Guidance

Extension of Transitional Relief and Supporting Small Business Relief for small and medium properties

Published 20 December 2021

Applies to England

About this guidance

1. This guidance is intended to support local authorities in administering the Extension of Transitional Relief and Supporting Small Business (SSB) relief for small and medium properties announced at the Budget on 27 October 2021. This guidance applies to England only.

2. This guidance sets out the detailed criteria which central government will use to determine relief for properties coming out of transition to higher bills. The guidance does not replace existing legislation on any other relief.

3. Enquiries on this measure should be addressed to: ndr@communities.gov.uk

Introduction

4. The transitional relief scheme was introduced in 2017 to help those ratepayers who were faced with higher bills as a result of the revaluation. The scheme ends on 31 March 2022, as a result a small number of ratepayers would face a jump to their full rates bill from 1 April 2022.

5. At the Budget on 27 October 2021 the government therefore announced that it would extend the current transitional relief scheme and the supporting small business scheme for one year to the end of the current revaluation cycle. The scheme will restrict increases in bills to 15% for businesses with small properties (up to and including £20,000 rateable value) and 25% for medium properties (up to and including £100,000 rateable value).

6. This document provides guidance to authorities about the operation and delivery of the policy. The government anticipates that billing authorities will include details of the relief to be provided to eligible ratepayers for 2022/23 in their bills for the beginning of the 2022/23 billing cycle.

Section 1: Extension of Transitional Relief and Supporting Small Business

How will the relief be provided?

7. As this is a temporary measure for 2022/23, the government is not changing the legislation around transitional relief. Instead, the government will, in line with the eligibility criteria set out in this guidance, reimburse billing authorities that use their discretionary relief powers, under section 47 of the Local Government Finance Act 1988, to grant relief. It will be for individual billing authorities to adopt a local scheme and determine in each individual case when, having regard to this guidance to grant relief under section 47.

8. The government will fully reimburse billing authorities and major precepting authorities for their loss of income under the rates retention scheme as a result of awarding the relief that falls within the definitions in this guidance, using a grant under Section 31 of the Local Government Act 2003.

9. Local authorities will be asked to provide an estimate of their likely total cost for providing the relief in their National Non-Domestic Rate Return 1 (NNDR1) for 2022/23. Central government will provide payments to authorities to cover the local share. Local authorities will also be asked to provide outturn data on the actual total cost for providing the relief, via the National Non-Domestic Rate 3 (NNDR3) forms. Any required reconciliations will then be conducted at these points.

Which properties will benefit from relief?

10. Properties that will benefit are those with a rateable value up to and including £100,000 who would have received transitional relief and/or SSB in 2022/23. In line with the existing thresholds in the transitional relief scheme, the £100,000 rateable value threshold should be based on the rateable value shown for 1 April 2017 or the substituted day in the cases of splits and mergers.

11. This policy does not apply to those in downward transition to lower bills – they will fall to their full bill on 1 April 2022.

How much relief will be available?

12. The government will fund discretionary relief to ensure eligible properties receive the same level of protection they would have received had the statutory transitional relief scheme and SSB scheme extended into 2022/23.

13. The practical effects of the transitional relief scheme should be assumed to remain as it is in the current statutory scheme (As prescribed in the Non-Domestic Rating (Chargeable Amounts) (England) Regulations 2016 No. 1265) except that:

a. the cap on increases for small properties (with a rateable value of less than or equal to £20,000/£28,000 in London) in 2022/23 should be assumed to be 15% (before the increase for the change in the multiplier). Specifically, X in regulation 10(6) for the year commencing 1 April 2022 should be assumed to be 115. Q in regulation 10(12) should be assumed to be 1, and

b. the cap on increases for other properties (up to and including £100,000 rateable value) in 2022/23 should be assumed to be 25% (before the increase for the change in the multiplier). Specifically, X in regulation 10(4) for year commencing 1 April 2022 should be assumed to be 125. Q should be assumed to be 1.

14. As explained above, the scheme applies only to properties up to and including £100,000 rateable value based on the value shown for 1 April 2017 or the substituted day in the cases of splits and mergers. Changes in rateable value which take effect from a later date should be calculated using the normal rules in the transitional relief scheme (i.e., “N over J” for reductions or “N minus J” for increases ). For the avoidance of doubt, properties whose rateable value is £100,000 or less on 1 April 2017 (or the day of merger) but increase above £100,000 from a later date will still be eligible for the relief. Where necessary the Valuation Office Agency will continue to issue certificates for the value at 31 March 2017 (regulation 17, SI 2016 No. 1265) or 1 April 2017 (regulations 16 and 18 SI 2016 No.1265). The relief should be calculated on a daily basis.

