The boss of Britain’s largest pub company has been drawn into a row over whether it unduly influenced the way the industry is taxed.*
|Select Committee hearing on business rates May 2019|
Mr Townsend, 57, was responding to a Treasury select committee inquiry into business rates, the tax on commercial properties. He wrote that “false suggestions” had been made that Ei had played “a major part in the way that the business rates system was agreed, inferring that the system was corrupted”.
The disagreement revolves around the calculation of business rates for bars and public houses. The tax is usually based on a property’s rateable value, but in a handful of areas including pubs, cinemas and petrol stations, the tax is linked to a tenant’s turnover.
Paul Crossman, (Paul Swan York) a pub operator, had told MPs that the industry had been “gleeful about the way they persuaded” the government to adopt a system which he claimed had resulted in lower taxes and higher rents for pub owners.
Mr Crossman said the system “is totally corruptible and it has been corrupted”, claiming the approach to calculating rates for pubs had been “sold by the industry”.
In the case of pubs, Mr Crossman said this often had the effect of leaving lower rates bills than if the conventional approach were taken. Since rent paid to pub companies, such as Ei Group, is based on a share of a pub’s net profits, lower expenses including business rates can result in a higher rent.
Representatives of tenants said that as well as hitting the public purse, the approach could penalise publicans who improved their pubs, since higher sales result in higher business rates.
Mr Crossman alleged that the Valuation Office Agency, the government body that oversees business rates, had been influenced by a professional body called the trade-related valuation group. Mr Crossman told MPs in May: “It says a lot that the person chairing the group was the national rent controller for Enterprise Inns.” Enterprise Inns was the former name of Ei Group.
In response to Mr Townsend’s rebuttal, Mr Crossman wrote to the Treasury committee to reassert his allegations, naming the individual who chaired the group as Rob May, Ei Group’s national rent controller.
The trade-related valuation group was a part of the Royal Institution of Chartered Surveyors (Rics) which advised on licensed and leisure property. A spokeswoman for Rics said that it no longer existed but confirmed Mr May had chaired it.
It is understood that the period in question dates back more than a decade. However, Mr Crossman claimed the group had influenced an inappropriate approach to business rates which was still in place.
Ei Group declined to comment.