The current system for calculating business rates threatens a double blow for beleaguered retailers.
So says the British Retail Consortium, which is urging the government to use alternatives to September’s Retail Price Index when calculating the next rise in commercial property taxes for England and Wales.
It maintains that business rates are the equivalent of council tax for companies. They are subject to an annual inflationary increase, implemented in April and based on the previous September’s RPI measure of inflation, which this year is expected to be above 4%.
The other part of the business rates calculation is determined by rateable values, based on how much it would cost to rent commercial properties. These are re-calculated every five years. The last change was introduced in April 2010. This resulted in a substantial rise in many retailers’ bills. To help these businesses, a transitional scheme was introduced to phase in the extra costs.
The combination of having to pay significant costs held over from 2010/11 and a high annual increase caused by this September’s RPI rate would see the business rates bills for some retailers rising by almost 22% next April.
“One large retailer estimates every extra RPI percentage point could add £1.3m to their business rates costs” said BRC director general Stephen Robertson. “September’s RPI is expected to be above 4% but few retailers have budgeted for increases as large as 4 to 5%.
“We’re urging the government to use alternatives to September’s RPI to calculate next April’s bills. The coalition has already changed the way pensions are calculated. It’s now using CPI rather than RPI – this change could also apply to business rates. Another option is to use the 12-month average RPI rate from October 2009 to September 2010 – which would help to iron out inflation volatility.”
September’s RPI figure is published on October 12.