Consultation outcome

Business Rates Improvement Relief: Draft regulations

Updated 14 December 2023

Applies to England

Scope of the consultation

Topic of this consultation:

This consultation seeks views on draft regulations to implement the business rates Improvement Relief scheme.

Scope of this consultation:

The scope of this consultation is limited to whether the draft regulations deliver upon the policy objectives of the Improvement Relief scheme. The policy objectives of the Improvement Relief scheme were considered in Chapter 4 of the Business Rates Review: Technical Consultation and Summary of Responses and are outside of the scope of this consultation.

Geographical scope:

These proposals relate to England only.

Impact assessment:

No impact assessment has been prepared for this consultation as it concerns a local taxation regime and amendments to any tax are excluded from the definition of a regulatory provision (Section 22(4)(a) of the Small Business, Enterprise, and Employment Act 2015)

Basic Information

Body/bodies responsible for the consultation:

Department for Levelling Up, Housing and Communities.

Duration:

This consultation will last for 12 weeks from 5 June 2023.

Enquiries:

For any enquiries about the consultation please contact: ndr@levellingup.gov.uk

How to respond:

You can email your response to the consultation to ndr@levellingup.gov.uk

Written responses should be sent to:

Non-Domestic Rates Team LGF – Local Taxation
Department for Levelling Up, Housing and Communities
SE Quarter - 2nd Floor Fry Building
2 Marsham Street
London
SW1P 4DF

When you reply it would be very useful if you confirm whether you are replying as an individual or submitting an official response on behalf of an organisation and include:

• your name,
• your position (if applicable),
• the name of organisation (if applicable),
• an address (including post-code),
• an email address, and
• a contact telephone number

Improvement Relief

1. Improvement Relief will support businesses wishing to invest in their property. It will ensure that no ratepayer will face higher business rates bills for 12 months as a result of qualifying improvements to a property they occupy.

2. Following the Review of Business Rates, the government announced its intention to bring forward the Improvement Relief Scheme. Detail of how the relief will work was provided in Chapter 4 of the Review’s technical consultation.

3. The policy objective of the relief is to help occupiers make improvements to their existing premises, rather than subsidising general commercial property development. In order to target the relief in this way, the technical consultation described conditions which would have to be met for the relief to apply to a hereditament^{[footnote 1]}:

a. The qualifying works condition. The works should increase the area of any building in or on the hereditament, otherwise improve the physical state of the hereditament or add to it rateable plant and machinery. Therefore, neither a newly constructed hereditament nor a refurbished hereditament (which had left the rating list during the works) will qualify. A change of use alone or the addition of land also will not qualify.

b. The occupation condition. The same ratepayer has been in occupation of the hereditament on each day since the qualifying works commenced. This ensures the support is not diverted to landlords, developers or businesses which have merely inherited the improvements from a previous occupier.

4. These conditions and the policy objectives of the Improvement Relief scheme are explained in the technical consultation and in the government’s response to that consultation. The government intends to capture these policy objectives in the draft regulations at Annex A. The scope of this consultation is limited to whether the draft regulations deliver upon the policy objectives of the Improvement Relief scheme.

5. The relief is scheduled to commence from 1 April 2024 and apply to works completed by 31 March 2028 (with qualifying works completed by that date benefitting from 12 months of relief). The Valuation Office Agency (VOA) will work with local government on the systems and processes necessary to deliver Improvement Relief. We expect the VOA and local authorities to be able to do this in the normal course of business using information they obtain about the property and occupier. This should ensure businesses quickly receive their relief.

Non-Domestic Rating Bill

6. Improvement Relief requires a change in the main legislation governing business rates – contained in Part 3 of the Local Government Finance Act 1988. Therefore, the Non-Domestic Rating Bill currently before Parliament contains provisions to introduce Improvement Relief. The Bill provides for:

a. the conditions which must be met before Improvement Relief can apply^{[footnote 2]}, and

b. a deduction to be made from the rateable value of the property, for the purposes of calculating the rates bill, when Improvement Relief applies^{[footnote 3]}. This deduction will allow for the change in value attributable to the qualifying works to be delayed for 12 months.

7. As is common with many business rates reliefs, the detail of when a property is eligible and how the relief is calculated will be set out in regulations. Those regulations, in draft form, are the subject of this consultation. The government has prepared draft regulations for consultation and to assist Parliament in considering the Non-Domestic Rating Bill.

The Draft Non-Domestic Rating (Improvement Relief) (England) Regulations 2023

8. The Draft Non-Domestic Rating (Improvement Relief) (England) Regulations 2023 are at Annex A. Where necessary, further explanations of the regulations are provided below.

Regulations 1 (Citation, commencement, extent and application) and 2 (Interpretation)

9. The regulations will come into force on 1 April 2024 – the day in which the relief is due to commence. However, the government aims to make and lay the regulations at least several weeks in advance of that date to ensure the smooth introduction of the scheme.

