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You are here: Home / Business / Business Rates / How Business Rates Are Calculated / Transition Scheme

What is the transition scheme?

Rateable values can change fairly significantly between revaluations. This does not necessarily mean there will be a significant change in your rates bill as the multiplier is adjusted downwards after a revaluation to offset the overall rise in values.

However, some ratepayers may see dramatic changes in their rates bill. If this happens, you may be entitled to transitional relief which will soften the impact of revaluation. It phases in changes to your rate bill over a period of time. Different transitional relief will apply, depending on whether your bill has increased or decreased and whether your business is classed as small or large. A small business is defined as a property with a rateable value of under £18,000 outside London.

Transitional relief is based on the change in your rates bill from one financial year to your new rates bill in the next financial year. It does not depend on a change in your rateable value itself.

The transition scheme operates over a five year period in tune with revaluations on non-domestic properties.  However, the next revaluation has been delayed until 1 April 2017 so the Government has asked Rating Authorities to extend the existing scheme where applicable, for the additional two years, using the same calculation as in 2014/2015.

Most ratepayers will pay their true rate liability within a shorter period than the 5 or 7 year phasing term.

Table one shows the proposed limits by which a rates bill can be increased in a single year before transitional reliefs apply:

Table 1
Year Small business (RV Under £18,000) Large business (RV Over £18,000)
2010/2011
5%
12.5%
2011/2012
7.5%
17.5%
2012/2013
10%
20%
2013/2014
15%
25%
2014/2017
15%
25%

 

Slightly different arrangements apply for the proposed limits by which a rates bill can decrease in a single year, as shown in table two.

 

Table 2
Year Small business (RV Under £18,000) Large business (RV Over £18,000)
2010/2011
20%
4.6%
2011/2012
30%
6.7%
2012/2013
35%
7%
2013/2014
55%
13%
2014/2017
55%
13%

 

Transitional relief is automatically calculated and will be included in your bill from 2010/2011 forward. We have to undertake a specific transitional calculation and the two examples below help illustrate the way transitional arrangements work in practice.

Example one (limit on an increase)

2005 rateable value x 2009/2010 small business multiplier - rateable value £15,000 x small business multiplier 48.1p = £7,215.00.

2010 rateable value x 2010/2011 small business multiplier - rateable value £29,000 x small business multiplier 40.7p = £11,803.00.

In this example, the rates liability has increased from 2009/2010 to 2010/2011 by nearly 64% (£7,215 less £11,803).

A rateable value of £29,000 means this is classified as a large business - the limit on an increase for large businesses for 2010/20011 is 12.5%, so transitional relief applies. The adjusted rate bill figure for 2010/2011after transition is therefore £8,116.87 (£7,215 plus 12.5%).

We make two subsequent adjustments:

Example two (limit on a decrease)

2005 rateable value x 2009/2010 small business multiplier - rateable value £21,750 x small business multiplier 48.1p = £10,461.75.

2010 rateable value x 2010/2011 small business multiplier - rateable value £22,600 x small business multiplier 40.7p = £9,198.20.

In this example, the rates liability has decreased from 2009/2010 to 2010/2011 by 12% (£10,461.75 less £9,198.20).

A rateable value of £22,600 means this is classified as a large business - the limit on a decrease for large businesses for 2010/20011 is 4.6% so a transitional surcharge applies. The adjusted rate bill figure after the transition for 2010/2011 is therefore £9,980.50 (£10,461.75 less 4.6%).

We make two more adjustments:

For more information, contact our business rates team on 01329 824651 or by e-mail at businessrates@fareham.gov.uk.

 



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