We might be in deflation again but business rates aren’t

The Office of National Statistics revealed yesterday that the UK entered deflation in September, but at the same time there was a rise in the Retail Price Index (RPI), the statistic used to calculate any increase in business rates.

RPI increased 0.8% in the year to September as the Consumer Price Index, which is the official measure of inflation, fell 0.1% across the same period. Unfortunately, business rates still look set to rise because the Treasury bases any changes to the tax based on September’s RPI figure rather than CPI.

The September RPI figure was announced as 259.6 which should result in a Small Business Non Domestic Rating Multiplier for 2016/17 of 0.484. If the supplement for Small Business Rate Relief (SBRR) remains unchanged at 0.013 then the full multiplier for England in 2016/17 will be 0.497.

The provisional multipliers will be announced in December and confirmed in February 2016. The Scottish multipliers will probably be the same as England with Wales set at 0.486.

The British Retail Consortium is estimating the rise in RPI will mean the business rates burden placed on retailers will increase £70m to pass £8bn for the first time. BRC Director General Helen Dickinson told Retail Week that the overall burden of business rates was just too high – whether it is based on RPI or CPI.

Chancellor George Osborne may have enjoyed his moment in the sun last week when he announced business rates being devolved back to regional level but he has still left a lot of uncertainty in the market by maintaining his stance that any reform to the business rates system would have to be “fiscally neutral”. This has left most business people scratching their heads as it is unclear whether this means the ongoing structural review of the business rates system will mean any reductions for hardest hit sectors, such as retail. Despite last week’s announcement and the new Multipliers coming out we are still none the wiser what the future structure of Business Rates will look like for this country.

Osborne may want to keep the initiative and reveal more details in his Autumn Statement next month but the bulk of the reforms are not due to be announced until next Spring.

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