Agenda item

Purpose of Report

To provide the Shared Revenues and Benefits Joint Committee with an update on current issues within non-domestic rates, related to City of Lincoln Council, North Kesteven District Council and West Lindsey District Council. The report was not intended to include non-domestic rate performance matters, as this was covered within the Performance Update reported to Joint Committee today.

Decision

That the content of the report be noted.

Alternative Options Considered and Rejected

None.

Reason for Decision

The report included some of the changes announced as a result of the Government’s financial support provided to businesses in the form of NDR relief, as well as forthcoming changes to the NDR system.

The following updates were noted:

Retail, Hospitality and Leisure Relief

Eligibility criteria for the Retail, Hospitality and Leisure Relief was set out by the Ministry of Housing, Communities and Local Government (MHCLG) and issued to Local Authorities on 20 December 2021. No changes were made to the qualifying criteria for the year 2024/25.

This relief had been extended for the year 2025/26 – with guidance provided by MHCLG ON 16 January 2025.It was expected to end on 31 March 2026, with the introduction of the RHL multipliers.

The table at paragraph 4.5 of the officer’s report reflected the significant reduction in the amounts awarded in the last three years (previously known as the Expanded Retail Discount (ERD) scheme), with an estimate on the award to be granted in 2024/25.

NDR Changes and Significant Reliefs/Discounts

At the Autumn Statement on 30 October 2024, the Chancellor announced that the Government would continue to provide a package of NDR measures to support businesses in England.

• The retail, hospitality and leisure relief (RHL) would continue for 2025/26 at 40% up to £110,000 per business. Although this relief was to continue, the reduction from 75% to 40% would be significant for a lot of businesses.
• The multipliers were announced for 2025/26 – the small business multiplier would be frozen at 49.9p again. The standard multiplier would be uprated by the September 2024 CPI rate to 55.5p (2024/25 54.6p)
• Going forward from 2026/27 the Government intended to introduce two permanently lower multipliers for retail, hospitality and leisure properties. This would be paid for by a higher multiplier for properties with a rateable value (RV) of above £500,000. This meant that overall, there would be 5 different multipliers depending on the rateable value of the hereditament and the activities carried out at the hereditament. The details of these multipliers were not expected to be announced until the 2025 budget.
• Private schools were to lose their mandatory charity relief (80%) with effect from 1^st April 2025, subject to Parliamentary process. Private schools which were ‘wholly or mainly’ concerned with providing full time education to pupils with an Education, Health and Care plan would remain eligible for the relief.

NB. We had been instructed by MHCLG not to remove the mandatory relief until the legislation had been completed

Multipliers from 2026

The most significant announcement for NDR in the budget was the announcement of alternative multipliers for qualifying properties from 1 April 2026.

The full details of this were not yet known as this would require changes to the legislation and more information was expected to be released as the legislation was developed.

Like most current reliefs, the RHL was currently delivered using discretionary powers found in Section 47 of the Local Government Finance Act 1988. In order to provide more certainty, the Government wanted to make the RHL a permanent feature of the NDR system and to level up NDR between online retailers and the High Street – the changes to the multipliers may go some way to doing this. Once this became part of the way the liability was calculated, it would no longer be a ‘discretionary relief’ under Section 47.

The five multipliers for 2026 were expected to be–

·      Standard multiplier

·      Small business multiplier

·      Standard multiplier RHL

·      Small business multiplier RHL

·      Premium multiplier.

Any property with a Rateable Value in excess of £500,000 would have their rates calculated based on the premium multiplier, although properties in the RHL sector were expected to be based on either the Standard RHL or the Small business RHL. All other properties would therefore be calculated on either the standard or the small business multiplier as they were now.

Significant changes would need to be made to the current software in order for officers to be able to override the standard and small business multiplier in favour of the RHL where the activities at the property met the RHL eligibility.

MHCLG would have to provide a methodology for compensating local government for the loss of income arising from this announcement. The amount raised from the premium charge was meant to cover the cost of the lost income from applying the RHL multipliers, however, it was unlikely to work at local level.

Transforming NDR – Information taken from CIPFA

This paper was published by the Treasury as part of the Budget papers. The Government wanted to “create a fairer NDR system that protects the high street, supports investment, and is fit for the 21st century”.

The first step was the introduction of lower multipliers for retail, hospitality and leisure from 2026-27.

The paper invited business and other stakeholders to discuss how the government could deliver a transformed system.

The impact on the local government funding system would be considered in the review of NDR which the paper acknowledged was an important source of revenue for local government. The Government wanted to ensure that local government funding was not affected by these tax reforms.

The temporary RHL reliefs had meant uncertainty for businesses. The Government were looking to bring in more certainty by introducing a permanent reduction for retail properties with the introduction of the additional multipliers.

Other areas of reform included looking at the effectiveness of Improvement Relief, the loss of small business relief when taking on a second property, cliff edges in the system and empty property relief.

The Government would consider avoidance and evasion. There would be consultation on a ‘General Anti Avoidance Rule’. The Government would also look at the benefits and potential costs of shortening the gap between the Antecedent Valuation Date, the revaluation coming into effect, and increasing the frequency of valuations.

Views were invited especially from businesses and business representative organisations, local authorities and rating agents on the various reforms to fit with its overall objectives between November 2024 and March 2025, our shared service officers had expressed an interest in being part of this engagement.