LATEST RPI FIGURES ADD £500m TO BUSINESS RATES BILLS

Today’s official Retail Price Index (RPI) figures will add further pressure to the UK’s soaring business rates bills. Firms in England face a £500 million rise in business rates for 2015/16 following the announcement that RPI in September was 2.3%.

Last year, for the first time ever, the Government capped the UBR increase at 2% rather than adopt the full RPI rise of 3.2% and businesses will hope that the Chancellor will again provide some business rates relief in his forthcoming Autumn Statement.

Jerry Schurder, head of rating at Gerald Eve said: “As the only national tax linked to inflation rather than prevailing market conditions, business rates are in urgent need of reform. At the very least, pegging business rates to the Consumer Price Index (CPI) – currently 1.1% – would provide welcome relief to UK businesses and halve next year’s rates increases.”

Even a 2.3% rise will pale into insignificance for tens of thousands of businesses whose business rates bills will leap due to the ending of transitional relief in April 2015. This scheme, introduced with the 2010 rating revaluation, was designed to assist firms facing large increases in their rates liabilities, phasing in rises over the five-year revaluation period. However, the Government’s controversial decision to postpone the 2015 revaluation, while neglecting to continue the transitional relief programme, has left the most-impacted firms exposed to sudden jumps in their rates bills in April 2015.

Research from Gerald Eve reveals that tens of thousands of small business in England face inflation-busting hikes in their business rates bills when transitional relief is removed in April 2015.

Some 67,000 small properties – including 19,000 shops, 2,500 pubs and cafes and 4,700 workshops – will face rate bill rises well above inflation, with 6,500 hit with increases of at least a third and 600 businesses having to come to terms with hikes of 100% or more. At their most extreme, the increases will be crippling: Gerald Eve has identified a newsagent’s kiosk in Bristol that faces an eye-watering rise of 534%.

With small properties typically occupied by small and medium enterprises (SMEs) it is such businesses that will bear the brunt of the increases, although over 4,000 larger properties – including landmarks such as The Oval cricket ground, London Zoo and Castle Howard in Yorkshire – will also attract significant hikes.

Examples identified by Gerald Eve include a high school in West Yorkshire whose rates bill will surge by over £61,000 from £22,249 to £83,328 and a Liverpool hostel which faces a £49,000 rise from £9,719 to £58,032.

Jerry Schurder, head of rating at Gerald Eve, said: “The end of transitional relief and the two-year deferment of the 2015 revaluation have created a perfect storm that will see huge rises in business rates bills hitting the smallest firms hardest.”

“I call on George Osborne to use December’s Autumn Statement to address this urgent issue, with any rises in business rates limited to no more than inflation. Longer term, the rating system needs overhaul to avoid radical leaps in bills and reduce SME’s exposure to such significant costs.”