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There needs to be a better way to calculate business rates

There needs to be a better way to calculate business rates

Contractor accountants could be interested to learn that the British Retail Consortium has written to the Government asking them to reconsider the method used for calculating business rates.

Business rates are currently based on the RPI and the commercial rateable value of the property. However, the BRC says that using this method could mean some businesses will be faced with a rise of up to 22% in rates payments next year.

Stephen Robertson, the director-general of the BRC, has written to the communities and local government secretary of state asking him to use an alternative method of calculation for the bills due to be set next April.

He pointed out that since the government now intends to use the CPI to calculate pensions this method could also be applied to the calculation of business rates.

The difference between the CPI and RPI can be considerable. Currently the consumer price index shows annual inflation of 3.1% while the retail price index shows 4.7%. Using the CPI for benefit calculations is expected to save the government £5.8bn a year by 2014-15.

22,000 more people are now employed in the retail sector compared to 12 months ago. However, the industry will be unable to absorb more unemployed public sector workers if huge rate increases are inflicted on them.

The chief executive of the Association of Convenience Stores, James Lowman, pointed out that business rates already place a significant burden on retailers. He believes that there is a strong case to freeze business rates rather than increase them.

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Image: calculating acorns by IntangibleArts

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