Transitional Relief
Some ratepayers may have witnessed dramatic changes in their rates bill in 2005, if this has occured it will probably be affected by transitional arrangements. Transitional arrangements soften the impact of revaluation by phasing in the changes to the rates bill over a period of time. Different transitional arrangements will apply, depending on whether your bill has increased or decreased and whether your business is classed as small or large.
The transition scheme for the period April 2005 to March 2010 was confirmed in December 2004, and operates over a four year period. Every ratepayer will pay their true liability in the fifth year and many will pay it well before this.
Transition can also affect your rates bill if a reduction from a later date, is certified by the Valuation Office that it should have taken effect from the beginning of the Rating List, but the list cannot be updated due to backdating restrictions.
If your bill receives a Transitional Adjustment, the amounts you pay is based on a net amount, calculated by increasing the previous years rate bills, not the true gross rates payable (Rateable Value X multiplier). A Rateable Value reduction for an account with Transitional Relief will only reduce the gross rates payable, not the net amount that you are actually paying.
How the current Transitional Scheme Works:
Calculating transitional adjustment can be quite complicated. The information below is for guidance only and is designed to give a general overview as to how the scheme works.
For example, in very simple terms, transitional adjustment for the 2005 Rating List is calculated by, comparing the charge for 2004/5, with the charge for 2005/6
This is done by taking the amount of rates payable on the day of 31 March 2005 and converting this into an annual figure. Likewise the amount of rates payable on the day 1 April 2005, is converted into an annual figure (using the lower multiplier).
Deciding what level of transitional relief should apply
If a property has a Rateable Value of £15,000 or more and is facing an increase in it’s bill, it is classed as a Large Loser
If a property has a Rateable Value of £15,000 or more and is facing a decrease in it’s bill, it is classed as a Large Gainer
If a property has a Rateable Value of less than £15,000 and is facing an increase in it’s bill, it is classed as a Small Loser
If a property has a Rateable Value of less than £15,000 and is facing a decrease in it’s bill, it is classed as a Small Gainer
Deciding by what percentage the bill is allowed to increase or decrease
Once we have found out what level of relief should apply, we then take the annual figure for 2004/5 and increase or decrease it by the appropriate percentage that is determined by the Government in the table below.
Transitional Scheme 2005 - 2010 | ||||
Year | Ratepayer is WORSE OFF following revaluation (Losers) | Ratepayer is BETTER OFF following revaluation (Gainers) | ||
2005/6 2006/7 2007/8 2008/9 2009/10 | Large properties (rateable Value £15000 or over) | Small Properties (rateable value under £15000) | Large properties (rateable Value £15000 or over) | Small Properties (rateable value under £15000) |
12.5% 17.5% 20% 25% Not applicable | 5% 7.5% 10% 15% Not applicable | 12.5% 12.5% 14% 25% Not applicable | 30% 30% 35% 60% Not applicable | |
Applying an adjustment for inflation
Once the percentage increase is applied to last years charge, we have to add an adjustment for inflation. This is the level of inflation as at the previous September. For example for 2005/6 the rate of inflation is 3.1%.
What will be the final adjustment?
After we have calculated the change to your bill we will be limited to the percentage increase or decrease by the limits set out by the Government.
This means that increases for large losers is limited to 15.6% and 8.1% for small losers. Likewise the decreases are limited to 15.6% for large gainers and 33.1% for small gainers.
The resulting figure is known as the transitional amount
Deciding whether a Transitional Adjustment applies
For losers (businesses that are worse off) where the transitional amount is still less than the gross rates payable (Rateable Value 2005 x Multiplier), then relief will be deducted from the bill equal to the difference between these two amounts.
If the gross charge is lower than the transitional amount, no relief applies.
For gainers (businesses that are better off) where the transitional amount is still more than the gross rates payable (Rateable Value 2005 x Multiplier), then an adjustment will be made to the bill equal to the difference between these 2 amounts.
If the gross charge is higher than the transitional amount, no relief applies.
Future years
For future years, i.e., 2006/7, 2007/8 and 2008/9, the Transitional Amount for the previous year is then increase/decreased by its appropriate percentage (see above table) until it no longer qualifies for relief. The change in Rateable Value will then have been phased in and the bill will revert to the standard charge of Rateable Value x Multiplier.
In 2009/10, all businesses will be paying the standard charge.
Changes in Rateable Value
If your Rateable Value is changed, we will have to recalculate your entitlement to transitional relief. It is quite possible that a reduction in your Rateable Value may not result in an immediate reduction in your bill.
Is my relief correct?
If you would like us to check that your calculation is correct, please contact us at Business Rates.
There is no right of appeal against transitional relief. It is part of Business Rates legislation and we have no powers to change or waver it.
More details regarding the re-valuation of rateable values and the transitional relief scheme can be found at www.mybusinessrates.gov.uk
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