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Retailers urge business rates rethink

The retailers’ organisation is urging him to use alternatives to September’s RPI when calculating the next rise in commercial property taxes for England and Wales. Something he has the power to do.

The two blows threatening retailers are:

1. Annual Rates Increase
Business rates are the equivalent of council tax for companies. They are subject to an annual inflationary increase, implemented in April and based on the previous September’s RPI measure of inflation, which this year is expected to be above four per cent.

2. Rates Held Over
The other part of the business rates calculation is determined by rateable values, based on how much it would cost to rent commercial properties. These are re-calculated every five years. The last change was introduced in April 2010. This resulted in a substantial rise in many retailers’ bills. To help these businesses, a transitional scheme was introduced to phase in the extra costs.

The combination of having to pay significant costs held over from 2010/11 and a high annual increase caused by this September’s RPI rate, would see the business rates bills for some retailers rising sharply by almost 22 per cent next April.

Stephen Robertson, British Retail Consortium Director General, said: "One large retailer estimates every extra RPI percentage point could add £1.3 million to their business rates costs. September’s RPI is expected to be above four per cent but few retailers have budgeted for increases as large as four to five per cent.

"We’re urging the Government to use alternatives to September’s RPI to calculate next April’s bills. The coalition has already changed the way pensions are calculated. It’s now using CPI rather than RPI – this change could also apply to business rates. Another option is to use the 12-month average RPI rate from October 2009 to September 2010 – which would help to iron out inflation volatility.

"We’re only weeks away from hearing the details of public sector cuts. Our own figures show 22,000 more people are employed in retail than 12 months ago. The private sector has driven the economic recovery so far, we need that trend to continue. This double business rates blow will undermine retailers’ ability to create and maintain jobs and to contribute to the success of town centre regeneration projects across the country.

"For the longer-term, retailers need more predictability and a permanent move to a more stable way of calculating business rates."

The BRC is also calling for Government action to hold back business rates pressure coming from two other areas.

On Business Rate Supplements (BRS)
Stephen Robertson, British Retail Consortium Director General, said: "We’ve consistently called for safeguards to ensure Business Rate Supplements are only used for projects which have the support of local businesses.

"We welcome the Government’s backing for mandatory business votes before local authorities outside London can introduce a BRS but the coalition must swiftly introduce legislation to ensure the effectiveness of this commitment."

On Empty Property Rate Relief
Stephen Robertson, British Retail Consortium Director General, said: "We’ve campaigned vigorously for the re-introduction of Empty Property Rate Relief (EPRR), since it was removed in April 2008.

"The temporary increases in EPRR, allowing more empty properties to qualify for an exemption to business rates until 2011, were a welcome step in the right direction. But, given the threat of a double-dip recession, the Government must seriously think about allowing more businesses to benefit from the relief and extend the timeframe to 2012."

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