Changes to business rates announced in the Spring 2017 Budget
The rateable values of all non-domestic properties are reassessed by the Valuation Office Agency (VOA) normally every five years. The 2017 Revaluation came into effect from 1 April 2017 and is based on rental values on 1 April 2015.
In the March 2017 spring budget the Chancellor announced the following three measures to help reduce the impact of business rate increases from April 2017:
Scheme 1: Supporting Small Businesses
Scheme 2: New Discretionary Relief Scheme
Scheme 3: New Business Rate Relief Scheme for Pubs
Information on the three schemes to date is as follows:
Scheme 1: Supporting Small Businesses
This measure only applied to a handful of accounts in the Borough and the Council identified eligible ratepayers for the Scheme and had recalculated and reissued new bills to them by mid-2017. Subsequent eligibility and adjustments to awards is automatically calculated - no application is required.
Supporting small business rate relief was been introduced for businesses that face very large percentage increases in their rate bills due to the loss of some or all of their small business rates relief as a result of an increase in rateable value in the 2017 revaluation. The Government introduced SSB from 1 April 2017 to help phase-in large percentage increases for those affected.
This scheme limits any increase in business rates to £600 per year and will apply for a maximum of five years. Relief will automatically be applied each year that the business is eligible to receive it; this could be every year for the five years or could end sooner if the bill amount without the relief is reached.
The Supporting Small Businesses relief will ensure that the increase per year in the bills of affected ratepayers is limited to the greater of: a percentage increase per year of 5%, 7.5%, 10%, 15% and 15% 2017/18 to 2021/22 all plus inflation. For the first year of the scheme the percentage increase is taken against the bill for 31 March 2017 after small business rate relief or rural rate relief, or a cash value of £600 per year (£50 per month). The Government’s intention is that the cash minimum increase ensures that those ratepayers paying nothing or very small amounts in 2016/17 after small business rate relief are brought into paying something
In the first year of the scheme, this means all ratepayers losing some or all of their small business rate relief or rural rate relief will see the increase in their bill capped at £600. The cash minimum increase is £600 per year thereafter. This means that ratepayers who are currently paying nothing under small business rate relief and are losing all of their entitlement to relief (Example - moving from £6,000 rateable value or less to more than £15,000) would under this scheme be paying £3,000 in year 5.
Ratepayers remain in the Supporting Small Businesses relief scheme for either 5 years or until they reach the bill they would have paid without the scheme.
Those on the Supporting Small Businesses relief scheme whose 2017 rateable values are £51,000 or more will not be liable to pay the supplement 1.3p to fund small business rate relief while they are eligible for the Supporting Small Businesses relief scheme.
As with all reliefs, the amount of relief awarded under the Supporting Small Businesses relief scheme will be recalculated in the event of a change of circumstances such as a change to the rateable value.
A change of ratepayers will not affect eligibility for the Supporting Small Business relief scheme but eligibility will be lost if the property falls vacant or becomes occupied by a charity or community amateur club.
State Aid law is the means by which the European Union regulates state funded support to businesses. Providing discretionary relief to ratepayers is likely to amount to State Aid. However the Supporting Small Businesses relief scheme will be State Aid compliant where it is provided in accordance with the De Minimis Regulations (1407/2013)7.
Recipients of SSB are required to inform the council if they are in receipt of any sum above the De Minimis aid limit. (Please refer to the section on 'State Aid' at the foot of this page for an explanation in full).
Scheme 2: New Discretionary Relief Scheme
The new discretionary relief scheme allows the Council to provide some support to ratepayers facing increases in their bills.
**Please note that the 2017-18 application and award process ended 31 December 2017**
A copy of the Hertsmere Revaluation Support Policy can be downloaded here.
In summary, the qualifying criteria is as follows:
Revaluation Support will be recommended if:
- The aggregate of all Rateable Value as at 1 April 2017 for all business owned locally or nationally by the ratepayer claiming Revaluation Support, is below £200,000.
- The ratepayer has experienced a financial increase, as a direct result of revaluation in the amount they have to pay for 2017-18, compared to their 2016-17 Hertsmere bill (after any other reliefs have been applied) in excess of 12.5%
- The relevant property was occupied on 1 April 2017 and has continued in occupation by the same ratepayer thereafter. For those applicants who occupied during 2016-17 their part liability will be annualised before comparison with their 2017-18 liability to ensure they comply with the 12.5% increase requirement.
- The ratepayer is not already in receipt of Discretionary Rate Relief or of ‘Support for Small Businesses Relief’ (also announced in the spring budget) which limits increases on small properties caused by the loss of Small Business Rates Relief to £600.
- The award of relief complies with EU law on State Aid: Discretionary Relief qualifies as State Aid. so ratepayers will be asked to declare that their company or business has not received more than €200,000 in de minimis state aid in the last three years, and that granting relief under this scheme for this or any other property, whether within Hertsmere or not, will not cause this limit to be exceeded. (Please refer to the section on 'State Aid' at the foot of this page for a full explanation).
An application form process for 2017-18 ran from October until December, following approval of the Hertsmere Scheme by Full Council on 27 September. Hertsmere Revenues wrote to ratepayers believed to be eligible, encouraging them to apply. Application forms were also made available for those ratepayers not automatically contacted, and who believed themselves to be eligible, to apply directly.
The application form process closed on 31 December 2017. At that point the value of the award to be made to each successful claimant was calculated, since the total value of relevant business rate liability for those ratepayers, and the value of the Government’s grant allocation to Hertsmere for the financial year in question were both known.
