Music venues latest to join calls for online sales tax to fund business rates reform

Rachel Reeves is being urged to help prevent Britain’s grassroots music venues from falling silent by backing a new ‘hybrid’ business rates model.

Business leaders want the Chancellor to adopt a new rates system involving a 2pc levy on online sales and a 37pc cut for bricks-and-mortar firms.

Mark Davyd, boss of the Music Venue Trust, a charity representing over 500 sites, said that fixing rates ‘is the difference between a room that can book the next Ed Sheeran and one that cannot make the rent’.

Davyd is the latest to back reforms proposals by the Heart of London Business Alliance (HOLBA).

It is calling for a small levy on all online sales to help fund substantial rate cuts for High Street businesses.

Rates went up at the start of April – battering businesses across Britain already dealing with inflation-busting increases in the minimum wage alongside other tax hikes and red tape.

Even though music venues received a discount on their rates for this year from the Chancellor, alongside pubs, bosses say that a functional system would not require such emergency interventions.

Writing for DailyMail.com, Davyd said that the current rates system means that venues such as the Washington, a pub at the heart of Sheffield’s grass roots music scene, is effectively ‘subsidising Amazon’.

‘Digital businesses pay a fraction of the rates that physical businesses pay for equivalent turnover,’ he said, arguing that the online economy ‘has been avoiding its share since the internet existed.’

An online tax would be positive for public finances and result in a system that ‘finally reflects the economy it is supposed to be taxing,’ he wrote.

And it could fund a ‘reset’ of the multipliers used to calculate rates for commercial properties to their much lower 1990 levels.

It comes after the Chancellor faced a fierce backlash over her botched business rates reforms announced last year that saw Labour MPs banned from pubs and many industries facing punishing hikes in their bills.

Ros Morgan, chief executive of HOLBA, which represents 500 businesses in the West End, said: ‘Rather than competing to win votes with proposals such as land taxes or temporary fixes like relief targeted at companies of particular sizes or from individual sectors, we need our politicians to engage with real, structural reform of business rates.’

Rates system must change as Sheffield music pub ‘subsidises Amazon’

By Mark Davyd, CEO & Founder, Music Venue Trust

There is a music venue in Sheffield called The Washington. It has been part of that city’s cultural life for decades. Its rateable value, as determined by the Valuation Office Agency, went up by 153 per cent in the 2026 revaluation; from £58,500 to £148,000. The Washington is one of our members.

So is the Fox and Firkin in London, up 275 per cent. The Blue Moon in Cambridge, up 195 per cent. The Eagle Inn in Manchester, up 212 per cent. Grand Central, also in Manchester, up 181 per cent. The Black Prince in Northampton, up 221 per cent. The Pelton Arms in London, up 479 per cent. Every one of them a music venue. 

Every one of them facing a business rates bill in 2026 that bears no relationship to their ability to pay it. Music Venue Trust represents 801 grassroots music venues like these across the United Kingdom. 

These are the rooms where British music begins; the 200-capacity clubs, the converted pubs, the former industrial spaces where every artist who has ever filled an arena first learned what it means to hold a room. 

The pipeline from those stages to the ones that generate the export revenues the Government is rightly proud of runs through our members. Without them, it does not exist.

These venues are operating on average profit margins of 2.5 per cent. More than half made no profit at all in 2025. Thirty closed permanently last year. 

A further 175 towns and cities, home to an estimated 25 million people, no longer receive regular touring shows from professional artists because the circuit that once connected those communities to live music has contracted past the point where it reaches them.

Business rates did not cause all of that. But they are doing their share of the damage, and they have been for years.

The pandemic-era 75 per cent relief that kept many venues functioning expired in April 2025. 

The October 2024 Budget replaced it with 40 per cent for 2025/26; an immediate additional tax demand of approximately £7 million across a sector whose entire collective gross profit in 2023 was just £2.9 million. 

Then the new rateable values published in November 2025 took effect from April 2026, with increases across hospitality premises at the scale the figures above illustrate. The Government’s response was to announce, in January 2026, a specific 15 per cent relief for pubs and live music venues. 

Not a planned reform. An emergency measure, introduced because the revaluation outcomes were so severe that without it, venues that had survived a pandemic could not survive a tax bill. 

A system working as intended does not need emergency interventions to prevent it destroying the businesses it has just revalued.

The current business rates system was designed in 1990 for an economy made almost entirely of physical premises. The value of the space a business occupied was a reasonable proxy for what it could afford to contribute to local services. 

That was thirty years ago. The digital economy now accounts for roughly a fifth of UK economic activity. Digital businesses pay a fraction of the rates that physical businesses pay for equivalent turnover; analysis by Altus Group puts the ratio at eight to one.

So The Washington in Sheffield is subsidising Amazon. That is not hyperbole. That is how the current system works.

Now, Heart of London Business Alliance is proposing the first serious attempt in thirty years to fix the structural problem rather than paper over it. 

A modest levy on online sales, collected through the existing VAT system, funds a reset of property-based multipliers to their 1990 level; a cut of around a third in every physical business’s rates bill, paid for by the part of the economy that has been avoiding its share since the internet existed.

No new tax. No additional burden on the Exchequer (indeed the net result for the public finances would actually be positive). Just a system that finally reflects the economy it is supposed to be taxing. 

For a music venue on 2.5 per cent margins, a structural reduction of that scale in a pre-profit tax is not a rounding error. It is the difference between a room that can book the next Ed Sheeran and one that cannot make the rent. 

The Washington has been part of Sheffield’s musical life for a generation. It should not need an emergency relief announcement to survive a revaluation. 

It needs a tax system that understands what it is. This proposal is how we get there.