Guidance

Nursery discount 2020 to 2021: coronavirus response – local authority guidance

Updated 2 April 2020

Applies to England

About this guidance

1. This guidance is intended to support local authorities in administering the business rates Nursery Discount announced on 18 March 2020. This guidance applies to England only.

2. This guidance sets out the criteria which central government considers for this purpose to be eligible for the Nursery Discount. The guidance does not replace existing legislation.

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

Introduction

4. As an extraordinary response to the coronavirus, the government announced a business rates Nursery Discount on 18 March 2020.

5. This relief will apply to hereditaments occupied by providers on Ofsted’s Early Years Register and wholly or mainly used for the provision of the Early Years Foundation Stage and which are subject to business rates in the year 2020/21. There will be no rateable value limit on the relief. Where necessary, Ofsted will provide local authorities access to the Ofsted Early Years Register to help local authorities identify eligible properties.

6. This document provides guidance to authorities about the operation and delivery of the policy.

Nursery Discount

How will the relief be provided?

7. As this is a measure for 2020/21 only, the government is not changing the legislation relating to the reliefs available to properties. Instead the government will, in line with the eligibility criteria set out in this guidance, reimburse local authorities that use their discretionary relief powers under section 47 of the Local Government Finance Act 1988 (as amended), to grant relief. It will be for individual local 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. Central government will fully reimburse local authorities for the local share of the discretionary relief (using a grant under section 31 of the Local Government Act 2003).

8. Central government will reimburse billing authorities and major precepting authorities for the actual cost to them under the rates retention scheme of the relief that falls within the definitions in this guidance. Local authorities will have completed their NNDR1 for 2020/21 already. Therefore, billing authorities will shortly be asked to provide a further and separate estimate of their likely total cost for providing the 100% Nursery Discount in 2020/21. The government will provide payments to authorities to cover the local share, as per the usual process.

9. Local authorities will also be asked to provide outturn data on the actual total cost for providing the relief, as per the usual process, via the National Non-Domestic Rate 3 (NNDR3) forms for 2020/21. Any required reconciliations will then be conducted at these points. ^{[footnote 1]}

Which properties will benefit from relief?

10. Properties that will benefit from the relief will be hereditaments occupied by providers on Ofsted’s Early Years Register and wholly or mainly used for the provision of the Early Years Foundation Stage.

11. To qualify for the relief the hereditament should be wholly or mainly being used for the above qualifying purpose. In a similar way to other reliefs (such as charity relief), this is a test on use rather than occupation. Therefore, hereditaments which are occupied but not wholly or mainly used for the qualifying purpose will not qualify for the relief. For the avoidance of doubt, hereditaments which have closed temporarily due to the government’s advice on COVID-19 should be treated as occupied for the purposes of this relief.

12. Billing authorities which are unitary authorities, London boroughs or metropolitan districts should work with their education teams to identify eligible hereditaments in their area. We strongly urge county councils to assist district councils in identifying eligible properties.

13. In line with the legal restrictions in section 47(8A) of the Local Government Finance Act 1988, billing authorities may not grant the discount to themselves, a precepting authority, or a functional body, within the meaning of the Greater London Authority Act 1999.

How much relief will be available?

14. The total amount of government-funded relief available for each property for 2020/21 under this scheme is 100% of the bill, after mandatory reliefs and other discretionary reliefs funded by section 31 grants have been applied, excluding those where local authorities have used their wider discretionary relief powers introduced by the Localism Act which are not funded by section 31 grants. ^{[footnote 1]}

15. The eligibility for the discount and the discount itself will be assessed and calculated on a daily basis. The following formula should be used to determine the amount of relief to be granted for a chargeable day for a particular hereditament in the financial year 2020/21:

Amount of relief to be granted = V, where

V is the daily charge for the hereditament for the chargeable day after the application of any mandatory relief and any other discretionary reliefs, and those where local authorities have used their discretionary relief powers introduced by the Localism Act which are not funded by section 31 grants. ^{[footnote 1]}

16. This should be calculated ignoring any prior year adjustments in liabilities which fall to be liable on the day.

17. Ratepayers that occupy more than one property will be entitled to relief for each of their eligible properties.

State Aid

18. The government’s assessment is that, given the impact of COVID-19 in the sector receiving the relief that the nursery discount 2020/21 is not a State aid. The government has considered this matter in discussions with the European Commission and is content with this analysis following those discussions. Local Authorities should provide the relief to all eligible properties.

Splits, mergers, and changes to existing hereditaments

19. The discount should be applied on a day to day basis using the formula set out above. A new hereditament created as a result of a split or merger during the financial year, or where there is a change of use, should be considered afresh for the discount on that day.

Annex A: Calculation examples for 2020/21

The Nursery discount is always calculated after mandatory relief and other discretionary reliefs funded by section 31 grant. The multiplier used here is provisional.

Example 1: An occupied nursery with a rateable value of £40,000

Gross rates (before any reliefs) = £40,000 x 0. 499: = £19,960

Nursery Discount (100%): = -£19,960

Rates due (after Nursery Discount): = £nil

Example 2: An occupied nursery with a rateable value of £100,000

Gross rates (before any reliefs) = £100,000 x 0.512: = £51,200

Nursery Discount (100%): = -£51,200

Rates due (after Nursery Discount): = £nil

Example 3: An occupied nursery run by a charity with a rateable value of £40,000

Gross rates (before any reliefs) = £40,000 x 0.512 = £20,480

Net rates after charity relief: = £4,096

Nursery Discount (100%): = -£4,096

Rates due (after charity relief and Nursery Discount): = £nil

Example 4: An occupied nursery with a rateable value of £13,500 eligible for Small Business Rate Relief (SBRR)

Gross rates (before any reliefs) = £13,500 x 0.499 = £6,737

Net rates after SBRR (50%): = £3,368

Nursery Discount (100%): = -£3,368

Rates due (after SBRR and Nursery Discount): = £nil

Example 5: An occupied nursery with a rateable value of £10,000 eligible for Small Business Rate Relief (SBRR)

Gross rates (before any reliefs) = £10,000 x 0.499 = £4,990

Net rates after SBRR (100%): = £nil

Rates bill is nil and, therefore, no Nursery Discount applies

Example 6: An occupied nursery with a rateable value of £40,000 eligible for Transitional Relief (TR) and receiving Revaluation Discretionary Relief

Gross rates (before any reliefs) = £40,000 x 0.499 = £19,960

Transitional Relief (say): = -£1,500

Net rates after Transitional Relief: = £18,460

Net rates after Revaluation Discretionary Relief (say): = £15,460

Nursery Discount (100%): = -£15,460

Rates due (after TR, revaluation relief and Nursery Discount): = £nil

1. As required in the NNDR3 guidance notes, the former categories of discretionary relief prior to the Localism Act (i.e. charitable/CASC/rural etc. top up and not for profit) should be applied first in the sequence of discretionary reliefs and, therefore, before the nursery discount. ↩ ↩² ↩³