The total value of all awards of relief is limited to the maximum financial allocation to Hertsmere Borough Council during any grant period. No applications can be accepted beyond the closing date.
Where awarded, Revaluation Support is granted only to the end of the financial year. All successful 2017-18 applications will be reviewed to ensure there has been no change in circumstances and to assess that applicants are still eligible for relief to continue into subsequent financial years of the Scheme.
In all cases relief will end in the following circumstances (NB where eligibility ends during the financial year the relief will be pro rata to the last day of entitlement):
- The end of the statutory period for which relief may be allowed;
- The end of the financial year;
- The property becoming unoccupied;
- The ratepayer ceasing to be the person or organisation liable to pay non-domestic rates in respect of the property;
- The commencement of a further award in respect of the property;
- The council is unable to verify, following reasonable notice, that the area remains occupied;
- A change in rateable value excludes the ratepayer from entitlement.
Please note that the total Gross Rates Payable for ratepayers within Hertsmere for 2017-18 was in excess of £53 million. The assistance the council was able to offer under the scheme was limited to the funding provided, which was £221,000 for 2017-18.
In subsequent years this government funding reduces significantly: the grant allocation is £107,000 for 2018-19, £44,000 in 2019-20 and £6,000 in 2020-21.
For Year 2 of the Scheme awards will be made automatically to those ratepayers still eligible from Year 1. The award will be a percentage of the increase in their 2018/19 net rates liability (after all reliefs) compared to 2017/18.
Scheme 3: New Business Rate Relief Scheme for Pubs
At the Spring Budget 2017, the Chancellor announced a £1,000 business rate discount for public houses with a rateable value of less than £100,000 for one year from 1 April 2017.
In the November Budget it was announced that the Pub Discount Scheme will be extended for a further year to 31 March 2019.
The scheme is available to eligible occupied properties with a rateable value of less than £100,000. The majority of pubs are independently owned or managed and will not be part of chains. Where pubs are part of a chain, relief will only be available for each eligible property in the chain subject to meeting State Aid requirements (see the State Aid section at the foot of this guidance).
There is no definitive description of a traditional pub or public house in law which can be readily used by central government to advise local authorities in order to determine eligibility. The Government's objective has been to adopt an approach that makes the design and eligibility of the scheme easy to implement for local authorities in a clear and consistent way.
To this end, Hertsmere decided to utilise the property classification for 'Public House' (Analysis Code CL) and other similar categories used by the central government Valuation Office Agency - which determines property use and Rateable Value for business rate purposes nationally and locally - as the basis for identification of eligible properties within the Borough.
The 'Pub Relief Scheme - Hertsmere Borough Council Guidance' document - which was approved by Full Council at the meeting held 27th September 2017 - can be downloaded here. (NB the guidance remains unchanged for 2018-19).
The Government’s policy intention is that eligible pubs should:
- be open to the general public
- allow free entry other than when occasional entertainment is provided
- allow drinking without requiring food to be consumed
- permit drinks to be purchased at a bar.
For these purposes, it should exclude:
- snack bars
- boarding houses
- sporting venues
- music venues
- festival sites
- exhibition halls
- concert halls
The exclusions in the list above are not intended to be exhaustive and it is for Hertsmere as the local authority to determine those cases where eligibility is unclear.
How much relief will be available?
The total amount of Government-funded relief available under this scheme is up to £1,000 for each eligible property. Relief is only available for properties with a rateable value of less than £100,000. Eligibility for the relief and the relief itself will be assessed and calculated on a daily basis.
If a property is eligible (or becomes eligible) for relief under other schemes – for example, Small Business Rates Relief, Charitable Relief, the Supporting Small Business Scheme, or the Discretionary Relief Scheme (Revaluation Support) that was also announced within the Spring Budget – relief will be awarded first under those schemes in the normal way. Only having initially awarded these reliefs would any Pub Relief be awarded.
How will the relief be awarded?
Properties identified as eligible for the Support for Pubs Relief will automatically be awarded the discount and ratepayers will receive a new business rates bill once this has been applied to their account.
Ratepayers who do not receive recalculated bills, and who believe they are eligible to receive the Pub Relief discount can download a Pub Relief Scheme Application Form here.
National or multi-national pub companies, chains or organisations will be requested to declare that their company or business has not received more than €200,000 in de minimis state aid in the last three years, and that granting relief under this scheme for this or any other property, whether within Hertsmere or not, will not cause this limit to be exceeded.
State Aid law is the means by which the European Union regulates state funded support to businesses. Providing discretionary relief to ratepayers is likely to amount to State Aid. However the support for ratepayers will be State Aid compliant where it is provided in accordance with the de minimis regulations (EC 1407/2013)14.
The de minimis regulations allow an undertaking to receive up to €200,000 of ‘de minimis’ aid over a rolling three year period (consisting of the current financial year and the two previous financial years).
It is necessary for the local authority to establish that the awarding of aid will not result in the undertaking having received more than €200,000 of de minimis aid over a rolling three year period. Pubs are within the scope of State Aid law as companies within the hospitality sector can and do set up business in other Member States as they trade on a market. Linked enterprises are considered as one single undertaking for the application of the de minimis rule, therefore can receive €200,000 de minimis aid (including that outside of business rates relief) over three years.
If we believe you are eligible for the business rate discount for public houses, we will send you a new business rates bill once this has been applied to your account. You should continue to pay your business rates bill in the meantime.