Chamber and committees

The Scheme has been widely promoted and it is estimated that 85% of eligible small properties now benefit from relief. The Scottish Government is aware that a number of businesses eligible for SBBS have not yet applied for the scheme and efforts will continue to encourage take-up among that group.

Estimated Number of Properties Eligible for Relief

The Scottish Government guarantees each local authority a combination of distributable business rates plus general revenue grant, with the total amount calculated on the basis of assessed need in each local authority area. The actual amount of business rates collected by each local authority is then deducted from this guaranteed funding with the balance paid as general revenue grant. The amount of business rates collected locally therefore has no effect on the total guaranteed funding.

The revaluation of business properties takes place every five years. The income received from business rates in the year prior to a revaluation, in this case 2009-10, is depressed as many appeals against the previous revaluation (2005) are settled towards the end of the revaluation cycle. Conversely the income received from business rates in the first year following a revaluation, in this case 2010-11, is over stated as the majority of appeals, which although backdated to 1 April 2010, will again not be settled until later in the 2010 revaluation cycle.

Therefore, while the latest forecasts in the table show the amount of business rates income collected in 2009-10 and 2010-11, the comparison between the years is distorted by the impact of appeals which deflates the income collected in 2009-10 and inflates the income to be collected in 2010-11. It should also be noted that the 2009-10 figures are near final, whereas the 2010-11 are estimated and as such will change.

The purpose of revaluation over the five year cycle is to redistribute the tax burden, based on changes in relative demand for property, not to generate additional income.

Notes:

2009-10 figures from PNA (provisional notified amount) return from local authorities.

2010-11 figures from PCA (provisional contributable amount) return from local authorities.

Figures relate to gross amount of NDR income minus mandatory and discretionary reliefs.

The Scottish Government guarantees each local authority a combination of distributable business rates plus general revenue grant. The total amount to be funded is calculated on the basis of assessed need in each local authority area. The amount of business rates raised locally therefore has no effect on the total guaranteed funding.

Business Rate Income Distributed 2009-10

Note: The figures above are taken from the relevant annual local government finance circular issued by the Scottish Government.

The Scottish Government guarantees each local authority a combination of distributable business rates plus general revenue grant, with the total amount calculated on the basis of assessed need in each local authority area. The actual amount of business rates collected by each local authority is then deducted from this guaranteed funding with the balance paid as general revenue grant. The amount of business rates collected locally therefore has no effect on the total guaranteed funding.

The revaluation of business properties takes place every five years. The income received from business rates in the year prior to a revaluation, in this case 2009-10, is depressed as many appeals against the previous revaluation (2005) are settled towards the end of the revaluation cycle. Conversely, the income received from business rates in the first year following a revaluation, in this case 2010-11, is over stated as the majority of appeals, which although backdated to 1 April 2010, will again not be settled until later in the 2010 revaluation cycle.

Therefore, while the latest forecasts in the table show the amount of business rates income collected in 2009-10 and 2010-11, the comparison between the years is distorted by the impact of appeals which deflates the income collected in 2009-10 and inflates the income to be collected in 2010-11. It should also be noted that the 2009-10 figures are near final, whereas the 2010-11 are estimated and as such will change.

The purpose of revaluation over the five year cycle is to redistribute the tax burden, not to generate additional income.

Business Rates Collected by Local Authority 2009-11

Notes:

1. The figures for 2009-10 are provisional notified amounts; the latest available returns made to the Scottish Government by local authorities.

2. The figures for 2010-11 are provisional contributable amounts; the latest available returns made to the Scottish Government by local authorities.

http://www.scotland.gov.uk/Resource/Doc/917/0098553.pdf.

The report showed the overall cost of a cap at this level, before appeals and reliefs are taken into account, would be around £194 million in 2010-11. To offset the cost would have meant increasing the bills for almost 99,000 properties by a total of £136million. The remaining shortfall of £58 million would have been funded by the Scottish Government. A relief scheme along these lines would have had the further result of shifting £77 million in business rates from largely public sector and large statutory undertakings onto small and medium enterprises and high street properties.

At the time the analysis was carried out for the May report, it was based on rateable values existing at 1 April (the date of the revaluation). The example of a 12.5% cap was illustrated because that is the level traditionally applied for transitional relief (it is, for example, the level that currently applies in England). In the period since then, the basis of the model has shifted as valuation appeals have begun to be settled. It will increasingly shift further as the appeal process gathers pace. Some of the resulting changes are already quite significant. As a result, it would now be misleading to model alternative rate caps using rateable values based on the information that existed at April 2010 which is out of date and therefore no longer valid.