap of £110,000 per business (GOV.UK). Small business rate relief gives 100% relief below a rateable value of £12,000, tapering to nothing at £15,000 (GOV.UK). A multi-site operator burns through the RHL cap quickly. Relief is a discount on a number; a challenge changes the number.

Timing matters too. The 2023 rating list is based on rental values as at 1 April 2021 (GOV.UK). The 2026 list takes effect on 1 April 2026 and is based on values as at 1 April 2024 (GOV.UK). The Non-Domestic Rating Act 2023 moved England to more frequent revaluations (legislation.gov.uk), which means the window to fix a wrong assessment closes faster than operators are used to.

Check, Challenge, Appeal — and where operators lose

England runs a three-stage system (GOV.UK).

Check is where you correct the facts held about the property: floor areas, layout, ancillary space, external trading areas, plant and machinery, dates of alteration. It is unglamorous and it is where most of the value is created. If the VOA has your trading area 20% larger than it is, or has a cellar recorded as usable trading space, no amount of clever argument at the next stage repairs it.

Challenge is where you argue the valuation. A challenge must generally be made within four months of the Check decision, extended to 16 months where it is based on a Valuation Tribunal or Upper Tribunal decision (GOV.UK). Critically, you can usually only make one challenge on the same grounds for the same property in the same rating list (GOV.UK). There is no second bite. A thin challenge filed in a hurry does not leave you where you started — it burns the ground.

Appeal goes to the Valuation Tribunal for England, generally within four months of the challenge decision; you can also appeal if the VOA has not decided your challenge within 18 months (GOV.UK).

Two practical warnings. First, you must keep paying while the challenge is considered (GOV.UK). Nobody gets a payment holiday for arguing. Second, Covid-19 and the associated restrictions were removed as grounds for a material change of circumstances by the Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act 2021 (legislation.gov.uk). Arguments built on that footing go nowhere.

What a winning challenge is made of

A challenge that succeeds is an evidence pack, not a complaint. In a trade-based valuation the material is:

• Audited or accountant-prepared trading accounts for the relevant years, reconciled to the assumed level of trade. If the VOA has assumed a fair maintainable trade the site has never achieved and cannot achieve, that is the argument.
• A defensible explanation of why, tied to the property rather than the operator: catchment, access, footfall, loss of a neighbouring anchor, road layout changes, permanent loss of covers.
• Physical facts: measured areas, drawings, photographs, dates.
• Comparables: settled assessments on genuinely similar properties in the list.
• The alternative valuation you say is correct, with the arithmetic shown. "Too high" is not a case.

The grounds on which a proposal can be made, and what it must contain, sit in the Non-Domestic Rating (Alteration of Lists and Appeals) (England) Regulations 2009 (legislation.gov.uk). Getting the ground wrong is a common and expensive error, because it spends your one challenge.

Run in parallel, not instead: billing authorities have discretionary relief powers under section 47 of the Local Government Finance Act 1988 and hardship relief powers under section 49 (legislation.gov.uk). A council conversation and a VOA challenge are different levers and should be pulled together.

One forward-looking point: the Non-Domestic Rating Act 2023 introduced duties on ratepayers to provide and update information held by the VOA about their properties (legislation.gov.uk). Operators who already keep clean, current property records will find challenges easier and compliance cheaper. Those who do not will be doing both jobs at once, under a deadline.

How Dinmore Bell runs it

For a founder-led group, the failure mode is rarely ignorance — it is that nobody owns it. The finance lead assumes the property adviser has it; the property adviser assumes the accountant has it; the deadline passes.

Dinmore Bell takes the file. That means: an inventory of every hereditament in the group and its current rateable value; registration and property linking on the VOA account so the group can actually see and act on its own assessments; a Check submission built from measured facts; selection and instruction of the right rating specialist; a challenge sequenced against list deadlines rather than against whoever shouted loudest; and the relief position reviewed alongside it, including the RHL cash cap across the estate.

The fee is fixed and monthly, so the work happens in the quiet months when the evidence is being assembled — which is when challenges are actually won.

Where a specialist is needed

Valuation is a discipline, and the credible ones are RICS-registered rating surveyors. Where the case turns on fair maintainable trade, comparables or a receipts-and-expenditure valuation, Dinmore Bell instructs a rating surveyor and, where the matter proceeds to the Valuation Tribunal for England, arranges representation. Where the accounts evidence touches a filing position or a tax computation, an accountant or tax adviser is instructed to produce and stand behind it.

In each case Dinmore Bell scopes the instruction, negotiates the basis of charge, holds the budget and owns the outcome — so the founder has one number to look at and one person to ask.