Consultation outcome

Business Rates Revaluation 2023: Consultation on the transitional arrangements

Updated 17 November 2022

Applies to England

Scope of the consultation

Topic of this consultation:

This consultation seeks views on the transitional arrangements to be adopted at the 2023 revaluation.

Scope of this consultation:

The scope of this consultation is limited to the format of the transitional arrangements for the 2023 revaluation as set out in the questions below. The scope of the consultation does not extend to the level of transitional relief and the rateable value thresholds for the different levels of relief which will be decided in the Autumn once the outcomes of the revaluation are known. Other relief schemes, such as the Supporting Small Business relief, are also outside of the scope of the 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 8 weeks from 30 May 2022.

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

1. Business rates revaluations

1. Business rates revaluations update rateable values, and therefore, rates bills to reflect changes in the rental market. This helps ensure that shifts in economic activity which have driven changes in market values are fairly reflected in business rates liabilities.

2. The final report of the government’s Review of Business Rates announced that the frequency of revaluations would be increased to 3 yearly starting from the next revaluation in 2023. The next revaluation of properties for business rates will, therefore, take effect from 1 April 2023 based on the rental market at 1 April 2021. The move to 3 yearly revaluations will make the system fairer and more responsive for all ratepayers, meaning bills will more closely reflect current rental values. Some stakeholders in the Business Rates Review also suggested that more frequent revaluations could reduce the need for and scope of future transitional arrangements.

3. It is too early to know the result of the 2023 revaluation. However, the government is required by law to introduce at each revaluation transitional arrangements which we have previously used to support businesses to adjust to their new bills. Therefore, this consultation seeks views on the format of the transitional arrangements for the 2023 revaluation. The government will then have regard to the responses to the consultation before deciding in the Autumn upon the transitional arrangements to be adopted once the revaluation outcomes are known.

4. The transitional arrangements are calculated based on changes in gross rates bills before changes to other reliefs. In the past the government has also introduced a separate relief scheme (called Supporting Small Business relief) to help those ratepayers losing other reliefs as a result of the revaluation. The government will separately consider whether to introduce a scheme such as Supporting Small Businesses in the Autumn of 2022 once the outcomes of the revaluation are known. Whether to introduce or continue other relief schemes, such the Supporting Small Business relief, is outside the scope of this consultation.

5. In July 2020 the government published a call for evidence as part of its review of business rates which, in part, sought views on the transitional arrangements scheme in the context of moving to more frequent revaluations. A summary of the responses to that in respect of the transitional arrangements was included in the interim report to the review (at paragraph 3.24 to 3.22).

6. Since their introduction in 1990, the format of the transitional arrangements have been designed to provide support to businesses facing increases in their bills. Consultations have considered different changes to the transitional arrangements with common considerations for each scheme but broadly speaking, only the level of support provided has varied following fiscal decisions made by the Exchequer. Therefore, the government will on conclusion of this consultation review whether continued consultations at future revaluations are necessary for the transitional arrangements.

2. The role of the transitional arrangements

7. Revaluations serve an important role in the rating system by ensuring rates bills reflect the up to date value of properties. They, therefore, ensure everyone pays the correct and fair share of business rates.

8. For some ratepayers – broadly speaking those whose rental values have been falling in comparison to the national average – the revaluation will mean reductions in bills. But inevitably other ratepayers – broadly speaking those whose rental values are doing better than the average – see their rate bills rise at the revaluation. The transitional arrangements have been used at previous revaluations to provide that these changes in bills are gradual and phased in over time.

9. By law the government are required to have a transitional arrangements scheme at each revaluation. That legislation also requires the government to have regard to the object of securing (so far as practicable) that the aggregate amount of business rates collected is unaffected by the transitional arrangements scheme.

10. Therefore, there is a trade-off in the design of the transitional arrangements between allowing the full impacts of the revaluation to feed through into rate bills quickly or dampening the effects of the revaluation over time. A more generous transitional arrangements scheme provides more support to those facing increases (i.e. those whose rental values have grown beyond the average) but means the effects of the revaluation are felt more slowly – so it takes longer for ratepayers to move to the right bills.

Question 1: how do you believe the government should strike the balance in the 2023 transitional arrangements between supporting ratepayers facing increases to their bills and allowing the effect of the revaluation to flow through into bills?

