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Rating Policy - Recent developments

Details of the District Rates Convergence Scheme Published

20th November 2014 - The Finance Minister Simon Hamilton MLA has now decided upon the final details of the scheme to help manage the issue of rates convergence. The scheme will come into effect on 1 April 2015 to coincide with the creation of the new larger councils

The scheme is an outworking of the Executive’s decision to provide up to £30 million of support for the effects of District Rate Convergence on ratepayers (i.e. the result of district councils coming together or boundary changes). The subsidy will be applied automatically by LPS and therefore ratepayers do not need to claim this support.

It will see the effects of rates convergence phased in over the full council term with an 80% subsidy applied next year (2015/16). This will remove 80% of the amount which has been identified as the “convergence” effect. That support will then be gradually phased out over the 4 year term and will be applied at increments of 60%, 40%, and 20% over the remaining years of the scheme. There will be no threshold applied to the scheme and the only exclusions applied will be in respect of public sector bodies and those properties which are already converged through social sector standardisation.

This serves to effectively neutralise any sudden and significant increases as a result of the specific effects of district rate convergence. This will not interfere with the District Rates that are set independently by the new Councils next year, as these decisions are based on a range of other factors under the control of local government and outside the scope of this ratepayer support scheme. Councils, therefore, have an equally important part to play in managing their finances and acting responsibly when striking their District Rates over the course of the scheme.

The support scheme will also avoid any ‘netting off’ due to the non-domestic revaluation. It will operate by discounting the District Rate to the same extent in each of the affected areas and therefore those business ratepayers who stand to benefit from the revaluation will get their full entitlement from next April.

The model selected for the final scheme was the one broadly supported during the consultation exercise and the funding available has been utilised so as to reflect that preference, particularly given the unprecedented pressure on public finances over the next few years.

The estimated cost does, however, comes very close to the maximum funding of £30m made available by the Executive.  As a result the Department will be monitoring actual spend carefully for the mid-term review which is planned in advance of the 2017/18 rating year, to establish if any adjustment to the scheme will be required in the latter years. The Department is already required to do this under statute in line with the provisions of the Local Government Finance Act (Northern Ireland) 2014.

The next stage is the calculation of the various District Rate Discounts that will be applied to rate bills in each of the affected areas over the life of the scheme, to implement the above policy. These will be published on this website in the coming weeks.

Public Consultation on Review of Public Administration - Managing Convergence of District Rates

In May 2014 the Department of Finance and Personnel launched a public consultation on the details of the Transitional Rate Relief Scheme to manage rates convergence as a result of local government reorganisation. The purpose of the scheme is to help ratepayers who would otherwise face sudden increases in District Rates.

The consultation document* sought views on the following:

  • The eligibility criteria for the scheme;
  • The duration of the scheme;
  • The level of relief to be provided each year.

In response to early feedback from Local Government Officials, a technical annex was also produced with tables showing more analysis on the phasing in options. These tables provided a more detailed breakdown of the high level figure work presented in the consultation paper.

The consultation closed on Tuesday 19th August 2014.

A consultation report and details of the responses received have now been published by the Department.

Evaluation of the Small Business Rate Relief Scheme

The Department of Finance and Personnel launched a public consultation on the Small Business Rate Relief scheme on 10 April 2014.  The consultation paper was designed to help set the scene and remind stakeholders what the schemes does, why it was set up, what it did, what people have been saying about it and other similar schemes and the possible choices going forward

This evaluation was undertaken by the Northern Ireland Centre for Economic Policy (NICEP) at the University of Ulster and sought views from organisations and ratepayers on the following:-

  • the effectiveness of the scheme,
  • should the scheme continue post April 2015
  • If so, how the scheme should be replaced post April 2015, and
  • how any further scheme could be funded.

The consultation closed on Tuesday 1 July 2014 and the responses received from the consultation have been published.

A factual consultation report has also now been published.

The full evaluation report will be published by NICEP during November 2014.

Business ratepayers will also be interested in progress with the non-domestic revaluation. See below for more information

Non Domestic Rates Revaluation 2015 - Decapitalisation Rates: Converting Cost to Rateable Value

As part of the revaluation process properties are valued for rates by reference to an estimate of rental value (net annual value or NAV). Some specialist properties are rarely let however and therefore direct open market rental evidence is not available to assist with valuing them. Rental value has to be determined by reference to construction costs and converted to an assessed rental sum through the use of ‘decapitalisation rates’.

Last year the Department launched a targeted consultation on its preferred approach for the setting of decapitalisation rates in order to undertake the 2015 revaluation and complete the valuations for a wide range of specialist properties

A consultation report which also details the way forward has now been published by the Department.

2015 Non-Domestic Revaluation

Land & Property Services (LPS) is well advanced with its preparations for producing a new Valuation List and will have completed the valuation work by the autumn of 2014. LPS will let business know the outcome of the Revaluation as soon as possible after that part of the exercise is complete.

A revaluation, however, is revenue neutral and therefore the regional and district rates (per pound of value) will change accordingly. Until the new district and regional rate poundages are struck in February 2015 using the new values, the final outcome of the rates revaluation process cannot be determined.

However, individual business ratepayers will be given an early opportunity to assess whether their new rateable value represents a fair rental estimate and LPS plan to publish a schedule of draft values well before the end of 2014. A final date is still be to set for this.

