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High RPI signals business rate headache for businesses

With September’s Retail Prices Index (RPI) figure recently announced at 3.9%, this will have far-reaching implications for owners and occupiers paying business rates.

The RPI is important to business rates as it affects the Multiplier, on which rates payments are calculated each year. This figure is compounded annually by the increase or decrease, in line with inflation. This will be the penultimate year we see the RPI figure used for this purpose – as from 1 April 2020 the Government is moving to the Consumer Price Index (CPI) figure as the yardstick for future changes to the multiplier.

But concentrating on now, applying the 3.9% RPI figure to the current UBR multipliers, produces the following figures:

Type  2017/18 UBR  2018/19 UBR
Small Property England 46.6 48.4
Large Property England 47.9 49.7
Small Property Scotland 46.6 48.4
Large Property  Scotland 49.2 51.0
Wales 49.9 51.8

 

The 3.9% increase is a ‘maximum’ that can be applied for the next financial year and the above estimates still need to be confirmed in the Autumn Statement next month. In previous years the Chancellor has opted not to pursue the maximum increase and so business’ will be anxiously waiting to see how it plays out this time around. If the maximum limits are applied, then the nation, as a whole, will be paying over £4 million in extra Business Rates come next April.

A number of occupiers in England, whose property has a Rateable Value (RV) higher than £100,000, could also be hit with a further added burden of up to a 32% increase in their payments, due to the Transitional Relief Scheme. As an example, to illustrate the large hike, the below property would be facing an increase of almost £21,000 in the coming financial rate-year.

2010 RV: £80,000

2017 RV: £220,000

Rates Payable 2016/17: £58,942

Rates Payable 2017/18: £79,775

Conversely, a property that would be hoping to see a correspondingly large decrease in its Rates Payable due to the large fall in its RV will be sorely disappointed, as demonstrated below:

2010 RV: £150,000

2017 RV: £70,000

Rates Payable 2016/17: £67,557

Rates Payable 2017/18: £59,769

As ever, this only highlights once again the complicated nature of the Business Rates system; which we advise all owners and occupiers to seek professional advice in order to avoid falling foul of the pitfalls and enjoy the best chance of success in appealing your RV.

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