10. The regulations apply to England only. Business rates policy is fully devolved to Wales and whilst the associated parts of the Non-Domestic Rating Bill will also apply to Wales, the Welsh Government will make separate regulations concerning Improvement Relief in Wales^{[footnote 4]}. Entirely different legislation applies in Scotland and Northern Ireland.

11. The qualifying period for the relief (which is defined in regulation 2) is set out in the Non-Domestic Rating Bill and is one year beginning with the day on which the qualifying works are completed.

Regulation 3 (Conditions for Relief)

12. Regulation 3 contains the occupation condition. In doing so the regulations “lift the corporate veil” and ensure that changes in occupation between, for example, subsidiary companies will not count as a change of occupier.

13. Regulation 3 also provides, by reference to “predecessor hereditament”, that the conditions for the relief may still be met where a hereditament splits or merges during the relevant period provided the same person has been in occupation throughout. This ensures that a person may not necessarily lose relief merely because their hereditament has seen a split or a merger^{[footnote 5]}.

Regulation 4 (Meaning of Qualifying Improvement Works)

14. Regulation 4 contains the definition of qualifying improvement works.

15. The Non-Domestic Rating Bill provides that relief can be available on days before 1 April 2029. The government intends for the relief to apply to works completed by 31 March 2028 (with qualifying works completed by that date benefitted from 12 months of relief). The government will review the relief during 2028 and the Non-Domestic Rating Bill contains powers to extend the duration of the relief scheme.

Regulation 5 (Relevant certificate of qualifying improvement works) and Regulation 6 (Calculation of the amount of G)

16. Regulations 5 and 6 provide for the Valuation Officer to certify the value of G which is to be deducted from the rateable value. As discussed above and in the technical consultation, this is the change (if any) in the rateable value which appears to the officer attributable to qualifying improvement works.

17. It is possible that qualifying improvement works also lead to the split or merger of a hereditament and, therefore, the creation of a new hereditament. Regulations 5(4), (5) & (6) ensure that the value in the certificate is concerned with the change in rateable value from the improvement works and not the change in rateable value from the new hereditament being larger (due to a merger) or smaller (due to a split).

Regulation 7 (Certificates: general)

18. It is possible that more than one set of qualifying works apply in relation to the same hereditament. This is especially likely with large hereditaments. The VOA has discussed with local government how best, from an operational perspective, to accommodate such cases and decided to proceed with a single certificate covering multiple works (allowed for in regulation 5(9)).

19. In such cases the certificate will show the amounts certified for the qualifying works, when the qualifying works were completed and when the qualifying period ends in relation to each set of works (regulation 7(10). The value to be deduced G is the sum of the certified amounts (see regulation 6(2)). This will allow ratepayers and local authorities to keep track of large complex properties when each set of qualifying works (and associated certified values) commences and ends.

20. It is also possible that during the 12 month period of the relief, there are further material changes to the property as a result of which the value attributable to the works varies. An example could be where rateable plant and machinery which has been added to the property is removed. Regulation 7(5) & (6) allows for the VOA to, in such circumstances, amend the certificate. The value attributable to the works could also change if, during the 12 month period of relief, a new rating list is compiled (i.e. a revaluation). Regulation 7(7) & (8) allows for the VOA to, in such circumstances, amend the certificate.

21. Regulation 7(13) provides that a copy of the certificate may be sent to the ratepayer by post, electronic communication (e.g. email) or posted on an electronic portal. The VOA, in developing the electronic portal and other means of communication, will consider accessibility to ensure that the service can be used by as many people as possible and that, where it is not possible for a ratepayer to use the portal, alternatives are available.

Question: do you consider the draft regulations deliver the policy objectives of the Improvement Relief scheme as set out in the technical consultation and government response? If not why not?

About this consultation

This consultation document and consultation process have been planned to adhere to the consultation principles issued by the Cabinet Office.

Representative groups are asked to give a summary of the people and organisations they represent, and where relevant who else they have consulted in reaching their conclusions when they respond.

Information provided in response to this consultation may be published or disclosed in accordance with the access to information regimes (these are primarily the Freedom of Information Act 2000 (FOIA), the Environmental Information Regulations 2004 and UK data protection legislation. In certain circumstances this may therefore include personal data when required by law.

If you want the information that you provide to be treated as confidential, please be aware that, as a public authority, the Department is bound by the information access regimes and may therefore be obliged to disclose all or some of the information you provide. In view of this it would be helpful if you could explain to us why you regard the information you have provided as confidential. If we receive a request for disclosure of the information we will take full account of your explanation, but we cannot give an assurance that confidentiality can be maintained in all circumstances. An automatic confidentiality disclaimer generated by your IT system will not, of itself, be regarded as binding on the Department.

The Department for Levelling Up, Housing and Communities will at all times process your personal data in accordance with UK data protection legislation and in the majority of circumstances this will mean that your personal data will not be disclosed to third parties. A full privacy notice is included below.

Individual responses will not be acknowledged unless specifically requested.

Your opinions are valuable to us. Thank you for taking the time to read this document and respond.

