The Business Rates Retention Scheme and ‘Localisation’
Local Authorities currently collect the business rates wholly on behalf of Central Government and receives its considered proportion back in the Revenue Support Grant and Formula Grant to fund services.
From April 2013 Local Authorities will be retaining a proportion of their income. In London, Borough’s will keep a 30% share of the collected rates, the GLA get 20% and Central Government receive the remaining 50%. The government will be setting a Business Rates Baseline for all authorities; this takes into account all the revenue the government thinks the authority needs based on a number of variables.
Based on their calculations and Hounslow’s expected rates yield, the Council have been determined to be a top-up authority of the new scheme; this means they do not collect enough money just on the 30% retained to pay for their statutory services and we will be receiving an annual ‘top-up’ to our funding from Central Government.
Other authorities in the country have been determined as tariff authorities. In these cases they will be giving the Government more than the 50% share based on their baseline calculation of the amount which is surplus to their needs. The amount of top-up or tariff is set until 2020 when the scheme is expected to be reset. The values will be up-rated in line with the Retail Price Index.
Although Boroughs have a 30% share, they now also hold 30% of the risk associated to the collection of rates. Before if the collection rate fell or if the rates yield changed, the money was recovered from a central pool and in year and future year service provision would not be affected. Now however, if there is an in year loss, the authority have to bear this cost until the following financial year when some of the loss will be recovered back in proportionate shares from the GLA and Central Government; but they would not see there income brought up to the expected yield which was predicted. The loss would have to be taken into account and may have an impact on the services provided the following year.
On the other hand, if the area has seen growth, the authority would be able to retain a proportion of that growth to re-invest into services. It is therefore in a local authority’s interest to encourage development of commercial sites and business investment within their areas.
Local Authorities need to know now more than ever before any changes within their areas; the government has termed this ‘local knowledge’. Authorities should look at information going forward for the 18 months from October to the April of the start next financial year so they can as accurately as possible predict the rates yield for the coming financial year and not put services and resources at risk.
The government is allowing authorities to make a determination of local growth or loss on, and the volatility of their local rating list to allow for predicted changes to the rates yield each financial year. Examples of information which will have an effect on the list and therefore the yield are applications for demolition and proceeding development, change of use, development policy, local regeneration projects and policy changes, changes in occupiers, changes in ownership and financial information on businesses.
At Hounslow, all internal and external departments have been asked to share as much information as possible with their finance colleagues to help them make their predictions of changes within 2013-14. They will be building on this information throughout their year to help them for the estimates for 2014-15.
When performing the calculations for estimated income for the next financial year, details have to be provided to central government and the GLA with the estimated payments which will be made to them and their budgets will be set against this information. This will be issued to the GLA by mid-December each year and the Government will expect a final estimate by the end of the January before the start of the new financial year.
The Government released the Business Rate Multipliers for 2013/14 as below:
Standard: 47.1 pence (2012/13 – 45.8 pence)
Small Business: 46.2 pence (2012/13 – 45.0 pence)
The Secretary of State estimated that the supplement to fund SBRR should be at 0.9p for 2013/14.>
Small Business Rates Relief (SBRR):
The Small Business Rates Relief Temporary Increase has been extended for a further year to 31 March 2014. Businesses who are entitled to relief, with a rateable value (RV) up to £6,000 will receive a full relief from rates and those with a RV from £6,000 to £12,000 will have their rates reduced on a sliding scale from 100% to 0% relief.
All properties with a RV under £25,500 in London already have their rates bills calculated using the Small Business Multiplier, this was from the 1 April 2012 and there is no need to apply unless you believe you are entitled to the relief itself.
New Build Exemption:
The chancellor announced that there will potentially be an exemption for new build properties to come in from October 2013. It would mean an extension to the 3 or 6 month period, which is currently in place, of up to 18 months relief on properties which are completed but are still awaiting an occupier. This only applies to new properties and not pre-existing refurbished properties. This relief would be subject to State Aid limits.
Revaluation:
There was a revaluation due to start from 1 April 2013 to bring in new RV’s from the 1 April 2015; the Government has announced their intention to postpone this to the 1 April 2017. Therefore current RV’s, which were set from the 1 April 2008, will continue to be used as the basis of charge until then.
Contact the Council:
If you need any advice or you have any queries about the changes or your account, please do not hesitate to contact the London Borough of Hounslow rates department by emailing businessrates@hounslow.gov.uk.
If you have any queries which have not been resolved by the rates department themselves and would like to escalate this as an issue, please email curevenues@hounslow.gov.uk and they will assist you in progression of your query.