3. Transitional relief

11. Typically, the transitional arrangements have capped increases in bills due to the revaluation at a set percentage level each year – these caps on increases are known as “transitional relief”. Previous schemes have included different caps for different sizes of properties recognising that, generally speaking, occupiers of smaller properties are less likely to be able to manage large increases in their rates bills. For example, in 2017 the following caps on increases were adopted:

Transitional Arrangements 2017 revaluation (before inflation) caps on increases (upwards cap)

Property Size 2017/18 2018/19 2019/20 2020/21 2021/22
Small 5.00% 7.50% 10.00% 15.00% 15.00%
Medium 12.50% 17.50% 20.00% 25.00% 25.00%
Large 42.00% 32.00% 49.00% 16.00% 6.00%

Note: these are year on year caps on increases. For instance, the maximum increase for small properties over 5 years would be 64%. But a small property with an increase of 7% would reach their full bill in year 2.

Medium is above £28,000 rateable value in London and £20,000 elsewhere. Large above £100,000.

12. This type of transitional relief scheme gives all ratepayers a degree of certainty over their new bill. Ratepayers may still see their bill change for other reasons but it does provide a relatively simple assurance to ratepayers about the annual change in their bills due to the revaluation. However, this type of transitional relief scheme does mean that all ratepayers (within size categories) see their increases capped at the same percentage irrespective of the underlying increase in their full rates bill.

13. Some practitioners have suggested the scheme should be redesigned so that all ratepayers reach their full bill by the end of the rating list irrespective of the size of increases that might involve. For the future three yearly rating cycle, such a scheme could take ratepayers to their full bill in even steps – i.e. paying one third of their increase in the first year, two thirds in the second year and their full bill in the third year. Under that approach, transitional relief would end after the 2nd year. This approach would ensure all ratepayers transition to their full bill within the life of the list. However, it also means that compared to most caps in previous ‘capped’ schemes, such an approach would provide less relief to those ratepayers most affected by the revaluation. It would also be more complicated than the previous schemes.

Question 2: what format of transitional relief do you think should be provided for the 2023 revaluation?

Question 3: do you think that we should continue to provide assurances through transitional relief that bills will not rise by more than a set percentage due to the revaluation?

Question 4: do you think we should provide different caps for different sizes of properties?

14. The level of relief and the rateable value thresholds for the different levels of relief will be decided in the Autumn once the outcomes of the revaluation are known and is outside the scope of this consultation.

4. Funding transitional relief

15. When introducing a transitional relief scheme the government must have regard to the object of securing (so far as practicable) that the scheme is revenue neutral over its life.

16. To meet this requirement the government has at previous revaluations applied caps on reductions as well as on increases in bills. As with transitional relief, different caps on reductions have in the past been adopted for different sizes of properties. For example, in 2017 the following caps on reductions were applied to bills:

Transitional Arrangements 2017 revaluation (before inflation) caps on reductions (downwards cap)

Property Size 2017/18 2018/19 2019/20 2020/21 2021/22
Small 20.00% 30.00% 35.00% 55.00% 55.00%
Medium 10.00% 15.00% 20.00% 25.00% 25.00%
Large 4.10% 4.60% 5.90% 5.80% 4.80%

Note: these are year on year caps on increases.

Medium is above £28,000 rateable value in London and £20,000 elsewhere. Large above £100,000.

17. This approach ensures that those who are seeing the greatest reductions at the revaluation meet the cost of funding the transitional arrangements, recognising that those ratepayers are best placed to meet the cost – because they have seen a fall in their rates bill. However, this approach does also mean that the cost of transitional relief is met in large part by a relatively small number of ratepayers.

18. Alternatively, the government has previously considered meeting the cost of transitional relief by applying a supplement to the rate bills of other ratepayers. In effect this would mean an increase to the business rates multipliers - so some ratepayers would pay a higher multiplier to fund upwards transitional arrangements. The level of the supplement would depend on the outcomes of the revaluation and the cost of the transitional relief.

Question 5: what are you views on how we should fund transitional relief within the requirement for the government to have regard to the object of securing (so far as practicable) that the scheme is revenue neutral over its life?

Question 6: do you have any other views on the format of the transitional arrangements for the 2023 revaluation?

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 of 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.

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

We may share your data with the 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.