Are you satisfied that this consultation has followed the consultation principles? If not or you have any other observations about how we can improve the process please contact us via the complaints procedure.

Personal data

The following is to explain your rights and give you the information you are entitled to under UK data protection legislation.

Note that this section only refers to personal data (your name, contact details and any other information that relates to you or another identified or identifiable individual personally) not the content otherwise of your response to the consultation.

1. The identity of the data controller and contact details of our Data Protection Officer

The Department for Levelling Up, Housing and Communities (DLUHC) is the data controller. The Data Protection Officer can be contacted at dataprotection@levellingup.gov.uk or by writing to the following address:

Data Protection Officer
Department for Levelling Up, Housing and Communities
Fry Building
2 Marsham Street
London
SW1P 4DF

2. Why we are collecting your personal data

Your personal data is being collected as an essential part of the consultation process, so that we can contact you regarding your response and for statistical purposes. We may also use it to contact you about related matters.

We will collect your IP address if you complete a consultation online. We may use this to ensure that each person only completes a survey once. We will not use this data for any other purpose.

Sensitive types of personal data

Please do not share special category personal data or criminal offence data  if we have not asked for this unless absolutely necessary for the purposes of your consultation response. By ‘special category personal data’, we mean information about a living individual’s:

• race
• ethnic origin
• political opinions
• religious or philosophical beliefs
• trade union membership
• genetics
• biometrics
• health (including disability-related information)
• sex life; or
• sexual orientation.

By ‘criminal offence data’, we mean information relating to a living individual’s criminal convictions or offences or related security measures.

3. Our legal basis for processing your personal data

The collection of your personal data is lawful under article 6(1)(e) of the UK General Data Protection Regulation as it is necessary for the performance by DLUHC of a task in the public interest/in the exercise of official authority vested in the data controller. Section 8(d) of the Data Protection Act 2018 states that this will include processing of personal data that is necessary for the exercise of a function of the Crown, a Minister of the Crown or a government department i.e. in this case a consultation.

Where necessary for the purposes of this consultation, our lawful basis for the processing of any special category personal data or ‘criminal offence’ data (terms explained under ‘Sensitive Types of Data’) which you submit in response to this consultation is as follows. The relevant lawful basis for the processing of special category personal data is Article 9(2)(g) UK GDPR (‘substantial public interest’), and Schedule 1 paragraph 6 of the Data Protection Act 2018 (‘statutory etc and government purposes’). The relevant lawful basis in relation to personal data relating to criminal convictions and offences data is likewise provided by Schedule 1 paragraph 6 of the Data Protection Act 2018

4. With whom we will be sharing your personal data

DLUHC may share your data with His Majesty’s Treasury and the Valuation Office Agency. DLUHC may appoint a ‘data processor’, acting on behalf of the Department and under our instruction, to help analyse the responses to this consultation. Where we do we will ensure that the processing of your personal data remains in strict accordance with the requirements of the data protection legislation.

5. For how long we will keep your personal data, or criteria used to determine the retention period.

Your personal data will be held for two years from the closure of the consultation, unless we identify that its continued retention is unnecessary before that point.

6. Your rights, e.g. access, rectification, restriction, objection

The data we are collecting is your personal data, and you have considerable say over what happens to it. You have the right:

a. to see what data we have about you

b. to ask us to stop using your data, but keep it on record

c. to ask to have your data corrected if it is incorrect or incomplete

d. to object to our use of your personal data in certain circumstances

e. to lodge a complaint with the independent Information Commissioner (ICO) if you think we are not handling your data fairly or in accordance with the law. You can contact the ICO at https://ico.org.uk/, or telephone 0303 123 1113.

Please contact us at the following address if you wish to exercise the rights listed above, except the right to lodge a complaint with the ICO: dataprotection@levellingup.gov.uk or Knowledge and Information Access Team, Department for Levelling Up, Housing and Communities, Fry Building, 2 Marsham Street, London SW1P 4DF.

7. Your personal data will not be sent overseas.

8. Your personal data will not be used for any automated decision making.

9. Your personal data will be stored in a secure government IT system.

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1. A hereditament is a unit of property assessed for business rates. ↩

2. See paragraph 3 of the new Schedule 4ZA introduced by Clause 1 of the Non-Domestic Rating Bill. Similar provisions also apply to the central rating list through Clause 3. ↩

3. See paragraphs 10(2), (7) and (8) of the new Schedule 4ZA introduced by Clause 1 of the Non-Domestic Rating Bill. Similar provisions also apply to the central rating list through Clause 3. ↩

4. Although regulation 1(2) states that the regulations “extend” to England and Wales, this is a legal term which means that the jurisdictions which the regulation forms part of the law of covers England and Wales. In other words, it notes that England and Wales share a common legal framework for business rates. It does not mean that the effect of the regulations extends to Wales. ↩

5. For example where part of the hereditament not associated with the qualifying works is taken into separate occupation and split out during the 12 month period of relief. ↩