Business Rates Retention Scheme - Local Government … · 4 Setting up the retention scheme •...

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A STEP-BY-STEP GUIDE

Business Rates Retention Scheme

September 2012

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Overview

• Setting up the retention scheme

• Running the retention scheme

• 2013‐14

• and beyond

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Setting up the retention scheme

Start‐up funding allocation (essentially formula grant for 2013‐14 + rolled in grants)

split in two

RSG Rate retention scheme

fixed in 13/14 and fixed in 13/14 at a level which scaled back for 14/15 is equivalent to 50% of the

aggregate rates income. Thereafter, dependent on growth

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• Local Government Finance Report for 2013‐14 will set out for each authority

(A) A baseline funding level

(B) An individual authority business rate baseline

• The difference between (A) and (B) determines tariffs and top‐ups

– If the individual authority business rate baseline is greater than the baseline funding level, the difference will be paid to central government as a tariff

– If the individual authority business rate baseline is less than the baseline funding level, the difference will be paid to the authority by central government as a top‐up payment

• Local Government Finance Report will set out how baseline funding levels and individual authority business rates baselines have been calculated.

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• Baseline funding level – essentially the “formula grant” distribution of the proportion of “start‐up funding” within the rates retention scheme

• Individual authority business rates baseline –

Estimated aggregate business rates for England for 2013‐14

Multiplied by: local share (50%)

EQUALS: Aggregate local share

Multiplied by: each billing authority’s proportionate share

EQUALS: Billing authority baseline

Shared between billing and major precepting authorities to give individual authority business rates baselines:

18% to county council 80% to billing authority 2% to FRA

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Running the retention scheme 2013-14

BEFORE START OF YEAR DURING THE YEAR AFTER YEAR‐END

Forecasting BR income

Calculating shares

Budget setting

Schedules of payment

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Forecasting BR Income Calculating Shares Budget Setting Schedules of Payment

• Rateable Value (at 30 Sept) x small business multiplier for 2013‐14

(adjusted to reflect authority’s view of growth, or decline over the year based on local intelligence)

• Plus:‐• Additional yield from “larger” businesses to finance small business rate relief• Additional yield as a result of the deferral scheme

• Less:‐• Small business rate relief• Mandatory and discretionary relief• Rates collected in enterprise zones, new development deal areas and from renewable energy

schemes• Cost of collection• City of London offset

• Provisions for:‐• Bad debt• Losses on Appeal

ALL FIGURES IGNORE THE IMPACT OF TRANSITIONAL RELIEF

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• BR income forecast to be set out in NNDR1

• NNDR1s to be sent to billing authorities in early November 2012

• By mid‐December, provisional NNDR1s to be sent to:• Department of Communities and Local Government (DCLG)• A billing authority’s major precepting authorities (County Council, FRA, GLA)

• By 30 January 2013, billing authority must secure council approval of NNDR1 and confirm approval to DCLG and its major precepting authorities

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Forecast of BR income (provided in NNDR1)MULTIPLIED BY:

• 50% ‐ equals the “central share” to be paid to DCLG during the course of 2013‐14

• 40% ‐ equals the business rate income to be retained by the billing authority in 2013‐14

• 9% ‐ equals the business rate income to be paid by the billing authority to its county council in 2013‐14 (2‐tier areas)

• 1% ‐ equals the business rates income to be paid to a single‐purpose FRA in 2013‐14

IN LONDON

• 50% equals the “central share” to be paid to DCLG during the course of 2013‐14

• 30% equals the business rate income to be retained by the billing authority in 2013‐14

• 20% equals the business rate income to be paid by the billing authority to the GLA in 2013‐14

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Billing authorities:

• 40% of the forecast business rates income (NNDR 1)

• Plus/minus top‐up/tariff (and any income from Enterprise Zones or renewables)

Major precepting authorities:

• Share of forecast business rates income due from each of its billing authorities (NNDR 1s)

• Plus/minus top up/tariff

All authorities:

• Safety net payments on account

{safety net baseline for the year} minus {BR income +/‐ top‐up/tariff}

• Levy payment

[{BR income +/‐ top‐up/tariff} minus {baseline funding level for the year}] x levy rate

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DCLG

Calculates:• sum due in respect of central share• sum due to/from billing authority in respect of transitional protection payments• sum due to/from authorities in respect of tariff and top‐ups• sum due to authorities in respect of any provisional safety net payment

Notifies billing authority of:• Aggregate sum due• Number of instalments to be set out in regulations• Timing of instalments

Billing authority/major precepting authority

Agrees:• sum due to the precepting authority• Number of instalments default arrangements to be • Timing of instalments set out in regulations

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Payments to/from the collection fund

Payments to/from the general fund

Recalculating business rates income

Forecasting surpluses/deficits

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Collection Fund Payments General Fund Payments Recalculating BR Income Forecasting Surpluses/Deficits

business rates transitional protection

receipts payments

payments to business in respect of appeals

billing authority

collection fund

payment of central share payments to major precepting transfer to BAto central government authorities general fund

(all payments as set out in schedules of payment before the start of the year)

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business ratesreceipts

payment of central share payments to major precepting transfer to BAto central government authorities general fund

What is transferred?

