Business Rates

What is the transition scheme?

Rateable Values can decrease and increase fairly significantly between revaluations. This does not necessarily mean there will be a significant change in the rates bill, as the multiplier is adjusted downwards following a revaluation to offset the overall rise in values. Some ratepayers, however would see some dramatic changes in their rates bill - if this happens to your rates bill, it will then probably be affected by transitional relief. Transitional Relief softens the impact of revaluation by phasing in the changes to the 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 under £15,000 outside London and under £21,500 within 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 is not dependant on the change in your rateable value itself.

The transitional scheme, which was confirmed in December 2004, operates over a four year period. Every ratepayer will pay their true rates liability in the fifth year and many will pay it well before this.

Table 1 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 £15,000)	Large Business (RV Over £15,000)
2005/2006	5%	12.5%
2006/2007	7.5%	17.5%
2007/2008	10%	20%
2008/2009	15%	25%
2009/2010	N/A	N/A

Slightly different arrangements apply for the proposed limits by which a rates bill can decrease in a single year, as shown in table 2.

Table 2.

Year	Small Business (RV Under £15,000)	Large Business (RV Over £15,000)
2005/2006	30%	12.5%
2006/2007	30%	12.5%
2007/2008	35%	14%
2008/2009	60%	25%
2009/2010	N/A	N/A

Transitional Relief is automatically calculated and will be included in your bill from 2005/2006 onwards.

The two examples below are to help illustrate the way transitional arrangements work in practice.

Example 1.

2000 rateable value £20,000, so 2004/2005 rates bill is ££9,120.

2005 rateable value is £25,000, so 2005/2006 liability before transition is £10,375.

In this example the rates liability has increased from 2005/2005 to 2005/2006 by nearly 14% (£9,120-£10,375).

A rateable value of £25,000 means this is classified as a large business - the limit on increase for large businesses for 2005/2006 is 12.5%, so the transitional relief applies. The adjusted rate bill figure after the transition for 2005/2006 is therefore £10,260 (£9,120 plus 12.5%).

Two subsequent adjustment are then made:

The bill is increased by inflation.
There is a supplement to cover the cost of Small Business Rate Relief scheme. This is calculated from your rateable value, not from your rates liability.

Example 2.

2000 rateable value of £20,000, so 2004/2005 rate bill is £9,120.

2005 rateable value of £10,000, so 2005/2006 liability before transition is £4,150 (using the multiplier of 41.5)

In this example the rates liability has decreased from 2004/2005 to 2005/2006 by nearly 55%.

The limit decrease for a small business for 2005/2006 is 30%, so transitional relief applies. After transitional, the adjusted rate bill is £6,384 (£9,120 less 30%).

A subsequent adjustment is made: