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The September 2020 Consumer Prices’ Index (CPI) figure has been announced and shows a 0.5% increase over the previous year. This sets the upper limit by which next year’s Uniform Business Rate (UBR) multiplier is expected to increase in England and Wales.
The UBR multiplier for 2020/21 is 49.9 pence for small properties (those with a Rateable Value under £51,000) and 51.2 pence for large properties in England. In Scotland the multiplier is 49.0 pence for small properties, but it is 51.6 pence for large properties. In Wales the multiplier is 53.5 pence for all properties.
The September 2020 CPI figure sets the increase that the Ministers have made to the UBR in most recent years, at 0.5%. If Ministers in England, Wales and Scotland were to apply this uplift, then the current figures can be expected to increase in England to 50.2 pence for small properties and 51.5 pence for large properties; in Scotland to 49.2 pence for small properties, and to 51.8 pence for large properties; and in Wales to 53.8 pence, for the 2021/22 rate year, which commences on 1 April 2021.
The UBR figures are not normally finalised until the local government finance settlement, which is expected early in the New Year, but, in the light of the effects of the COVID-19 pandemic and the widespread criticism of the business rates system, these estimates could well change. The estimates assume that there will be no change to the Small Business Rate Relief (SBRR) Supplement in of 1.3 pence England and 2.6 pence in Scotland, which is not capped by any CPI uplift. It is worth noting that whilst the Barclay Review report commented on the high level of the SBRR supplement in Scotland, and recommended to Scottish Government that this should be reduced to the same level as in England, Scottish Government has said that this will only be done “when it is affordable to do so”.
The English Government’s call for evidence for its “Fundamental Review of Business Rates” closed at the end of October 2020 and the one-year “rates holiday” for retail, hospitality and leisure properties applied as part of the response to the COVID-19 pandemic, runs until 31 March 2021. The effects of the pandemic, combined with the longstanding criticism of the business rates system, must put considerable pressure on Ministers to extend the rates holiday, to refrain from any increase in the UBR, or to do both.
The September inflation figure also affects liability calculations for those properties where business rates liability is subject to transitional adjustments following the 2017 rating revaluation. The maximum transitional increases in England for 2021/22, of 15% for “small” properties, 25% for “medium” properties, and 6% for large properties, will be uplifted by a 0.5% inflation increase, adding further pressure to bills for those facing uplifts. Those ratepayers expecting reductions in liability following the revaluation in 2017 will also be affected by the inflation figures as the maximum level of reduction will, in part at least, be offset by an inflation increase. So, for ratepayers of large properties subject to transitional adjustments, the maximum decrease in rate liability, which would otherwise be a meagre 4.8%, will be reduced to a reduction of only 4.2% because of the inflation adjustment.
But, overshadowing all of this, are the effects of the COVID pandemic. The latest restrictions mean that many business properties have to close for at least a further month, at a time of year that many businesses, particularly in the retail and hospitality sectors, rely upon for their financial success. All business ratepayers must hope that the Government now sees that a burden, described as “excessive” even before the effects of the pandemic, needs fundamental review and reform. Perhaps this will be the moment when Government choses to deliver that reform. If it does not, it risks pushing many businesses over the edge.
