High-street retailers are set to be hit with a 17.2 per cent jump in business rates bills as the amount paid by stores and chains breaks through the £8bn-a-year barrier for the first time, according to industry experts.
The Retail Price Index (RPI) rise for September is used by the Government to calculate the annual level of business rates, which are charged on all commercial premises in a similar way to council tax. The index rose 0.8 per cent year-on-year last month, despite the official measure of inflation, the Consumer Price Index (CPI), showing that the UK entered deflation. Rates bills will rise by the same amount, despite calls for several years by retailers and businesses for a rates freeze.
Although the rise is small compared with previous years, a £1,500 retail relief scheme will end in March, so the true rise in bills is 17.2 per cent.
Jerry Schurder, head of business rates at Gerald Eve, called on the Government to clarify whether it plans to extend the relief to reassure struggling high-street retailers.
He said: “The Government’s piecemeal, sticking-plaster approach to business rates is clearly flawed and makes the system more complicated than it need be. Rather than being able to accurately predict their bills for next year, retailers are left on tenterhooks waiting to see if some crumbs will be thrown down from the Chancellor’s table in his Autumn Statement.”
The British Retail Consortium (BRC) has led the charge for an overhaul on business rates, which are calculated based on the rental value of each premises. Ministers had promised to hold a review into changing the system, with the Chancellor, George Osborne, revealing that local authorities will be able to keep 100 per cent of business rates collected. However, there has been no update on when the system itself will be overhauled, with ministers unlikely to tinker heavily with the £25bn-a-year tax, despite warnings that it could cost jobs in the retail sector.
A spokesman for the BRC estimated that the rise meant retailers will be handing over £8bn in business rates, to the benefit of online-only retailers who use complex, but legal, tax avoidance tactics. He said: “Against a backdrop of a 1.9 per cent fall in overall shop prices in September, marking the 29th consecutive month of falling prices, retailers were hit with a rise to business rates as the tax is based on September’s RPI figure rather than CPI.”
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