Published in DIY Week’s ‘Property Matters’ column
Are you budgeting for a change to your business rates liability from the 1st April 2012? If not, then you should be.
For the majority of ratepayers, their assessments are likely to increase in line with the Retail Price Index (RPI) as at September 2011 at 5.6%. However, for some, the increase could be as high as 25.6% where the liability is impacted by transitional relief (the so-called ‘cushioning’ to take into account variances in rateable values between the 2005 and 2010 Rating Lists). In what appears to be desperately unfortunate timing, this is set to be the highest increase since 1991/1992.
A general increase of 5.6% will, to many, seem grossly unfair. The application of annual increases based on September’s RPI has been the position since 1990. Some have called for the increases to be based on the annual averaged RPI, and not a single snapshot. Had this been applied then the increase would still be 4.6%. Alternatively a link with the Consumer Price Index would result in the increase being 5.2%. At a time when turnover for many businesses is static or reducing, margins are under increasing pressure and energy and other costs increasing disproportionately, for some this may well be the final nail in the coffin.
Under existing legislation, the increase of 5.6% is the maximum that could be applied. There is, however, a long established trend of the Treasury adopting the actual rate of RPI, rather than a lower figure as permitted. If the Government chose to freeze the uniform business rate, then the shortfall to the Treasury would be approximately £1.4 billion. These funds would then need to sourced from other revenue sources, such as VAT or through other tax rises. In my view this makes a freeze, or even a reduced percentage, being adopted unlikely.
So, can anything be done to mitigate the impact of your business rate liability? You may already have taken advice from a suitably qualified chartered surveyor and successfully appealed your rateable value.
Chancellor George Osborne recently confirmed that the Business Rates Deferment Scheme was to be repeated this year. This scheme allows the ratepayer to defer 60% of the increase to rates payable due from April 2012, the amount deferred has to then be repaid over the following two years. This scheme can hardly be described as generous, and in practice is likely to recruit few takers. The previous such scheme in 2009/2010 was a disaster. Billing Authorities failed to cope and ratepayers received erroneous demands for non-payment.
The issue is more fundamental than the annual increase based on RPI. The overall sums raised through business rates are disproportionate. Unfortunately, there is no real prospect of this being addressed in the near future as the Treasury is reliant on the levels of revenue raised, and for them business rates is too convenient a source, relatively easy to collect, and extremely difficult to avoid.