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Non-domestic Rates and the 2017 Revaluation

The Sc ot tish Parliament and Scottis h Parliament I nf or mation C entre l ogos . Financial Scrutiny Unit Briefing Non-domestic Rates and the 2017 Revaluation 16 March 2017 17/20 Anouk Berthier This briefing provides information on Non-domestic Rates including historical revenue and relief expenditure as well as Rates and relief schemes for 2017 -18. It analyses the impact of the 2017 Revaluation on rateable values and the estimated impact on Non-domestic Rates bills. 2 CONTENTS EXECUTIVE SUMMARY .. 4 INTRODUCTION .. 5 Non-domestic Rates INCOME .. 6 NDR DISTRIBUTABLE AMOUNT .. 6 NDR COLLECTABLE AND DISTRIBUTABLE AMOUNT .. 8 FORECASTING NDR INCOME .. 10 BUSINESS Rates INCENTIVISATION SCHEME .. 10 POUNDAGE .. 11 POUNDAGE RATE .. 11 LARGE BUSINESS SUPPLEMENT (LBS) .. 12 COSTINGS .. 14 2017 Revaluation .. 15 CONTEXT .. 15 SCOTTISH ASSESSORS .. 15 NUMBER OF SUBJECTS IN SCOTLAND ON THE VALUATION ROLL.

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Transcription of Non-domestic Rates and the 2017 Revaluation

1 The Sc ot tish Parliament and Scottis h Parliament I nf or mation C entre l ogos . Financial Scrutiny Unit Briefing Non-domestic Rates and the 2017 Revaluation 16 March 2017 17/20 Anouk Berthier This briefing provides information on Non-domestic Rates including historical revenue and relief expenditure as well as Rates and relief schemes for 2017 -18. It analyses the impact of the 2017 Revaluation on rateable values and the estimated impact on Non-domestic Rates bills. 2 CONTENTS EXECUTIVE SUMMARY .. 4 INTRODUCTION .. 5 Non-domestic Rates INCOME .. 6 NDR DISTRIBUTABLE AMOUNT .. 6 NDR COLLECTABLE AND DISTRIBUTABLE AMOUNT .. 8 FORECASTING NDR INCOME .. 10 BUSINESS Rates INCENTIVISATION SCHEME .. 10 POUNDAGE .. 11 POUNDAGE RATE .. 11 LARGE BUSINESS SUPPLEMENT (LBS) .. 12 COSTINGS .. 14 2017 Revaluation .. 15 CONTEXT .. 15 SCOTTISH ASSESSORS .. 15 NUMBER OF SUBJECTS IN SCOTLAND ON THE VALUATION ROLL.

2 16 RATEABLE 17 EFFECT ON BILLS .. 19 APPEALS PROCESS .. 20 2017 -18 NDR RELIEFS .. 20 RELIEF SCHEMES .. 21 NUMBERS OF BUSINESSES RECEIVING RELIEFS .. 22 SMALL BUSINESS BONUS SCHEME .. 23 RURAL RATE .. 24 CHARITIES .. 24 EMPTY BUILDINGS .. 24 OTHER SCHEMES FOR EMPTY BUILDINGS .. 25 Fresh Start .. 25 New Start .. 26 RENEWABLE ENERGY GENERATION .. 26 ENTERPRISE AREA .. 27 DISABLED PERSONS .. 27 DISTRICT HEATING .. 27 TELECOMMUNICATION INSTALLATIONS .. 27 BROADBAND RELIEF .. 28 SPECIAL CASES OF PREMISES .. 28 PREMISES EXEMPT FROM NDR .. 28 WORKING FROM HOME .. 28 SELF-CATERING AND GUEST HOUSE ACCOMMODATION .. 28 RECENT UK GOVERNMENT CHANGES TO BUSINESS Rates .. 28 WATER AND SEWERAGE CHARGES EXEMPTION SCHEME .. 29 EMPTY PROPERTIES .. 29 CHARITIES AND SPORTS CLUBS .. 30 ANNEXES .. 31 ANNEX 1 NDRI DISTRIBUTABLE AMOUNT, SCOTLAND, 1990-00 TO 2017 -18 .. 31 ANNEX 2 DISTRIBUTABLE NDRI BY LOCAL AUTHORITY, 2016-17 & 2017 -18.

3 32 ANNEX 3 BRIS BUOYANCY TARGET BY LOCAL AUTHORITY, 2014-15 TO 2016-17 .. 33 ANNEX 4 CHANGE IN RATEABLE VALUES BETWEEN 2016-17 AND 2017 -18 BY LOCAL AUTHORITY .. 35 ANNEX 5 APPEALS PROCESS .. 36 3 SOURCES .. 37 RELATED BRIEFINGS .. 40 4 EXECUTIVE SUMMARY Local authorities collect and retain Non-domestic Rates Income. This is theoretically pooled at the Scottish Government level for accounting purposes and distributed. Non-domestic Rates Income for 2017 -18 is provisionally set to raise 2, , a million decrease (equal to ) from 2016-17. The 2017 -18 Non-domestic Rate poundage rate is set at , down or from 2016-17 (when it was ). The Large Business Supplement for 2017 -18 is set at This is the same as last year. The proposed threshold is proposed to increase to a rateable value 51,000. The next Revaluation will occur on 1 April 2017 . The Scottish Government estimates that 70% of premises will see no change or a decrease in their Non-domestic Rates bill in 2017 -18.

