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Rating Policy - Recent developments

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

The Department of Finance and Personnel has 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 scheme is intended to help ratepayers who would otherwise face sudden increases in District Rates.

The consultation document* is 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 is being 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 October 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.

Welfare Reform: Rate Rebate Replacement Arrangements - Second Consultation Paper

The Department of Finance and Personnel has now published (PDF format) the report on the future of rate rebate following its second consultation which closed on 31 October.  The report can be accessed below:

Report on 2nd Consultation

The Department would once again like to thank all those who submitted responses.

The Department has undertaken further modelling work in response to helpful views expressed during the consultation about the future treatment of Universal Credit in the assessment of rate rebates.  The Department plans to hold a seminar in the near future inviting key stakeholders to examine the findings of this work and provide a further opportunity to influence future policy in this area.

Earlier in the year the Executive undertook a 12 week preliminary consultation exercise to inform how a new rate rebate scheme might be developed for April 2014 and to gather fresh evidence of the potential effects on households. The outcomes of that preliminary consultation can be accessed via the DFP website

The Department of Finance and Personnel has now published (PDF format) a second consultation paper which can be accessed below:

The purpose of this second stage consultation is to set out the proposed way forward together with illustrative impact assessments and modelling. Please view the Initial Integrated Impact Assessments (IIAs).

As part of the consultation process the Department welcomes any additional evidence to supplement initial IIAs.

The Department has made available further information requested by the consultees during the consultation period.

This consultation formally closed on 11 October however, in order to allow stakeholders time to respond to additional information provided during the course of the consultation, the Department informally extended the closing date to 31 October.  

The Department would like to thank all those who submitted responses.  A report on the outcome of the consultation will be published during November.  Although the consultation is now closed, if any stakeholder feels they have something important to add to the responses already submitted, they should contact the Department by telephone on the following number: 028 9127 7606.

Welfare Reform: Rate Rebate Replacement Arrangements - Preliminary Consultation Paper

The Northern Ireland Executive has agreed to the publication of a paper to begin a preliminary consultation on changes to rates support for low income households. These changes have to be made as a result of the UK wide programme of Welfare Reform.

The introduction of Universal Credit in April 2014 will mean that modifications will have to be made to existing rates support for low income households because many of the current mechanisms for deciding entitlement will start to disappear for working age claimants.

The preliminary consultation paper sets out the background to the change along with options for an interim scheme.

The consultation period closed on the 10 April 2013.

The Department has published a copy of the factual consultation report outlining responses received.

During the consultation period the Institute of Fiscal Studies also published a report entitled "Universal Credit in Northern Ireland: what will its impact be, and what are the challenges?" Chapter 4 of that report covered the issues relevant to the preliminary consultation, relating to the designing of a rate rebate scheme to work alongside Universal Credit.

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.

No decisions have been made yet but the scope of the changes being considered by the Department involves the following:-

  • That all rented property with a capital value of £150,000 or under will be subject to compulsory landlord liability;
  • The removal of the criteria for rent to be payable or collected at intervals shorter than quarterly;
  • The landlord allowance to be standardised at 10% across the all rental sectors; and
  • The award of the allowance will occur regardless of whether the property is occupied or vacant.

The Department has now produced the attached consultation paper setting out the proposed changes.

The consultation period closed on 28 June 2013 and the Department has published an overview of responses received from this 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