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Transitional Relief

All rateable values are reassessed every five years at a general revaluation.  The current rating list is based on the 2010 revaluation.  Five-yearly revaluations make sure each ratepayer pays their fair contribution and no more, by ensuring that the share of the national rates bill paid by any one ratepayer reflects changes over time in the value of their property relative to others.  Revaluation does not raise extra money for Government.

Whilst the 2010 revaluation will not increase the amount of rates collected nationally, within this overall picture, over a million properties will see their business rate liabilities reduced and some ratepayers will see increases.

For those that would otherwise see significant increases in their rates liability, the Government has put in place a £2 billion transitional relief scheme to limit and phase in changes in rate bills as a result of the 2010 revaluation.  To help pay for the limits on increases in bills, there also have to be limits on reductions in bills.  Under the transition scheme, limits continue to apply to yearly increases and decreases until the full amount is due (rateable value times the appropriate multiplier). 

The scheme applies only to the bill based on a property at the time of the revaluation.  If there are any changes to the property after 1^st April 2010, transitional arrangements will not normally apply to the part of a bill that relates to any increase in rateable value due to those changes.  Changes to your bill as a result of other reasons (such as because of changes to the amount of small business rate relief) are not covered by the transitional arrangements. 

How the current Transitional Scheme Works

Calculating transitional adjustment can be quite complicated. The information below is for guidance only and is designed to give a general overview as to how the scheme works.

For example, in very simple terms, transitional adjustment for the 2010 Rating List is calculated by, comparing the charge for 2009/10, with the charge for 2010/2011.

This is done by calculating the rates payable on 31st March 2010 and converting this into an annual figure.  This is known as the Base Liability, so, for example:

Rateable Value as at 31st March 2010 x Small Business Multiplier as at 31st March 2010:

£29,250 x 48.1p = £14,069.25

There are certain prescribed percentages above or below which this figure cannot go.  This depends on whether the property has a rateable value of above £18,000, and which are known as 'Large Properties', or below £18,000 and are known as 'Small Properties'.  Please see tables below:

PROPERTIES OVER £18,000 RATEABLE VALUE (LARGE PROPERTIES)

PERCENTAGE LIMITS ON INCREASE OF BILL FROM BASE LIABILITY

Transitional Scheme 2010 - 2015

PROPERTIES OVER £18,000 RATEABLE VALUE (LARGE PROPERTIES)

PERCENTAGE LIMITS ON DECREASE OF BILL FROM BASE LIABILITY

Transitional Scheme 2010 -2015

PROPERTIES UNDER £18,000 RATEABLE VALUE (SMALL PROPERTIES)

PERCENTAGE LIMITS ON INCREASE OF BILL FROM BASE LIABILITY

Transitional Scheme 2010-2015

PROPERTIES UNDER £18,000 RATEABLE VALUE (SMALL PROPERTIES)

PERCENTAGE LIMITS ON DECREASE OF BILL FROM BASE LIABILITY

Transitional Scheme 2010 - 2015

Before applying these percentages to the Base Liability as at 31st March 2010, an adjustment has to be made to take account of the relevant rate of inflation, the figure for 2010/11 was 0.986.

For example, in our example, on 1st April 2010, the rateable value is £31,750, and is therefore a large property.  The rateable value on 31st March 2010 was £29,250.  This is facing a decrease in the rates payable from last year because of the lower multiplier.  Referring to the relevant table, the bill cannot be less than 95.4% of the base liability.  Also, the percentage has to be adjusted by the inflation factor:

0.954 x 0.986 = 0.940644

So in the example above:  Base Liability is £14,069.25

BL £14,069.25 X 0.940644 = £13,234.16

I.e the bill cannot be any lower than £13,234.16.

Without transition, the bill would be (gross rates payable):

RV x SBRR Multiplier:

£31,750 x 40.7p = £12,922.25

So the difference between the two is £311.91, which is a debit transition figure.

Deciding whether a Transitional Adjustment applies

For losers (businesses that are worse off) where the transitional amount is still less than the gross rates payable (Rateable Value 2010 x Multiplier), then relief will be deducted from the bill equal to the difference between these two amounts.

If the gross charge is lower than the transitional amount, no relief applies.

For gainers (businesses that are better off) where the transitional amount is still more than the gross rates payable (Rateable Value 2010 x Multiplier), then an adjustment will be made to the bill equal to the difference between these 2 amounts.

If the gross charge is higher than the transitional amount, no relief applies.

Future Years

For future years the Transitional Amount for the previous year is then increased/decreased by its appropriate percentage (see above tables) until it no longer qualifies for relief. The change in Rateable Value will then have been phased in and the bill will revert to the standard charge of Rateable Value x Multiplier.

Changes in Rateable Value

If your Rateable Value is changed, we will have to recalculate your entitlement to transitional relief. It is quite possible that a reduction in your Rateable Value may not result in an immediate reduction in your bill.

Is my relief correct?

There is no right of appeal against transitional relief. It is part of Business Rates legislation and we have no powers to change or waver it. However the Revenues Service will check the calculation if you have reason to believe it may be incorrect.

More details regarding the re-valuation of rateable values and the transitional relief scheme can be found on the Government's Business Rates website.

This webpage was updated on 4/3/2012

 

 

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