Chancellor Alistair Darling’s March budget confirmed the industry’s worst fears.

Although no new impositions were heaped upon the industry (except for the increase in alcohol duties), it confirmed the abolition of Hotel Buildings Allowance (HBA) and the introduction of what, for many in hospitality, will be a much less favourable capital allowance and capital gains tax regime.

These measures seem to have been designed to make owning and running a small restaurant and hotel ever more difficult.

The reduction in the HBA allowance, to be finally completed in 2011, will be a huge disincentive to future investment.

So will the reduction in capital allowances on the cost of investment in businesses, for example, from 25 per cent to 10 per cent.

This will almost certainly discourage restaurateurs and hoteliers from modernising and refurbishing – a measure made worse by the increase in the top rate of corporation tax for small businesses, rising from 19p to 22p by 2009. This is calculated to raise £650m from the hospitality industry alone, which leaves that much less to be re-invested.

How is this supportive of the industry?

In addition, despite a concession to soften the blow, the increase in capital gains tax means that restaurateurs and hoteliers who sell their businesses on retirement will be paying 80 per cent more than they would have done before the Spending Review, because the Chancellor has also got rid of inflation indexing before 1998.

Ownership in the hospitality industry tends to be long-term and the loss of taper relief is a serious blow.

To cap all this bad news, supplementary business rates are also set to rise with the proposal that local councils will be able to raise an additional 2p in the pound rate for specific developments.

At a time when the government is urging businesses to modernise, update and invest, these measures represent a penalty of millions of pounds every year on the hospitality industry.

Does this make sense?

Is this what is meant by joined-up government?

The answer must be no.

Bob Cotton

Chief Executive