At each revaluation since 1990 the government has introduced a scheme of “transitional adjustments” designed to help “phase-in” any large changes in rate liability resulting from the revaluation. This “phasing” of changes in rate liability has become a feature of the rating system in England.

At the 2010 revaluation a new scheme of transitional adjustments was introduced and was enshrined in the Non-Domestic Rating Chargeable Amounts Regulations. The scheme limited year on year increases or decreases in rate liability to a maximum percentage change, before any adjustment for Retail Prices Index inflation, with different percentage adjustments being set for different levels of rateable value. There was a more generous scheme of transitional adjustments, allowing smaller maximum annual increases in liability and larger maximum reductions, for properties with rateable value below £18,000 or below £25,500 in London.

The scheme was set for five rate years from 2010/11 to 2014/15, as that was the proposed life of 2010 Rating List and, in 2015, there was to have been a revaluation which would have brought with it a new scheme of transitional adjustments. In 2013 the Government announced that the 2015 revaluation would be postponed for two years until 2017. Until the Autumn Statement 2014 it was assumed that the scheme of transitional adjustments would end at 31 March 2015 and that any properties still subject to these adjustments would simply pay their unadjusted liability from 1 April 2015. But in the Autumn Statement it was announced that a limited scheme of transitional adjustments would continue from 1 April 2015, which is to be delivered through a novel route.

Department of Communities and Local Government (DCLG) has announced that, for properties with rateable value up to and including £50,000, local authorities are encouraged to continue to continue to grant transitional relief where applicable until the next revaluation in 2017. This will not be given effect by a change to the Chargeable Amounts regulations, but will instead be delivered as a discretionary relief under Section 47 of the Local Government Finance Act 1988, as amended by the Localism Act 2011. To encourage local authorities to grant this relief the government will fund the full cost of it including any local element.

The properties that will benefit from the relief are those with a rateable value up to and including £50,000 and which would have benefitted from transitional relief had the statutory scheme continued in 2015/16 and 2016/17 – about 30,000 properties across the whole of England. Where the relief applies it will limit annual increases in rate liability to 15%, before RPI adjustment, for properties with rateable value below £18,000 (or £25,500 in London) and to 25%, before RPI adjustment, for properties with rateable values above those figures but no more than £50,000.

Because this relief is delivered outside the original statutory framework it may be subject to the European Union “State Aid” rules, which would limit the maximum amount of relief available to any one ratepayer. EU State Aid rules are a matter that we have commented on in other news items – for example in respect of the retail rate relief that was also extended in the Autumn Statement – and are so complex as to make transitional rate relief appear positively simple! Suffice it to say that, if the £50,000 maximum rateable value does not limit the benefit of this measure to only small and medium sized businesses, then the EU State Aid rules will.

Full guidance can be found in a Business Rates Information Letter (BRIL) on the gov.uk website – use the link to BRIL’s from our External Resources page to obtain details.

Whilst any relief from the very substantial burden of business rates is a welcome one, this particular measure seems both odd and unsatisfactory for a number of reasons:

  • The rateable value limit is different to those used in the original scheme of transitional adjustments;
  • The delivery through a discretionary relief by individual local authorities is a different route to the original scheme of transitional adjustments;
  • This in turn means that local authorities will have the job of working out where the relief should apply and how it should be calculated;
  • And will make it very difficult for ratepayers to check;
  • As well as possibly bringing it within the Byzantine scheme of EU “State Aid” limits

Business rates are at such a high level that reliefs are needed, but the system is already over-complicated and needs simplification. This measure will make liability calculations more complex rather than simpler.

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