March 2013

Business Rates and Local Government Finance

On 1st

April 2013 the financing of local government will change dramatically and it is anticipated this

will have implications for business rates assessment and collection. Billing authorities will no longer

be just collection agencies for the Government but will retain 50% (varies slightly depending on

whether unitary or county etc) of the income that they collect, known as the Business Rates

Retention Scheme. They are responsible for preparing budgets and essentially the “books will be

balanced” at the end of the year. The Government anticipates that councils will collect £21.8bn in

2013-2014 known as the Estimated Business Rates Aggregate.

No longer will Councils be getting immediate refunds for Section 45 and Section 44A reliefs from

central government. The councils that we have spoken to will be publishing new guidance on vacant

rates as at 1st

April 2013 and it seems there will be much greater scrutiny as 44A and Section 45

reliefs will come out of their annual budgets. So it is essential to ensure that there are no

outstanding premises for which applications can be made in this current financial year as it is

understood there may be restrictions on the dates of application. (At present supposed to be made

in current financial year, ie not retrospectively, but we are all aware that on occasions applications

have not been made until much later but it seems this practice will no longer be acceptable).

There is, in addition to the above, a new provision; Section 69 which amends section 47 of the Local

Government Finance Act 1988 to replace the limited circumstances in which local authorities can

currently give discretionary relief with a power to give relief in any circumstances. This is subject to

the condition that except in the limited circumstances specified the local authority may only grant

relief if it would be reasonable to do so having regard to the interests of council tax payers in its

area”. There are also a few qualifying issues around the granting of relief under Section 47 of the

LGFA and changes in time limits.

All in all the Councils will have closer involvement in identifying hereditaments and will be keen to

identify new or under assessed properties as they get to keep more of the money.

Multipliers now confirmed for the year of 2013 to 2014 as follows non-domestic rating multiplier

47.1p (0.471) - small business non-domestic rating multiplier 46.2p (0.462).

New Buildings Vacant Rate Relief The Government is introducing a new temporary measure for

unoccupied new builds from October 2013. Unoccupied new builds will be exempt from unoccupied

property rates for up to 18 months (up to state aid limits) where the property comes on to the list

between 1 October 2013 and 30 September 2016. The 18 month period includes the initial 3 or 6

month exemption and so properties may, if unoccupied, be exempt from non domestic rates for up

to an extra 15 or 12 months.

Small Business Rates Relief – to be continued at current levels until 31/3/2014

Lower multiplier to be used for all properties under £18,000 RV

100% exemption for premises less than £6,000 RV (subject to use of one property and/or any other

properties less than £2,600 RV).

Sliding scale of relief from 50% to 100% between £6,000 and £12,000

NB At present many billing authorities do not check this and the small business relief is automatically

granted. Due to greater scrutiny it may be that premises which fall into this category are identified

as being occupied by parties who may not fulfil the above criteria, so there is a need to check your

property portfolio and accrue accordingly if this may apply to you.

Transitional Relief - this ensures there are no sharp increases or decreases in liability following a

revaluation as in April 2010, so transition caps increases or decreases in liability relative to the bills

issued for 2009-2010. Most properties are now out of transition. See increase for large properties

for this year to 25% and downwards to 13%. This will no longer be an issue for most properties and

will not arise again until the next revaluation presently projected to be in 2017.

Rate Increase Limits Rate Decrease Limits

Year Small

Property

Large

Property

Year Small

Property

Large

Property

2010-2011 5% 12.5% 2010-2011 20% 4.6%

2011-2012 7.5% 17.5% 2011-2012 30% 6.7%

2012-2013 10% 20% 2012-2013 35% 7%

2013-2014 15% 25% 2013-2014 55% 13%

2014-2015 15% 25% 2014-2015 55% 13%

Empty Premises – no changes to Vacant Rate Relief – 3 months commercial buildings, industrial and

mineral 6 months. Ongoing relief subject to application on land and plant and land. All empty

premises are billed on the higher multiplier irrespective of RV

The Leading Vacant Rate Relief case at the moment is Oystons Angels v Preston Council re Section

45A(2)(b) of the Local Government Finance Act 1988 which reads “it appears that when next in use

the hereditament will be wholly or mainly used for charitable purposes (whether of that charity or

that and other charities)”.

The case concerns 6 empty units in a mill in Preston. The owners of Oyston Mill are Denwis Ltd.,

who on 30 March 2011 entered into a licence agreement (for all the units with a rateable value in

excess of £2,600) with Oyston Angel to give them the right to occupy for charitable purposes only, or

to “sublet” for charitable services. Oyston Angel agreed to be responsible for all rates, if any.

All the relevant units were unoccupied for some time (over six months), although one unit was later

sub-licensed to Methodist Action Northwest Ltd as a charity shop.

Preston City Council issued empty rate demands to the Trust for 2011–12 rates on eight of the units,

and subsequently applied to Preston Magistrates’ Court for liability orders. The magistrates found

that although the Trust did not intend to occupy the units, they were satisfied that on the basis of

the restriction on any sub-licenses, that when re-occupied each unit would be wholly or mainly used

for charitable purposes. On that basis, the magistrates considered that the units should be zero

rated, and refused the liability orders.

The council appealed to the High Court, on the basis that the zero rating only applies if it appears to

the council that when next occupied, the property will be occupied by that charity for charitable

purposes (of that or that and other charities). Thus the issue concerned the proper construction of

section 45A(2)(b) of the Local Government Finance Act 1988, The High Court took the view that in

the absence of the words “by that charity” in section 45A(2)(b), zero rating is not limited to where

the next occupier would be the currently owning charity. The Judge stated that the sub-section

means “used for the charitable objects of the owning charity, accompanied or not by other charitable

purposes”.

Hence to be zero rated, it must appear that when next occupied, the hereditament will be occupied

by any charity for the charitable purposes of the owning charity, or the owning charity and others.

Business Rates Supplements

The Localism Act clarifies further the means and process for the ballots for establishing the Business

Rate Supplement in an area.

Enterprise Zones

If you are starting up or relocating to an enterprise zone you will qualify for relief. You must start up

by April 2015. You can get up to 100% business rate relief for 5 years up to maximum of £275,000.

The enterprise zones are:

• Black Country i54 and Darlaston

• Cornwall and Isles of Scilly Newquay Aerohub

• D2N2 (Derby, Derbyshire, Nottingham and Nottinghamshire)

• Greater Birmingham and Solihull City Centre

• Greater Cambridge and Greater Peterborough Alconbury Airfield

• Greater Manchester Airport

• Humber Estuary Renewable Energy Super Cluster and Green Port Corridor

• Humber Green Port Corridor

• Lancashire

• Leeds Lower Aire Valley

• Leicester and Leicestershire Mira Technology Park

• Liverpool Daresbury Science Campus

• Liverpool Mersey Waters

• London Royal Docks

• New Anglia Great Yarmouth and Lowestoft

• North Eastern River Tyne and Nissan Site

• Oxfordshire Science Vale UK

• Sheffield Modern Manufacturing and Technology Growth Area

• Solent Daedalus Airfield

• South East Midlands Northampton Waterside

• South East Sandwich and Harlow

• Tees Valley

• The Marches Hereford

• West of England Temple Quarter (Bristol)

Other related issues

Abolition of Home Information Packs

This Act has finally repealed all the laws on Home Information packs with the exception of Energy

Performance Certificates

Christine Telford BSc (Hons), MSc, MRICS, AIEMA, IRRV (Hons)

5.3.2013