Impact of RPI rise on Business Rates Multiplier
Richard Knox of CVS comments on the 5.6% increase in the Business Rates Multiplier.
There has been much speculation in the press on whether the government would refrain from imposing the full RPI increase of 5.6% on the Business Rates Multiplier this year, but following the announcement of the Provisional Multiplier before Christmas, anyone who was holding out any last hope will be shocked to hear that the full multiplier from April this year is actually being increased by slightly more than the inflation rate.
The full multiplier is made up of two components; the ‘Small Business Multiplier’ and a supplement which is used to fund Small Business Rate Relief. The full provisional multiplier for next year is 45.8p which is made up of the Small Business Multiplier of 45.0p (increased from 42.6p by RPI inflation rate of 5.6%) and a supplement which is paid by all ratepayers who don’t qualify for small business rate relief which is to be increased from 0.7p to 0.8p. The overall increase from 43.3 to 45.8 is therefore almost 5.8%.
The provisional multipliers will be confirmed before 1st March 2012 but it is very unlikely that the actual figures will differ from the provisional.
Although the biggest increase in over 20 years is set to take effect on 1st April, the Chancellors Autumn Statement gave some comfort to hard pressed businesses. The Business Rates Deferral scheme will give all ratepayers the option to defer payment of 60% of the increase until the following years, and the extension of the more generous Small Business Rate Relief scheme for another six months, giving Small Businesses occupying a property with a Rateable Value below £6,000 a ‘Business Rates Holiday’, will of course will be welcomed by those who qualify.
Changes to Small (or not so small) Business Rate Relief
Other changes due to take effect from 1st April are the result of the Localism Bill, which received Royal Assent on 15 November 2011 and is therefore now the Localism Act. One of the new measures is to change the way in which Small Business Rate Relief is funded. The Localism Act removes the obligation to apply for Small Business Rate Relief, and also removes the single occupancy rule to be eligible to have your rates calculated on the Small Multiplier. This effectively means that the Supplement which is used to fund the Small Business Rate Relief scheme will only be paid on properties with an RV of £18,000 or over (£25,500 in Greater London). Those of us who remember the 1995 Rating List will find this very reminiscent of the ‘Small Hereditament Factor’ which affected rate liabilities between 1997 and 2000.
The change to the scheme will of course lessen the impact of the increased supplement of 0.8p as more properties will be exempt from the supplement, and it will benefit small businesses that have previously missed out on Small Business Rate Relief because, even though they see themselves as ‘small’, the current occupancy rule classed them as ‘big’.
However, the real winners will be large organisations that have a number of properties that are below the ‘small’ RV threshold. For example, many Banks, Building Societies, Insurance Companies, Chains of Coffee Shops, and many other large organisations, have properties with an RV under £18,000. They will now be exempt from the supplement and have their rate bills calculated on the ‘small business’ multiplier. Hopefully these measures will encourage some of the bigger businesses to maintain a presence on our local high streets.
Local Discounts and The Mary Portas High Street Review
Another measure introduced by the Localism Act, will allow councils to “reduce the business rates of any local ratepayer”. The full details of how this will work are not yet available, but it would appear that councils could use these new powers to reduce the rates payable in a particular area to encourage businesses into the area, to promote development and regeneration, and to give much needed help to businesses struggling in these difficult times. It could also be targeted, as recommended by Mary Portas in her High Street Review, to give business rate concessions to new local businesses.
Helpful? Perhaps, Complicated? Definitely
The introduction of Business Rates Deferral, the changes giving ‘Small’ Business Rate benefits to larger businesses, and the possibility of Local Discounts for certain ratepayers, along with existing schemes such as Transitional Relief and Transitional Premium, mean that rate bills will become even more complicated. Rate Accounts are often confusing, and many ratepayers are not always certain that they are receiving the correct reliefs and paying the correct amounts. The changes will also mean a great deal of extra work for the already hard pressed staff in local rates offices, many of whom have seen job cuts and loss of expertise as a result of cost cutting.
Rate Liability Management
Business Rates are one of the biggest, and now one of the most complicated, expenses a business can have. It is important that businesses are confident that they are paying the correct amounts on all of their properties. Because of this, many businesses with a number of properties will instruct a Business Rates Specialist to handle the Rate Liability Management on their property portfolio. Rate Liability Management removes the administrative burden of processing a large number of rate accounts; it gives peace of mind that the amounts payable have been verified by an experienced Rate Liability Manager; and it ensures prompt payment thereby avoiding the possibility of reminders, summonses, and associated costs.
Mark Rigby, Chief Executive of business rates specialists, CVS, commented: “Since the commencement of National Non Domestic Rates in 1990, successive governments have introduced various schemes to modify the amount payable. The simple calculation of RV x Multiplier, which continues to be the basis of rate liability, is in reality just part of the story as most bills are affected by reliefs, surcharges, supplements, and sometimes even exemptions. The new measures mean that 2012 is likely to bring the most complicated rate accounts to date. CVS would urge businesses to seek professional advice to ensure they pay no more than their legal obligation.”
By
Richard Knox, surveyor at CVS