15. The SSB scheme should be assumed to remain as it is in the current non-statutory scheme (Found in Annex A of the Business Rates Information Letter 4/2017.) with a percentage cap in 2022/23 of 15% (or a cash value increase of £600 if greater).

16. A detailed explanation and illustration of how the relief (and the associated section 31 grant) should be calculated is at Section 2

17. As illustrated in Section 2 in cases where a ratepayer would have been in receipt of both transitional relief and SSB in respect of 2022/23, this guidance (and the resulting section 31 grant in respect of that account) will generate a single award of section 47 relief resulting in a chargeable amount equivalent to that had the original transitional relief and SSB schemes continued. Nevertheless, local authorities and their software providers may wish to consider whether to continue to show TR and SSB separately on the bill for information.

Subsidy control

18. The extension of transitional relief and Supporting Small Business (SSB) relief scheme is likely to amount to subsidy. Any relief provided by Local Authorities under this scheme will need to comply with the UK’s domestic and international subsidy control obligations (See the BEIS guidance for public authorities which explains the subsidies chapter of the UK-EU Trade and Cooperation Agreement (TCA), World Trade Organisation rules on subsidies, and other international subsidy control commitments).

19. To the extent that a Local Authority is seeking to provide relief that falls within the Small Amounts of Financial Assistance Allowance, Article 364 of the TCA allows an economic actor (e.g. a holding company and its subsidiaries) to receive up to 325,000 Special Drawing Rights (£343,000 as at 9 December 2021) in a three-year period (consisting of the 2022/23 financial year and the two previous financial years) Expanded Retail Discount granted in either 2020/21 or 2021/22 does not count towards the £343,000 allowance but BEIS business grants (throughout the 3 years) and any other subsidies claimed under the Small Amounts of Financial Assistance limit, should be counted.

20. In those cases where it is clear to the local authority that the ratepayer is likely to breach the Small Amounts of Financial Assistance Allowance then the authority should automatically withhold the relief.

Recalculations of relief

21. As with the current transitional relief scheme, the amount of relief awarded should be recalculated in the event of a change of circumstances. This could include, for example, a backdated change to the rateable value or to the hereditament. This change of circumstances could arise during the year in question or during a later year.

22. Under regulations made under section 47 of the Local Government Finance Act 1988 authorities must give at least 12 months’ notice of a revocation or variation of a rate relief scheme the effect of which would be to increase rate bills. Such a revocation or variation can only take effect at the end of a financial year (other than to comply with international agreements). But within these regulations, local authorities may still make decisions which are conditional upon eligibility criteria. If a change in circumstances renders a property ineligible, the relevant bill can be amended in the year to reflect the loss of the relief.

23. Therefore, when making an award for the extension of transitional relief, local authorities should ensure in the conditions of the award that the relief are subject to the property’s continuing eligibility. If the property’s rateable value changes so that it is no longer eligible, the relevant chargeable amount must be recalculated to reflect that fact. This includes where the change in the rateable value is backdated.

Section 2: Calculation for the extension of transitional relief and SSB

Calculating the extension of transitional relief and SSB where other reliefs apply

Under the existing statutory transition scheme which ends on 31 March 2022, transitional relief is measured before all other reliefs. But the extension of transitional relief and SSB into 2022/23 will be delivered via section 47 of the Local Government Finance Act 1988 which will be measured after other reliefs (including other funded reliefs granted under section 47 such as RHL relief).

Therefore, for the purposes of awarding relief and claiming section 31 grant, authorities should measure the extension of transitional relief and SSB after all other reliefs. To do this authorities will need to:

Step 1: identify those eligible properties which would have qualified for transitional relief and/or SSB in 2022/23,

Step 2: calculate the actual rates bill for those properties in 2022/23 after all other reliefs assuming transitional relief and SSB has ended,

Step 3: calculate the rates bill for those properties in 2022/23 after all other reliefs assuming transitional relief and SSB continued (in line with the assumptions in this guidance), and

Step 4: calculate the difference between stage 2 and 3 and award a section 47 discount to that value.

