We have been thinking a lot about pub companies recently, not least because of the Fair Deal for Your Local campaign. We still don’t understand enough about the details of the business model to have a strong opinion on its rights and wrongs, but one thing has been puzzling us: why do pubcos bother selling beer?
Why do they bother maintaining a buying-sales-distribution network when they could just make money from renting at market rates to people who want to run a genuine freehouse?
We wonder if the answer is tax.
At present, our tax system distinguishes between trading income and letting income, with the former qualifying for many more ‘reliefs’ (tax breaks). This is because trading is seen to be generating ‘economic activity’ while letting and passively holding investments is not. So, from the pubcos’ perspective, rental is probably ‘the wrong type’ of income.
Can anyone who works in the industry, or at Her Majesty’s Revenue & Customs, confirm our deny our hunch?