In the meantime, information on progress with the revaluation can be found at the Land and Property Services website

Background

Business rates are a long established local property tax levied on all non-domestic ratepayers, proportionate to the individual rental value of each property. It is necessary, therefore, to revalue periodically the entire stock of non-domestic property.

There are around 72,500 non-domestic properties in Northern Ireland. Non-domestic rates currently contribute around £550 million a year towards regional services (roads, hospitals, schools, etc.) and local services provided by District Councils.

Those areas and business sectors that have fared better than others over the period since the last Revaluation will face higher rate bills from April 2015, despite the fact that values have declined across the board since the downturn.

Business premises that have experienced rental value decreases more than the average will pay less following a revaluation and vice versa.

Many will find their rate bills not changing much. The last time a general revaluation took place in 2003 almost three quarters of business ratepayers’ rates bill went up or down by less than 20%.

Revaluations are a regular feature of all business rates systems, and make sure that liability for rates is fairly spread across all sectors in line with up to date rental values.

Ministerial Statement on Rating Issues associated with the Review of Public Administration

In a statement to the Assembly on 7th April, the Finance Minister Simon Hamilton, MLA set out his plans to help manage rating and other financial issues associated with the reform of local government.

Non Domestic Rates Revaluation 2015 - Decapitalisation Rates: Converting Cost to Rateable Value

As part of the revaluation process properties are valued for rates by reference to an estimate of rental value (net annual value or NAV). Some specialist properties are rarely let however and therefore direct open market rental evidence is not available to assist with valuing them. Rental value has to be determined by reference to construction costs and converted to an assessed rental sum through the use of ‘decapitalisation rates’.

The Department has launched a targeted consultation on its preferred approach for the setting of decapitalisation rates in order to undertake the 2015 revaluation and complete the valuations for a wide range of specialist properties .

The main proposals put forward in the paper are that:

  • for “Revaluation 2015” Northern Ireland harmonises with the decapitalisation rates (5% and 3.3%) used in England and Scotland;
  • the Department of Finance and Personnel continues to prescribe by legislation the decapitalisation rates to be used;
  • Northern Ireland does not follow the Welsh approach and set its own unique decapitalisation rates;
  • Northern Ireland continues with two decapitalisation rates; and
  • the Ministry of Defence (MOD) properties in Northern Ireland be moved from the lower decapitalisation rate to the standard decapitalisation rate.

The broad proposals will establish a position of parity with England and Scotland and, should the consultation responses be in favour of this approach, no further legislation will be required as this was already legislated for by the Assembly back in 2009.

The one exception is in relation to the new proposal for the treatment of MOD properties. Should the outcome of the consultation process result in a decision to move MOD properties to the standard decapitalisation rate then a short piece of subordinate legislation would be required to be taken through the Assembly to give effect to that change.

The consultation closed for the time being on 10 January 2014.

Review of Rates Liability for the Landlord Sector Consultation Paper

The Department of Finance and Personnel has agreed to the publication of a paper to begin a consultation on changes to rates liability in the landlord sector.

The attached consultation paper set out the proposed changes and the consultation period closed on 28 June 2013.

The Department has published an overview of responses received from this consultation.

The Department has written to consultees on the way forward in respect of policy changes arising from the consultation.

Ministerial Statement on Non-Domestic Rating - extending support to business through the rating system

In a statement to the Assembly on 26 November, the Finance Minister Sammy Wilson announced a number of measures, extending existing policies, to help businesses through the non domestic rating system.

In year review of the Small Business Rate Relief scheme

The Finance Minister, Sammy Wilson, has announced an in year review of the Small Business Rate Relief scheme, which was extended in April 2012.  This is not a full policy evaluation, however the Department is seeking comments from business ratepayers and interested parties on how well the scheme is operating.

The Department is particularly interested in the operation of the multiple properties exclusion and the merits of retaining double relief for business ratepayers who are also entitled to other support, such as derating (industrial, freight transport and sport and recreation relief). Wider views on the benefits and limitations of the scheme are most welcome, bearing in mind that the Department is only considering refinements to the scheme for its remaining life (up to 31 March 2015). Attached is the the terms of reference for the review

The Department has published the responses received from the review which closed on 5th October 2013.

Minister Announces 2015 Non-Domestic Revaluation

On 5 April 2012 the Northern Ireland Executive agreed that preparations should be put in place to undertake a revaluation of non-domestic properties in Northern Ireland in 2015, aligning with the rest of the UK. Revaluations of non-domestic property are also scheduled to take place in England, Scotland, and Wales in 2015.

Business rates are a long established local property tax levied on all non-domestic ratepayers, proportionate to the individual rental value of each property.  It is necessary, therefore, to revalue periodically the entire stock of non-domestic property.

There are around 72,500 non-domestic properties in Northern Ireland. Non-domestic rates currently contribute around £550 million a year towards regional services (roads, hospitals, schools, etc.) and local services provided by District Councils.

Those areas and business sectors that have fared better than others over the period since the last Revaluation will face higher rate bills from April 2015, despite the fact that values have declined across the board since the downturn.

Business premises that have experienced rental value decreases more than the average will pay less following a revaluation and vice versa.

Many will find their rate bills not changing much.  The last time a general revaluation took place in 2003 almost three quarters of business ratepayers’ rates bill went up or down by less than 20%.

Land & Property Services will shortly begin the work to assemble the evidence and begin the process of revaluing non-domestic properties in Northern Ireland

Revaluations are a regular feature of the business rates system, and make sure that liability for rates is fairly spread across all sectors in line with up to date rental values