2017 Revaluation Transitional Relief Scheme
Following the national revaluation of all non-domestic properties in Scotland, the Scottish Government has introduced a transitional relief scheme to lessen for businesses operating in some sectors the increase in 2017-18 bills to a real-terms increase of 12.5% (equivalent to 14.75%). The operation of this scheme is defined by legislation and the council has no discretion to vary its content. The scheme will operate for a period of one year, 1 April 2017 to 31 March 2018.
This scheme limits relief to properties which fall into one of the following classes of use:
i. bed and breakfast accommodation;
ii. camping site;
iv. caravan site;
v. chalet or holiday hut;
vi. guest house, hotel or hostel (excluding establishments where a significant amount of care is provided);
vii. public house or night club, with certain limitations;
viii. restaurant, café, coffee shop, bistro, fast food restaurant or snack bar;
ix. renewable energy generation;
x. self-catering holiday accommodation; and
xi. timeshare accommodation.
Note: The legislation also permits an award of relief to offices, but that is limited to properties situated in Aberdeen City and Aberdeenshire so is not applicable in Moray.
Relief is limited to properties which were:
i. in one of the classes of use stated above, at 1 April 2017; and
ii. in one of the classes of use stated above at 31 March 2017 or, if vacant at that date, were last so used.
There is no entitlement to relief for properties which are vacant at 1 April 2017.
The 2017 Transitional Relief scheme must be compatible with existing EU State Aid law. In practice this means the ratepayer who has received a State Aid award, in a rolling three year period, in excess of €200,000 (which is around £173,500 at April 2017 exchange rates) must declare it.
The scheme is application based and an application form must be completed for each property for which an award of transitional relief is sought.
A ratepayer seeking an award of relief will have to:
i. confirm in which class the property falls; and
ii. summarize the activities undertaken at the property to confirm its use.
Any award of relief is calculated on the basis of the gross Non-Domestic Rates which were payable at 31 March 2017 multiplied by a ‘real-terms’ factor equivalent to an increase of 12.5% (equivalent to 14.75%). This will produce a ‘capped’ amount which the ratepayer’s 2017-18 cannot exceed. An award of relief will be made if the amount of the 2017 rates bill exceeds the ‘capped’ amount.
The regulations also make provision for ratepayers who received 100% relief at 31 March 2017 (most likely due to a Small Business Bonus Scheme award) to receive an additional award of relief. If at 31 March 2017 a property’s rateable value was below £10,000 and the ratepayer had paid nothing at that date due to a relief award, the amount payable after an award of transitional relief will be reduced by 50%.
If there is any change to a property’s circumstances during the 2017-18, it is likely that this will effect entitlement to a 2017 Transitional Relief award.
Some example calculations are shown below.
For the purposes of this example, the property’s rateable value is £22,000 at 31 March 2017 and £27,000 at 01 April 2017.
• The 2016/17 gross rates payable is £10,648.00 (£22,000 x 48.4p [2016-17 rate poundage]);
• The 2017/18 gross rates payable is £12,582.00 (£27,000 x 46.6p [2017-18 rate poundage]);
• The ‘cap’ is £10,648.00 x 1.1475 (factor equal to a 12.5% real terms increase) = £12,218.58.
• The transition relief award would be £363.42 (£12.582.00- £12,218.58).
For the purposes of this example, the property’s rateable value is £19,000 at 31 March 2017 and £22,600 at 01 April 2017.
• The 2016/17 gross rates payable is £9,196.00 (£19,000 x 48.4p [2016-17 rate poundage]);
• The 2017/18 gross rates payable is £10,531.60 (£22,600 x 46.6p [2017-18 rate poundage]);
• The ‘cap’ is £9,196.00 x 1.1475 (factor equal to a 12.5% real terms increase) = £10,552.41.
• The transition relief award would be £0 as 2017/18 rates DO NOT exceed cap amount.
For the purposes of this example, the property’s rateable value is £9,000 at 31 March 2017 and £19,000 at 01 April 2017. This ratepayer was entitled to 100% Small Business Bonus at 31 March 2017.
• The 2016/17 gross rates payable is £4,356.00 (£9,000 x 48.4p [2016-17 rate poundage]);
• The 2017/18 gross rates payable is £8,854.00 (£19,000 x 46.6p [2017-18 rate poundage]);
• The ‘cap’ is £4,356.00 x 1.1475 (factor equal to a 12.5% real terms increase) = £4,998.51.
• The transition relief award would be £3,855.49 (£8,854.00 - £4,998.51).
• And since the ratepayer occupied a property with a rateable value less that £10,000 at 31 March 2017 and paid no rates at that date, the 2017-18 amount payable is reduced to £2,499.26 (£4.998.51x50%).
If you have any questions on this Transitional Relief Scheme, or want to know if you qualify, please contact us.