The Retail Prices Index (RPI) figures affect business rates liabilities because the Uniform Business Rate (UBR) multipliers are increased annually in line with RPI inflation. It is the September RPI figure that is used to make this adjustment, so business ratepayers look at RPI figures with increasing interest as September approaches. The July 2014 RPI figure has just been announced and shows and increase of 2.5%,down from 2.6% in June.
The UBR multiplier for 2014/15 is 47.1 pence for small properties and 48.2 pence for large properties in England and in Scotland and 47.3 pence for all properties in Wales. If the September 2014 RPI figure were to be 2.5%, then these figures might be expected to increase to 48.3 pence for small properties and 49.4 pence for large properties in England and in Scotland and 48.5 pence in Wales for the 2015/16 rate year which commences on 1 April 2015.
There has been much criticism recently of the annual RPI increase in the UBR multipliers. The September 2013 RPI increase was 3.2% but the Chancellor took the decision to cap the UBR increase for 2014/15 at 2% and the devolved governments in Scotland and Wales followed suit.
Under the legislation the RPI increase is, in fact, the maximum increase allowed in the UBR multiplier. It is no surprise, however, to find that in every year since 1990 (when the current system was introduced) up until 2014/15 the Government has increased the tax rate by the maximum amount allowed under the law – that is to say the RPI increase.
Will the Government feel that economic conditions have improved sufficiently to allow it to push ahead with a full RPI increase when the September figures are announced? Or will they cap any increase for a second year in succession? There is an election coming in May 2015 but, despite this, we are not confident of a cap on UBR increases for a second year running.