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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 medium or large. A small business is defined as a property with a rateable value of less than or equal to £20,000, a medium property is defined as a property with a rateable value of more than £20,000 and less than £100,000, a large property is defined as a property with a rateable value of more than £100,000.

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. 

Most ratepayers will pay their true rate liability within a shorter period than the five 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 £20,000) Medium business (RV more than £20,000 and less than £100,000) Large business (RV Over £100,000)
2017/2018
5%
12.5%
42%
2018/2019
7.5%
17.5%
32%
2019/2020
10%
20%
49%
2020/2021
15%
25%
16%
2021/2022
15%
25%
6%

 

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) Medium business (RV more than £20,000 and less than £100,000) Large business (RV Over £18,000)
2017/2018
20%
10%
4.1%
2018/2019
30%
15%
4.6%
2019/2020
35%
20%
5.9%
2020/2021
55%
25%
5.8%
2021/2022
55%
25%
4.8%

 

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)

2010 rateable value x 2016/2017 small business multiplier - rateable value £15,000 x small business multiplier 48.4p = £7,260.00

2017 rateable value x 2017/2018 small business multiplier - rateable value £29,000 x small business multiplier 46.6p = £13,514.00

In this example, the rates liability has increased from 2016/2017 to 2017/2018 by over 86% (£7,260 less £13,514).

A rateable value of £29,000 means this is classified as a medium business - the limit on an increase for large businesses for 2017/2018 is 12.5%, so transitional relief applies. The adjusted rate bill figure for 2017/2018 after transition is therefore £8,167.50 (£7,260 plus 12.5%).

We then make two further adjustments:

Example two (limit on a decrease)

2010 rateable value x 2016/2017 small business multiplier - rateable value £21,750 x small business multiplier 48.4p = £10,527.00

2017 rateable value x 2017/2018 small business multiplier - rateable value £18,000 x small business multiplier 46.6p = £8,388.00

In this example, the rates liability has decreased from 2009/2010 to 2010/2011 by over 20% (£10,527 less £8,388).

A rateable value of £18,000 means this is classified as a small business - the limit on a decrease for large businesses for 2017/2018 is 20.0% so a transitional surcharge applies. The adjusted rate bill figure after the transition for 2017/2018 is therefore £8,421.60 (£10,527 less 20%).

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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