• Billing authority’s 40% of forecast BR income (as set out in schedules of payment)PLUS

• Allowance for cost of collection• Elements of income that are to be retained by billing authority in their entirety:

• EZs, NDDs, Renewable Energy projects

billing authority collection fund

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receipts from billing authority collection fund

safety net payment levy payment

from central government to central government

billing authority /precepting authority

general fund

top‐up payment from central government

tariff payment to central government

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• At a set point in the year billing authorities will be required to re‐forecast their business rates income for the year

• Forecasts will need to be notified to DCLG and the billing authority’s major precepting authority/ies

• Forecasts will give early indication to major precepting authorities of the likely size of the surplus/deficit on the collection fund for the year.

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• In December – at the same time as completing provisional NNDR 1 for 2014‐15 – billing authorities will need to:

• Forecast their outturn business rates receipts for 2013‐14

• Estimate the likely surplus/deficit on the collection fund

• When sending provisional NNDR 1 for 2014‐15, billing authorities must also notify the estimated collection fund surplus/deficit to DCLG and their major precepting authorities

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Providing outturn data

Calculating levy and safety net payments

Calculating transitional protection

Making payments

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Providing outturn data Levy/Safety net calculations Transitional protection calculations Making payments

• June 2014 – billing authorities to provide outturn data in NNDR3 format

• NNDR3 to detail:• Amounts payable in 2013‐14 under sections 43 and 45 LGFA 1988 and including the effect of

prior year changes(FIGURES IGNORE IMPACT OF TRANSITIONAL RELIEF)

• NNDR3 will also ask for detail of:• reliefs (including transitional relief)• sums payable in respect of EZs, NDDs, renewable energy schemes, • sums written off etc

• NNDR3 to be ‘certified’ by auditor

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• NNDR3 data used to calculate levy and safety net payments due in respect of 2013‐14

• Step 1 calculates ‘allowable income’ as follows:

• Amounts payable for 2013/14, less repayments in respect of previous years• LESS EZ, NDD and renewable energy scheme income• PLUS amount of ‘Localism Act’ discretionary relief given

• Step 2 apportions the ‘allowable income’ between billing and precepting authorities as appropriate:

• 40% to billing authority• 9% to county council • 1% to FRAs

• IN LONDON: 30% to billing authority and 20% to GLA

(for a precepting authority, the share of allowable income from each of its billing authorities will then be aggregated)

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• Step 3, for all authorities, adds/subtracts the top‐up or tariff paid to or by the authority to give ‘retained rates income’ for every authority for 2013‐14

• Step 4 performs the levy or safety net calculation for each authority

Safety net calculation:

safety net baseline for the year* MINUS retained rates income*[baseline funding for the year x (1 – safety net threshold)]

Levy calculation

(retained rates income MINUS baseline funding level for the year) x levy rate**

**1 ‐ baseline funding level for the yearindividual authority business rates baseline

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• NNDR3 will ask billing authorities for details of:

• Amount of transitional relief given• Any additional income collected as a result of the transitional arrangements

• The sum of these amounts will determine the transitional protection payment due to/from the billing authority in respect of 2013‐14

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• On receipt of NNDR3, DCLG will calculate sums due for:• Levy • Safety net• Transitional protection

• Sums due in respect of safety net and transitional protection will be compared against amounts paid to/by the authority under the schedule of payments agreed at the beginning of 2013‐14

• Any difference in those figures, together with sums due in respect of the levy, will be notified to authorities.

• Following a period during which the authority can query the calculation, the sums notified will need to be paid.

• Payments in respect of 2013‐14 will then be made in financial year 2014‐15

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Running the retention scheme – beyond 2013-14

In future years the process will be the same as 2013‐14, except:

• Tariffs, top‐ups and baseline funding levels (used in the calculation of levy and safety net payments) will ALL be index linked to RPI

• Following submission of NNDR1s, central share payments and payments to major precepting authorities will be calculated by applying the relevant ‘shares’ to the sum of:

Forecast BR income for the year (from NNDR1)

PLUS

Forecast surplus/deficit on the collection fund

at the end of the previous year

Business Rates Retention Scheme - Local Government … · 4 Setting up the retention scheme •...

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