Research shows that more than 56,000 small business in the UK may have to be content with high tax rises next year.
Rates specialist CVS has announced that business rate rises will reach £152 million in April 2018. This will inevitably place even more of a burden on businesses that are dealing with ever-rising inflation.
Inflation highest for five years
This prediction for business rates follows significant falls in retail sales (0.8%) in September this year. In addition, inflation has hit the highest level since 2012.
The CEO of the British Rail Consortium, Helen Dickinson, says: “For many shops, this may be the last straw. Across the country, especially in economically deprived and vulnerable communities, the cost of failing to take action will likely be seen in yet more empty shops and gap-toothed High Streets.”
Business rates rise
The research shows that 37,364 small retailers will have to deal with business rates that rise above inflation. Many small shops (30,198) will face rate rises of between 10% and 14.99%.
A property tax based on the rental value, business rates increase every year, in line with inflation as measured by the Retail Prices Index (RPI). The Office of National Statistics (ONS) says that the RPI rate of inflation has reached 3.9%.
Increases in food and transport prices has meant that the UK’s key inflation rate also climbed to 3% in September 2017. This means that there is a likelihood of increases in interest rates (at the moment they’re at 0.25%) in November. This represents the first rise in ten years.
Brexit driving inflation
CVS CEO Mark Rigby points to Brexit as the main driver for inflation and urges the Chancellor to freeze inflation rate rises in the November Budget. He says: “Import prices have risen given the fall in the pound with prices rising faster than wages, causing households to tighten their belts on spending, especially on big ticket items.
The government alters the rateable value of business properties in order to stay in line with the wider property market. This process is known as ‘revaluation’. The latest one was in effect from 1 April 2017 and effectively means that increases in bills will be phased in over five years.
Government support
In March 2017, the government said that they would put £435 million to help the businesses facing the highest increases after the revaluation. This package included capping the increase for 16,000 small businesses at £50 per month for this year.
However, it’s hoped that the Chancellor will rule out any rise in business rates of small shops and businesses are to survive.