4 In February 2017 the Scottish Government proposed to: cap 2017 -18 bill increases at (real terms) for hotels, pubs, restaurants and cafes. This will benefit around 8,500 properties and will bring the average gross bill increase for hotels down to 12% and down to 2% for pubs cap 2017 -18 bill increases at This will benefit around 1,000 premises cap Rates bill increases at 12% for small-scale hydro schemes (up to 1 MW). 5 INTRODUCTION Business (or Non-domestic ) Rates (NDR) are a property-based tax charged to businesses and the public and third sectors. A Non-domestic property is an individual property used for Non-domestic purposes, for instance business premises and third and public sector properties. NDRI is collected by local authorities, pooled at a Scottish level and then redistributed back to local authorities. The amount distributed back is known as the Distributable Amount.

5 The principles of Non-domestic Rates were established in the Lands Valuation (Scotland) Act of 1854. There are three main bodies involved in the rating system: the Scottish Government, the Scottish Assessors and local authorities. The Scottish Government sets the annual tax rate and sets out and funds the national framework for reliefs. The Scottish Assessors are responsible for determining the classification and valuation of Non-domestic and domestic properties (see below for more information on the valuation process). They are independent of both the Scottish Government and local authorities. All Non-domestic properties and their corresponding rateable values are listed on the Valuation Roll, which is maintained by the Scottish Assessors. The Scottish Assessors Association (SAA) is a voluntary organisation that acts as a forum for Scottish Assessors to share practices and experiences, and facilitate a consistency of approach in the administration of the valuation, council tax and electoral registration services.

6 All Assessors and their senior staff are members of the Association. The SAA Portal provides all Scotland Valuation Rolls. Valuation Roll search results can be ordered by description (this provides a standardised and consistent way of searching for similar properties across Scotland), rateable value, reference number or Local authorities determine relief eligibility, issue Non-domestic rate bills and collect payments. Revenues are theoretically pooled for accounting purposes at the Scottish Government level and returned to local authorities on the basis of where it is collected. See SPICe Briefing 15/32 on Non-domestic Rates for more information on the distribution process. NDR are based on a property s rateable value (RV) which is a legally defined valuation provided by the Assessor. A poundage is applied to the RV, this is the rate taxed for each pound of RV.

7 This is charged annually on a ten-month basis (March and April are not chargeable). Rateable values are revalued on a regular basis. The last Revaluation was in 2010. Although a Revaluation was initially planned for 2015, in 2012 the Scottish Government announced it would delay Revaluation to 1 April 2017 to match the UK Government's decision to delay the Revaluation in England to 2017 , as this would maintain a competitive business environment in Scotland (Scottish Government 2013). In 2012 the Scottish Government committed to conducting a "thorough and comprehensive review of the whole business Rates system" between 2012 and the 2017 Revaluation (Scottish Government 2012a). This process began with a consultation paper on NDR Supporting Business - Promoting Growth which ran from 2012 to 2013 (Scottish Government 2012b). In particular, the Government stated: "Our approach will ensure all reforms are in place by the next Revaluation in 2017 , delivering a fairer, simpler and more efficient business Rates system" (Scottish Government 2013).

8 A separate Consultation on the Non-domestic rating valuation 1 The SAA state that their claim is to enhance this transparency further by providing more summary valuations at the SAA web site. They noted however in their submission to the Scottish Government s consultation paper Supporting Business - Promoting Growth that this process has been placed in abeyance due to a lack of the additional funding necessary to undertake the required development work. The SAA would suggest that additional funding be sourced to allow this process to continue. 6 appeals system was launched on 11 December 2014 and closed on 6 March 2015 (Scottish Government 2014a). In December 2015 the Scottish Government further announced it would review business Rates with recommendations expected to be submitted to Ministers by summer 2017 .

9 It set up the Barclay group in March 2016, led by former chair of RBS Scotland, Ken Barclay, to undertake the review, with the following remit: To explore ideas and options to improve the business Rates system in Scotland to better support business growth that: consider how the system can respond to wider economic conditions and changing marketplaces; support long-term growth and investment; are based on overall revenue neutrality and on maintaining the overall level of funding for local government. (Scottish Government 2016a) The Group ran a call for submissions from 13 July 2016 to 7 October 2016 and is expected to report to Ministers in July 2017 . First Minister Nicola Sturgeon announced in March 2016 that the Scottish Government would retain the Small Business Bonus Scheme until at least 2021 (Scottish Government 2016a). Non-domestic Rates INCOME NDR DISTRIBUTABLE AMOUNT Figure 1 shows the distributable amount of NDR from 1999-00 to 2017 -18.

10 This was 2,789m in 2015-16 and 2,769m in 2016-17. It is expected to decrease by in 2017 -18 to 2,666m. This is a higher decrease than in 2015-16 ( ). See Annex 1 for more detail. Changes to forecasting and reliefs since December 2016 caused an increase in the NDRI forecast for 2017 -18. In December 2016 it was estimated to be 2,606m which would have been a decrease in NDRI from 2016-17. The forecast in March 2017 is lower than the December 2016 one. Figure 1 NDRI Distributable Amount, cash terms, m, Scotland, 1999-00 to 2017 -18 Source: Scottish Government 2015a & 2017a 1,4411,6631,5541,7181,8041,8961,8971,884 1,8601,9632,1652,0682,1822,2632,4352,650 2,7892,7692,666 1999-002000-012001-022002-032003-042004- 052005-062006-072007-082008-092009-10201 0-112011-122012-132013-142014-152015-162 016-172017-18 7 Figure 2 shows NDRI Distributable Amount by local authority in 2016-17.


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