Ratepayers in England face a cumulative increase in rates bills of £1bn as a result of the 3.9% RPI rate of inflation in September announced today, according to Gerald Eve research.
The uniform business rates in April 2018 will increase in line with the September rate of RPI, which represents the biggest annual increase since January 2012. Research by Gerald Eve found that with total take from business rates for the year 2017-18 standing at £25.7bn, the increase of 3.9% equates to a rise of £1bn.
The huge increase is another blow to ratepayers, many of whom also face a surge in bills as a result of a revaluation in April this year. The rise is especially controversial owing to the use of RPI to calculate increases – a measure that records higher values than the wider-used CPI figure, which the government has committed to move to by 2020.
Jerry Schurder, head of business rates at Gerald Eve, said: “With the weakness of the pound causing inflation to surge, this is especially bad news for ratepayers, whose bills are based on RPI in September. Last month saw a recent peak in inflation, and this will filter through to £1bn more being taken in rates payments from April onwards.
“Just six months ago many firms had to adjust to enormous surges in rates bills as a result of the revaluation, and now they have to figure out how to deal with another increase of 3.9%. At a time when the economic clouds are darkening, this could be the straw that breaks the camel’s back for many firms.”
The impact of the latest increase could be most significant for those larger firms due decreases as a result of the revaluation. The impact of transitional relief arrangements means that tens of thousands of businesses whose property values have plummeted and should have received big rates cuts will see negligible falls in April – and may never receive the full reduction they are due.
Under transitional relief arrangements – which phase in increases for those facing large rises, at the cost to those due decreases, which are also phased – the maximum decrease for a larger property (with a rateable value above £100,000) in 2018-19 is 4.6%. But with inflation pushing bills up by 3.9% the actual fall is a negligible 1%, according to Gerald Eve.
Schurder added: “While those firms facing increases will struggle with this latest surge, it is the ratepayers due big reductions that will perhaps be the worst affected by the latest rise. These are the most struggling companies in the economically hardest-hit locations, for whom the prospect of significant falls in their rates bills offered some kind of salvation.
“Instead, the structure of the transitional relief scheme means that the decrease they will see is at best marginal and at worst so limited as to offer no real benefit. To have the carrot of lower bills held up, and then taken away, seems particularly cruel and will mean the writing is on the wall for many firms in some of the most struggling communities. The chancellor should use the Autumn Budget to provide a lifeline for these businesses.”
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