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bigduckontax
bigduckontax, Accountant
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My question is about valuation for tax purposes. My business

Customer Question

My question is about valuation for tax purposes. My business is a small pub (max capacity 320 people) in London zone 2 (full post code is SE5 7SY) the website is www.xxxxxxxxxxxxxxxxxxxx.com. In the last tax year I was trading as a sole trader. From the 1st of April 2014 I have created a limited company which is in charge of the business. The limited company rents the pub from me. For tax purposes I need to determine the rent that the limited company needs to pay me. I was advised from my accountant that the rent needs to be set at market value. What is the fair market value of a pub for hire (without any tie to any brewry etc.) in London zone 2? I need a monetary value and will be happy to pay for the advice. I will not pay for the advice to ask elsewhere. Kind regards

Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello, I'm Keith and happy to help you with your question.
The valuation of licenced premises is extremely complex. I started my working life as a trainee valuation surveyor with the old London County Council. The Valuer's Department was, as you can imagine, large. Exactly one Chartered Surveyor handled pub valuations exclusively and his methods were pretty much a mystery to the rest of the department, but I do recall that barrelage came extensively into the computations.
Accordingly, I must direct you to seek the advice of a Chartered Surveyor with expertise in this type of estimation.
I am so sorry not to be able to help further, but from my background knowledge I am sure that you will understand my reticence. The Royal Institute of Chartered Surveyors does have a guide on the web, but it is only available to RICS members. The Valuation Agency, an HMRC department, does give extensive guidance here:
http://app.voa.gov.uk/business_rates/PublicHouses/Guide_to_Public_Houses_R2010.pdf
but I would submit that it is so complex as to throw you back into the hands of a specialist surveyor.
Expert:  TaxRobin replied 1 year ago.
Hello and thank you for allowing me to assist you.
Pub valuations are either made on the profits method basis or Operators Appraisal method.
For you the sales, profits and development costs are used for the
profits method, however additionally an allowance is made for anticipated required future expenditure on periodic refurbishment. The rent is assessed by considering the residual sum remaining after allowing the tenant operator an appropriate market return on the investment required for such business endeavour and development.
You have requested a monetary value without supplying any needed information.
If you wish to calculate this yourself without going to a surveyor, look at the sales, profits and development costs you had prior to this new arrangement and apply 85 %.
The previous expert is correct though, you have come to a site that does address questions but your question is too involved and complicated for an expert to give you a monetary value.
Expert:  bigduckontax replied 1 year ago.
I would submit that you would be extremely ill advised to attempt to conduct a valuation yourself without the assistance of a Chartered Surveyor with a thorough knowledge of the valuation of licenced premises.

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