Decision details

The authority is required under paragraph 40 of schedule 1 to the Local Government finance Act 2012 to make calculations, and supply information on their anticipated collectable business rate income for the following year. This report sets out the calculations and seeks approval by the Council’s Chief Financial Officer. These figures will form part of the funding in relation to the Council’s 2019/20 budget.

The Local Government Finance Act 2012 amended the 1988 Local Government Finance Act to give local authorities the power to retain a proportion of funds obtained from business rates collected in their area.

The Department for Communities and Local Government guidance requires each billing authority should formally set a Business Rate baseline each year. This baseline will be the authority’s estimate of the business rates it forecasts to collect in the following financial year, net of any reductions such as reliefs and the estimated cost of appeals.

The Government introduced pilot schemes in 2017/18 in advance of permanent reforms to business rate retention later in the parliament. Initially only authorities with signed devolution deals were eligible to participate in a pilot in 2017/2018. However new pilots were created for 2018/2019. The pilot for the West of England (WoE) commenced in 2017/2018 and includes Bath & North East Somerset Council, Bristol City Council, South Gloucestershire Council and the West of England Combined Authority.

The 100% pilot gives the WoE the opportunity to retain 100% of any business rates growth over the next two to three years, with no downside financial risk when compared to remaining in the national system. It also gives the WoE the opportunity to help shape the national scheme.

In line with the Government’s stated intention for the reforms to the Business Rate Retention system, authorities participating in a pilot will not have to pay a Levy on growth above their Retained Income target and will retain an increased Local Share of Non-Domestic Rating Income and sums due from Government paid via Section 31 grant. The Pilot includes the rolling in of the Revenue Support Grant with the WECA receiving a small share of the business rates to reflect the rolling in of the DfT Integrated Transport Block and Highways Maintenance Capital Grants; this is shown in Table 1 below.

In line with the approval process for the Council Tax Base, the decision on the Business Rate forecast is delegated to the Council’s Chief Financial Officer. The Ministry of Housing, Communities &
Local Government requires the council to submit details of its forecast through a statutory return called the NNDR1. This return must be submitted by 31st January 2019.

The estimated business rate income for 2019/20 is £65.454m; of this the Council retains £22.547m after the tariff payment to the Government is taken into account. A breakdown is shown in Table 1 below.

Table 1 Business Rate Distribution

Anticipated Business Rate Distribution 2019/20
£m
Bath & North East Somerset Council Business Rate Income (Total business rates collected after deductions) 65.454
Central Share to Government 0.000
5% Share to WoE Combined Authority (3.273)
1% Share to Avon Fire Authority (0.655)
Deductions for Tariff (38.980)
Bath & North East Somerset Council estimated retained Business Rates 22.547

At recent spring and autumn Budget Statements, the Government announced the below measures that affect the business rates income of Local Authorities in 2019/20 and 2020/21. These changes are:

• Bills will be cut by one-third for retailers, retailers including shops, cafes and restaurants in England properties with a rateable value below £51,000, benefiting up to 90% of retail properties, for 2 years from April 2019, subject to state aid limits.

• 100 per cent business rates relief for all public lavatories will be introduced from 2020/21.

• The government will continue the £1,500 business rates discount for office space occupied by local newspapers in 2019/20.

Local authorities will be fully compensated for the loss of income as a result of
these business rates measures.



In addition to the above recent measures, in past years the Government announced a series of measures that continue to affect the business rates income of Local Authorities in 2019/20. These changes were:

i. Capping the increase in the business rates multiplier at CPI instead of RPI with effect from 1 April 2018

i. A discretionary relief scheme that will last four years to provide relief to the ratepayers facing significant increase in their bills following revaluation

ii. Capping the increase in the business rates multiplier at 2% in both 2014/15 and 2015/16 (rather than it increasing in line with September RPI increases of 3.2% and 2.3%)

ii. A Supporting small business rates relief scheme to support those rate payers who lost all or some of their small business or rural rate relief due to revaluation


iii. The doubling of Small Business Rate Relief made permanent from 1st April 2017 with changes to eligibility thresholds

iv. The doubling of rural rate relief to be awarded through discretionary relief until such time as the Government can make the necessary changes to primary legislation

All the above measures will be compensated through payment of a section 31 grant. The Council has estimated the impacts of these reliefs and has included the estimate of grant income in its 2019/20 budget.

The Council’s budget for 2019/20 also reflects transactions relating to the business rate pooling arrangements within the West of England City Region Deal agreement. These arrangements have been set out in previous budget reports.

The Section 151 Officer is required to estimate the amount of any surplus or deficit on the Collection Fund relating to Business Rates as at 31st March 2019. This must be done by the 31st January 2019, and this report also asks the Divisional Director – Business Support to approve the balance projected related to Business Rates.

After calculations of current year collection and adjustments to the business rate base in 2018/19, including making provision for appeals, it is estimated that the 2018/19 collection fund account position relating to business rates will be in deficit by £0.292m. The deficit will be shared between the Council, WECA and Avon Fire Authority in line the 100% pilot shares. The Council’s total share of the projected deficit is £0.274m.

The overall position of the forecast 2019/20 business rate income and the forecast 2018/19 deficit on the collection fund have been taken into account in the overall Council’s budget proposal which will be presented to Council on the 19th February 2019.

The retention of business rates presents new financial challenges to local authorities due to lack of detailed historic data and various uncertainties related to future outcomes and events which can impact the income stream. There are a number of significant risks associated with the scheme including the potential for the impact of successful appeals being greater than estimated levels. The Council has used historic appeals data from the Valuation Office Agency (VOA) to estimate the impact of appeals as well as external advice from specialist rating experts. The Council will continue to monitor closely actual performance against estimates made in forecasting its business rate income.

That the calculation of the Council’s business rate forecast for the year 2019/20 as set out in this report be approved. The total forecast Business Rate income for 2019/20 is £65.454m, of which the Council will retain £22.547m after allowing for the required tariff payment of £38.980m and the WoE Combined Authority and Fire Authority shares as shown in Table 1 of the report.


That the projected deficit on the collection fund as at the end of 2018/19 related to Business Rates is declared at £0.292m. The Council’s share of the deficit is £0.274m.

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