Correspondence

4/2023: The Non-Domestic Rating Act 2023

Published 1 November 2023

Applies to England

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To: Chief Finance Officers of English Billing Authorities - For the attention of the Business Rates section

From: Non-Domestic Rates Team, LGF - Local Taxation, Department for Levelling Up, Housing and Communities (ndr@levellingup.gov.uk)

Date: 31 October 2023

Business Rates Information Letter (4/2023): The Non-Domestic Rating Act 2023 

This is the fourth business rates information letter to be issued by the Department for Levelling Up, Housing and Communities this year. 

See previous letters and archived letters.

This letter covers the Non-Domestic Rating Act 2023.

The Non-Domestic Rating Act 2023 

In the last BRIL we provided an update on the progress of the Non-Domestic Rating Bill. That Bill, which delivers reforms to the business rates system following the government’s recent review of the tax, became the Non-Domestic Rating Act 2023 on 26 October, having received Royal Assent before the prorogation of Parliament. 

As a result of the Act, the law is changing in a number of areas, with changes expected to come into force at different times:

New mandatory reliefs 

From 1 April 2024, and subject to regulations, improvement relief will come into effect and heat networks relief will become mandatory. The government will, ahead of billing for the next financial year, make regulations setting out the conditions and details of both reliefs.

Improvement relief  

Section 1 of the Act provides the overarching framework for the relief. The draft regulations were published and consulted on by the government between June and August. The draft regulations set out detailed proposals for the conditions to be met, including the occupation condition and the definition of qualifying works, and the government will respond to the consultation to confirm any changes and lay the finalised regulations ahead of the billing cycle. 

The Valuation Office Agency (VOA) is currently working with a number of local authorities to understand the best design for the systems and processes to provide certified values. Further engagement and communications on this aspect will follow in due course from the VOA.

Heat networks relief

The scheme has been provided through section 47 discretionary relief since 1 April 2022. The parameters and conditions for accessing the relief will remain unchanged once the relief becomes mandatory.

Other relief changes 

From Royal Assent, the restriction preventing billing authorities from making a decision to award discretionary relief more than 6 months after the end of the relevant financial year has been removed.

Please note the following correction: in our last BRIL we stated incorrectly that authorities would be able to operate relief without the restriction from 1 April 2024 “in respect of the financial year 2024/25 onwards”. The correct position is that from 1 April 2024 there will be no restriction in respect of the financial year 2023/24 onwards.

The government will, ahead of billing for the 2024/25 financial year, revoke the Non-Domestic Rating (Discretionary Relief) Regulations 1989 to give billing authorities full flexibility in this area from 1 April 2024.

From Royal Assent, the requirement for transitional relief schemes to be self-financing has been removed, and the government has confirmed the scrapping of ‘downwards caps’. The Act also removes the 4th and 5th year of the current transitional relief scheme including the supplement in year 5. 

Charitable rate relief and – subject to planned regulations – unoccupied rate relief will be available to properties on the central rating list with effect from 1 April 2024.

Valuation

From Royal Assent, business rates revaluations will occur every 3 years rather than every 5, beginning in 2026. 

From Royal Assent, the grounds for a ‘material change of circumstances’ (MCC) have been amended: changes in legislation, licensing regimes and guidance from public bodies should no longer lead to a property’s rateable value changing between revaluations.

Information sharing

The following measures are all subject to commencement provisions unless otherwise stated: 

To support the delivery of more frequent revaluations, ratepayers will be under a duty to provide information to the Valuation Office Agency about themselves, their hereditament, and their business. To support the linking of tax and property data, ratepayers will also be required to provide HMRC with a taxpayer reference number (such as a self-assessment or corporation tax unique reference number). These duties will be operated through a single online service and their introduction will follow a soft launch, a public information campaign and user testing. 

A new gateway will be introduced to support data sharing between HMRC and billing authorities, as part of the government’s wider plans to link tax and property data in order to modernise business rates and provide central and local government with a more holistic view of businesses. This is expected to be commenced alongside other HMRC data-sharing provisions. 

The VOA will be able to share greater information with ratepayers about how their valuation was determined. And from 2 months after Royal Assent, a gateway to enable the sharing of certain valuation data between officials in the VOA and Northern Ireland’s Department of Finance will be in place.

Administration

From 2 months after Royal Assent, billing authorities will be able to serve a completion notice on refurbished buildings and return them to the rating list, using the same procedure as for new buildings. 

Ahead of billing for the 2024/25 financial year, the government will commence provisions to ensure that annual increases in the small business multiplier and the national non-domestic multiplier are automatically linked to the Consumer Prices Index (CPI) rather than the Retail Prices Index (RPI). The government will be able to provide by regulations that either multiplier is indexed by a figure less than CPI, and to determine by regulations which ratepayers are entitled to the small business multiplier in England. 

Subject to commencement regulations, the government will be able to administer the central rating list through powers of direction rather than by the more cumbersome regulations process. We anticipate preparing these directions during 2024/25 so that they may come into force on 1 April 2025. 

From Royal Assent, the legislation concerning the main non-domestic rating account, which shows how business rates income has been paid by local authorities to the government, has been adjusted to correct a flaw which led to a credit erroneously being shown in the account.

Annex A: Summary of implementation for Non-Domestic Rating Act 2023

From Royal Assent

  • Three-yearly revaluations
  • No deadline after end of financial year for determining award of discretionary relief
  • No requirement for transitional relief schemes to be self-financing and removal of years 4 and 5 of the current transitional relief scheme
  • Amendment of MCC provisions

From 2 months post-Royal Assent

  • Completion notices for refurbished buildings
  • Gateway for VOA to share information with Northern Ireland rating officials

Effective from 1 April 2024

  • Improvement relief
  • Heat networks relief
  • Charitable rate relief and – subject to regulations – unoccupied rate relief available to properties on the central rating list
  • Multipliers linked by default to CPI inflation.
  • Non-Domestic Rating (Discretionary Relief) Regulations 1989 revoked

Subject to future commencement regulations

  • Duties on ratepayers to provide information to the VOA and HMRC
  • Gateways for:
    • VOA to share information with ratepayers
    • HMRC to share information with billing authorities
  • Powers of direction to administer central rating list

Annex B: Background documents

The following documents are relevant to the Act: 

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