Guidance

Frequently asked questions

Published 1 September 2017

This guidance was withdrawn on 13 July 2018

The application process has closed.

Applies to England

This page will be routinely updated with frequently asked questions regarding the 100% business rates retention pilots 2018 to 2019 prospectus.

Applying to be a pilot

1. Does a county council need to apply with all districts in their area as part of the pool?

The government will look favourably on applications from groups of authorities who have committed to work together as part of a ‘pool’, including groups of districts who are proposing to pool with their county and particularly, as set out in the prospectus, pilots where all the districts and county have come together.

Authorities can, however, apply as a single authority and the government reserves the right to pilot a full range of options and so to create a single authority pilot if deemed useful. The government will not compel any authority to become a pilot that does not wish to, and we cannot designate a pool without explicit agreement from all participating local authorities.

2. Can existing pilots expand their pilot?

Existing 2017 to 2018 pilots can make a proposal to expand and their proposal will be considered on its merits.

3. Can authorities be part of more than one pool?

Authorities cannot be a part of more than one business rates pool. If authorities apply to be a part of a new pool, they will have to leave their existing pool if their pilot bid is successful. In the event that a pilot proposal is not accepted, the government will make 2018 to 2019 pooling arrangements with the authorities concerned in line with their expressed preferences on their pilot application.

4. Can a non-London authority part of a pool that includes London boroughs apply for the pilot programme?

The invitation to local authorities to pilot business rates retention, excludes London boroughs. If a non-London authority part of a pool that includes London boroughs wants to apply to be a pilot, the authority would have to apply as part of a new pool or as a single authority.

5. Will I be at a disadvantage if I do not apply to be a part of the pilot programme?

There is no requirement to apply to become a pilot or a pool. It is for each local authority to decide whether to pool or to apply to take part in the pilot programme. Alongside, the government will continue to collaborate with the Local Government Association and other sector representative groups to design the final reforms to local government finance which will apply to the whole country

Pilot design

6. How is the value of additional business rates share calculated for the 2018 to 2019 pilots?

Background

For the purpose of setting-up 100% pilots for 2018 to 2019, it will be necessary to recalculate pilot authorities baseline funding levels, business rates baselines and tariffs and top-ups to reflect both the additional share of business rates that authorities will be retaining and the loss of Revenue Support Grant (RSG).

The existing rates retention system

In setting up the existing ‘50%’ business rates retention system a baseline funding level (BFL) and business rates baseline (BRB) were established for each local authority for 2013 to 2014. The difference between an authority’s BFL and BRB set its tariff/top-up payment for that year.

At each local government finance settlement since 2013 to 2014, BFLs and tariff/top-ups have been uprated by the change in the small business rating multiplier. This ensures that authorities retain real-terms growth (or decline) in their business rates income, before the impact of any levy. BFLs for each of the pilot authorities, are set out in the local government finance report for the relevant year,

BRBs are not similarly uprated. But, a notional BRB for any year can be calculated by adding an authority’s tariff to (or subtracting its top-up from) its BFL.

Methodology for recalculating tariffs and top-ups etc

The calculation of a pilot authority’s tariff, or top-up will be based on its current BFLs, and notional BRB. This will preserve the integrity of the existing scheme by ensuring that any growth (or decline) in business rates achieved by pilot authorities since 2013 to 2014 is disregarded for the purpose of recalculating tariffs and top-ups.

Step 1: We will establish the BFL and BRB for 2018 to 2019 by uprating the 2017 to 2018 values^{[footnote 1]} by the change in the small business rating multiplier (based on the movement in the RPI index between September 2016 and September 2017), thereby establishing the BFLs and BRBs that would have applied to authorities in 2018 to 2019 under the 50% scheme.

Step 2: We will then add the RSG due to each authority in 2018 to 2019 to the BFL established in step 1, reflecting the fact that RSG will be scrapped and funded from an additional share of business rates.

Step 3: The BRB established in step 1 will be increased in line with the additional share of business rates due to the authority under the 100% pilot, reflecting the proposal made by each pilot area in response to the prospectus. The calculation will be:

BRB/existing % share of business rates x new share of business rates

Step 4, would see the BFLs and BRBs established in steps 2 and 3 used to derive tariffs and top-ups for the new pilot authorities for 2018 to 2019.

7. Would the new tier split agreed apply to all of the retained rates or only the additional rates retained under the pilot?

It is for pools of local authorities to decide how they want business rates income shared between the constituent tiers, subject only to the fact that where there is a stand-alone fire and rescue authority that is not part of the pilot arrangements, we will ensure that it continues to receive 1% of the locally raised business rates.

In most cases, we would anticipate that pools of authorities will preserve the existing split of the ‘local share’ and will only be deciding how they want to split the 50% of business rates that currently goes to central government. The additional percentage points due to each tier would then be added to the existing shares to determine the overall percentage of business rates due to each authority in 2018 to 2019.

However, the government would be prepared to consider proposals for more radical change – for example, by reducing the overall percentage of business rates due to one tier below the current ‘local share’ percentage and awarding the balance to the other tier – subject to being persuaded that the arrangements delivered sustainable local services.

8. Will the baseline used for pilot areas be reassessed, in line with the proposed Fair Funding Review?

The Fair Funding Review will set new baseline funding allocations for all local authorities on implementation. We will continue to seek views on the approach and the target date for implementation. There is currently no intention to treat pools or pilots differently through the Review.

9. How will the 100% pilots affect the calculation of section 31 grants?

The section 31 compensation due to authorities will reflect their percentage shares. As under 100% rates retention, authorities in an area, collectively, will share 100% of the locally-raised business rates, we will pay section 31 grants at 100% of the relief given.

10. Will any adjustments to growth be made in pools to account for the impact of backdated appeals/provision for appeals?

Authorities will calculate the total provision needed and the provision will be shared according to the relevant percentage shares. So, in 2018 to 2019, if authorities increase their provision by, say £1 million, thereby reducing their collectible rates by £1 million, the pool will bear the whole cost of that, regardless of whether the increase was needed in respect of prior years (when, of course 50% rates retention applied), or current/future years.

11. Do areas have to retain any new pooling arrangements into 2019 to 2020 if the pilots only run for one year?

The prospectus makes clear that we anticipate the pilots running for only one year, 2018 to 2019. In line with the legislation, if members of the pool then request us to revoke the designation for 2019 to 2020, we will do so. If also requested to establish a different pool for 2019 to 2020 (or to establish pooling arrangements that existed prior to 2018 to 2019) we will consider the request on its merits at that time.

12. What would happen to the sharing arrangements of the pool under the pilot scheme in 2019 to 2020 when the pilot is due to end?

As sharing arrangements are not mandated in legislation, it would, therefore, be for pool members to decide between themselves what arrangements (if any) to put in place; in the same way as pools currently decide how to share the risks and rewards that attach to pool membership.

1. The 2017 to 2018 tariffs and top-ups, set out in the last Local Government Finance Report will be adjusted to reflect updated revaluation information, as set out in last year’s Local Government Finance Report. The adjusted tariffs and top-ups will be used to derive the notional BRB for 2017 to 2018 ↩