Recent decisions pile pressure on hospitality industry

Bob Cotton Chief Executive, British Hospitality Association

Despite government protestations, recent Treasury decisions have been designed to make owning and running a small restaurant ever more difficult.

First, two measures introduced in the Spring Budget by Gordon Brown, when he was Chancellor of the Exchequer:

Capital allowances

Reduction in capital allowances on the cost of investment in businesses, for example, from 25 per cent to 10 per cent, which will discourage restaurateurs from modernising and refurbishing.

Corporation tax

Increase in the top rate of corporation tax for small businesses.
This will rise from 19p to 22p by 2009 and it's calculated to raise £650m from hospitality industry generally a good proportion of this from restaurant businesses.

Then came the new Chancellor's measures in his October Pre-Budget Report:

Capital gains tax

Increasing Capital Gains Tax.
Restaurateurs who sell their business on retirement will be paying 80 per cent more Capital Gains Tax than they would have done before the Spending Review: 18 per cent, not 10 per cent. In fact, the tax hike will be more in the hospitality industry, where ownership tends to be long-term, because the Chancellor has also got rid of inflation indexing before 1998.

For this reason, the introduction of a £100,000 tax allowance, which the Chancellor is believed to be considering, will have little beneficial impact.

Business rates

Supplementary Business Rates.
The proposal that local councils will be able to raise an additional 2p in the £ rate for specific developments raises the prospect of additional charges on business rates, even though restaurants may not gain from the proposed development.

At a time when the government is urging businesses to modernise, up-date and invest, these measures represent a penalty of millions of pounds every year on the restaurant industry, leaving that much less to be re-invested.

Does this make sense?

Is this what is meant by joined up government?

The answer must be NO.