Business rates to rocket as RPI inflation hits 5.6%

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Business gurus, consultants and experts aren’t cutting the mustard
Business gurus, consultants and experts aren’t cutting the mustard

Businesses face the biggest annual jump in rates for over 20 years as the government is using September’s 5.6% increase retail price inflation to set next April’s rates rise.

Retailers called for the government to head off the £350m tax blow.

Ratings experts predicted the tax rise would collect an additional £1.35bn in business rates across all industry sectors next year.

Since 1990 successive governments have linked the Uniform Business Rate to the previous September’s inflation figure even though the legislation permits the adoption of a lesser figure.

Andrew Cave, chief spokesman for the Federation of Small Businesses, said: “Rates are the highest overhead for a small business. At a time when they are struggling it will be another kick in the teeth next year when most businesses hoped things would be improving and their overheads coming under control.”

If the government decides to set the rise as part of November’s local government finance settlement it will mean the Uniform Business Rate rockets from 43.3p to 45.7p per £1 of rateable value.

London’s firms will face rates nearing 50p in the £1 for the first time as a result of the additional 2p rate levied to help pay for Crossrail.

Jerry Schurder, head of rating at Gerald Eve said with the Bank of England expecting inflation will fall next year, the government should “assist businesses and the struggling high street by holding business rates for 2012/13 in the same way as it found funding to freeze Council Tax for a second successive year.”

He said 171,000 businesses already faced rising bills following the rating revaluation in 2010 and were likely to now see their rates shoot up by 26.7%.

“The government has moved to use a lower CPI measure of inflation to which it links certain payments it makes such as benefits, and consideration should be given to also adopting CPI for linking business rate payments,” Mr Schurder added.

A spokesman for the Department for Communities and Local Government said: “We need to balance support for business against the tough decisions needed to reduce the deficit.”