UKHospitality has called for an overhaul of the discretionary business rates relief system a week after slamming the chancellor for failing to take decisive action in his Spring Statement.
The industry body has written to the minister for local government, Rishi Sunak MP, raising concerns that relief distributed by local authorities may be in breach of EU state aid rules.
The rules prohibit EU countries from giving financial assistance to some companies and not others in a way that could impact fair competition.
UKHospitality urged the government to reassess the application of these rules to ensure hospitality businesses receiving relief cannot be penalised.
The body also repeated its plea for a full review of the rates system at the earliest opportunity after the chancellor Philip Hammond was accused of "kicking the issue into the long grass" last week.
Chief executive Kate Nicholls (pictured) said: "The introduction of discretionary relief for businesses was well-intentioned, but it has caused hospitality businesses a number of significant headaches.
"Local authorities were, in many cases, slow to begin distributing the relief and we saw numerous examples of councils attaching completely arbitrary stipulations to the reliefs. These stipulations ran counter to the spirit of the fund and unfairly penalised businesses that were entitled to relief.
"We are also concerned that the application of the relief may unintentionally breach state aid rules designed to avoid a distortion in competition in the EU. We have informed the government that we believe discretionary rates relief should not fall into this category and that hardworking hospitality businesses should not be penalised in any way for accessing relief to which they were entitled.
"We have called on the Department for Communities and Local Government to act to ensure that hospitality businesses that contribute so much to their local communities are not punished, and reiterated our call for a full review of the business rates system that is long overdue."
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