Authorities will be asked to report the cost of extending the transitional relief scheme and SSB using this methodology from which the associated single section 31 grant will be calculated (using the appropriate local share). In practice authorities may wish to consider with their software providers whether a separate amount for TR and SSB is shown on bills.

Examples

If a ratepayer would have been eligible for transitional relief of 15% cap in 2022/23 and not eligible for SSB then their bill is calculated as follows (ignoring inflation):

	Step 1	Step 2	Step 3	Step 4
	2021/22	2022/23	2022/23	2022/23
Bill before any reliefs	9,980	9,980	9,980	9,980
Transitional relief (had the original schemes continued)	-4,772	n/a	-3,990	n/a
Net bill before section 47 discount	5,208	9,980	5,990	9,980
SSB (had the original scheme continued)	n/a	n/a	n/a	n/a
Combined section 47 discount (to give effect to extension of transitional relief/SSB)	n/a	n/a	n/a	-3,990
Net rates bill	5,208	9,980	5,990	5,990

For illustration. Based on a hereditament whose rateable value increased from £6,000 to £20,000 at the 2017 revaluation and the hereditament was not eligible for SBRR.

This is the simple case. The value of the transitional relief had the scheme continued is £3,990. In practice extending transitional relief will be achieved by awarding a section 47 discount which is calculated at the end of the bill. But because there are no other reliefs the value of the discount to ensure in practice transitional relief continues is also £3,990.

But if, for example, the same ratepayer would otherwise have fallen out of transitional relief in 2022/23 and also receives 80% charitable mandatory relief then their bill is calculated as follows (ignoring inflation):

	Step 1	Step 2	Step 3	Step 4
	2021/22	2022/23	2022/23	2022/23
Bill before any reliefs	9,980	9,980	9,980	9,980
Transitional relief (had the original schemes continued)	-4,772	n/a	-3,990	n/a
Net bill before charitable relief or section 47 discount	5,208	9,980	5,990	9,980
Charitable Relief	-4,167	-7,984	-4,792	-7,984
Combined section 47 discount (to give effect to extension of transitional relief/SSB)	n/a	n/a	n/a	-798
Net rates bill	1,042	1,996	1,198	1,198

For illustration. Based on a hereditament whose rateable value increased from £6,000 to £20,000 at the 2017 revaluation and the hereditament is eligible for charity relief

In the above example, whilst the reported cost of transitional relief in 2022/23 would still have been £3,990 had the scheme continued in its current form as this is measured before all other reliefs (step 3). In practice extending transitional relief will be achieved by awarding a section 47 discount which is calculated after all other reliefs. So the value of the discount to ensure in practice transitional relief continues is £798 (step 4).

Finally, if the ratepayer in the first example had also in 2017 lost SBRR (and the same could apply to rural rate relief relief) and was therefore eligible for both transitional relief and SSB then their bill is calculated as follows (ignoring inflation):

	Step 1	Step 2	Step 3	Step 4
	2021/22	2022/23	2022/23	2022/23
Bill before any reliefs	9,980	9,980	9,980	9,980
Transitional relief (had the original schemes continued)	-4,772	n/a	-3,990	n/a
Net bill before charitable relief or section 47 discount	5,208	9,980	5,990	9,980
SSB (had the original scheme continued)	-2,208	n/a	-2,390	n/a
Combined section 47 discount (to give effect to extension of transitional relief/SSB)	n/a	n/a	n/a	-6,380
Net rates bill	3,000	9,980	3,600	3,600

For illustration. Based on a hereditament whose rateable value increased from £6,000 to £20,000 at the 2017 revaluation and the hereditament was previously eligible for SBRR.

In the above example, the reported cost of transitional relief in 2022/23 would still have been £3,990 had the scheme continued in its current form as this is measured before all other reliefs (step 3). The reported cost of SSB in 2022/23 would have been £2,390 again had the TR and SSB schemes continued in their current form (step 3). In practice extending transitional relief and SSB will be achieved by awarding a single section 47 discount which is calculated after all other reliefs. So the value of the discount to ensure in practice transitional relief and SSB continues is £6,380 (step 4).

As discussed above, local authorities and software providers may wish to consider for transparency whether on the face of the bill this single award of section 47 relief is shown as separate amounts for TR (£3,990) and SSB (£2,390).