Report To: / MANAGEMENT TEAM
CABINET
Date: / 1 November 2012
13 December 2012
Report Title: / Rate Relief Policy Review Paper (Draft)
Report Author: / Nicholas Clayton – Policy & Performance Officer
Paul Naylor – Deputy Chief Executive
Summary: / This report has been put together as a result of new regulations which will come into force from April 2013. Cabinet agreed in 2012 that a full policy review be completed by a task group (comprising the former mini PAG) to consider and make recommendations to Cabinet for new policy to apply from April 2013. The paper presents the background and issues, as well as the new draft policy which the Cabinet is asked to approve for consultation.
Key Decision: / YES will be in future as it represents a change in policy
Affected Wards: / Potentially all
Recommendations: / The Cabinet is asked to approve that the draft policy, as attached, be sent out for public consultation. If this is agreed, Cabinet will be asked to consider the responses in March 2013.
Policy Overview: / In line with government’s new regulations applying to funding of rate relief, to develop new policy criteria which, subject to Cabinet approval, will be sent out for consultation
Financial Implications: / The current costs of discretionary rate relief are addressed within the report
Risk Assessment / To be undertaken when results of consultation are known
Equalities Impact Assessment / To be undertaken following consultation
Other Material Implications:
Background Papers:
Contacts: / – Tel: (01233) 330208
- Tel (01233) 330436
Agenda Item No.
Report Title: Rate Relief Policy Review Paper
Purpose of the Report
1. To present new policy criteria (as recommended by the Task Group) for a new rate relief scheme and to seek approval for sending out to public consultation prior to implementation in April 2013.
Issue to be Decided
2. To approve the proposed policy criteria (as recommended by the Task Group) for a new rate relief scheme and that the public consultation process should begin.
Background
3. Between February and April 2012, Cabinet agreed an interim position relating to discretionary rate relief. They also agreed that a full policy review be completed by a task group (comprising the former mini PAG) to consider and make recommendations to Cabinet for new policy to apply from April 2013. This review is not intended to address the discretionary rate relief received by individual organisations, rather to create a rigorous but fair framework within which decisions on rate relief will be conducted.
4. As consultation is desirable (and indeed necessary by law) with the voluntary and community sector particularly, it is recommended that the draft policy be approved for the purposes of public consultation, with responses being considered by Cabinet next March.
Reasons for a review
5. The need to start a review was driven partly by the business plan budget requirement that planned a cut to the council’s spend on discretionary relief (by £43k) from 2013/2014. However, in March Cabinet decided it would not be appropriate to introduce a cut in funding at that time and agreed to review the budgetary position and defer any cut, if one is eventually needed, until 2014 at the earliest. For the two leisure trusts similar assurances were not made as it was agreed reviews of the service relationship to the council should be completed by March 2013. This aspect is ongoing and does not form part of this report.
6. As well as the business plan budget requirement there are at least four other reasons for the policy review:
a. To ensure there is alignment of relief policy and decisions on awards of relief that are consistent with council priorities
b. The current open-ended policy arrangement (which in practice gives open-ended entitlement to discretionary top-up relief) causes uncontrolled year-on-year growth in the council’s support, without any real opportunity to assess the appropriateness of such growth. Also, current arrangements do not provide for periodic reassessments of an individual organisation’s circumstances and outcomes.
c. Introduction from April 2013 of the Non Domestic (Business) Rates Retention scheme. If the current proposals for sharing the costs of mandatory and discretionary relief between government and councils of future growth in relief are implemented the borough council will be required to fund a larger proportion of the costs of relief.
d. The government’s emphasis on encouraging social enterprise (not-for-profit organisations) is expected to give rise to a growth in applications from social enterprises (SEs). SEs are not entitled to mandatory relief and so the cost of supporting SEs has potentially higher impacts for the council.
7. The Localism Act 2011 amends section 47 of the Local Government Finance Act 1988 to replace the limited circumstances in which local authorities can currently give discretionary relief with a power to grant relief in any circumstances. However, this policy is not concerned with the issue of these wider business rate discounts – this will be subject to a further policy. Instead this draft policy relates solely to those more limited circumstances which previously applied and which continue to apply under the Localism Act. Section 49 of the Local Government Finance Act 1988 also allows for ‘Hardship’ relief to be granted to any organisation in acute difficulties, and is an aspect of rate relief which this draft policy also addresses.
Costs of supporting ‘top-up’ (to mandatory) relief (up to 20%), and 100% discretionary relief
The table below shows how currently the costs of different types of relief are shared between government (through a charge to the national non-domestic rate pool and councils), and how they may be apportioned (subject to confirmation of the business rate retention scheme by Government) – shown in italics. Note the retention scheme is likely to mean an increase in the proportion by the council for new applications from April 2013.
Type / Maximum Relief / Cost to / Cost toRegistered Charity / Mandatory 80% by law / Government 100% of 80%
(50%) of 80% / Council Nil
(50%) of 80%
Discretionary ‘Top-Up’ up to 20% / Government 25% of 20% / Council 75% of 20%
Registered (with HMRC) community amateur sports clubs (CASCs) / Mandatory 80% by law / Government
100% of 80%
(50%) of 80% / Council Nil
(50%) of 80%
Discretionary ‘Top-Up’ up to 20% / Government 25% / Council 75%
Unregistered Charity or other ‘Not for Profit’ Organisation / Discretionary up to 100% / Government 75% / Council 25%
Hardship (for any business ratepayer) / Discretionary up to 100% / Government 75% / Council 25%
Costs relate to the business rate liability of the organisation concerned. By law this is annually indexed-linked to the Retail Prices Index. Local government funding support will not increase in the same proportion.
From April 2013 the business rates retention scheme will operate; essentially this scheme is a new consolidated scheme for local authority general funding. The retention scheme’s consultation proposes to use 2012-2013 relief as the starting point. After this point annual business rates yields and costs of new relief will be shared 50:50 between government and local authorities. This is likely to shift more of the future growth in relief (of both mandatory and discretionary relief) to councils, though this cost will then be apportioned between billing councils (80%) and the major precepting councils (20%). Government has not stated any plan to change the mandatory amount of relief to registered charities and CASCs from its current 80% level. At face value this is a shift in burden and is a point the council has challenged in its consultation response.
Local position and summary financial impacts
In this section, the overall 2012/2013 costs are summarised for all types of relief as they stand based on relief granted to date – more can be expected in the remaining months.
Type of Discretionary Relief / Number of accounts / Gross value of relief / Cost to ABC / Cost to national poolNo. / £ / £ / £
CASCs / 35 / 14,350 / 10,762 / 3,588
NFPOs / 16 / 48,048 / 12,012 / 36,036
Rural Reliefs - fully discretionary / 13 / 53,698 / 13,424 / 40,274
Rural Reliefs - top-up to mandatory / 15 / 14,872 / 3,718 / 11,154
Charities - top up to mandatory / 110 / 173,072 / 129,804 / 43,268
189 / 304,040 / 169,720 / 134,320
Risk Assessment
8. To be conducted following consultation
Equalities Impact Assessment
9. The results of public consultation will feed in to a wider impact assessment to be presented alongside the proposed scheme for Cabinet decision.
Consultation
10. Public consultation to be undertaken following Cabinet’s approval
Portfolio Holder’s Views
11. This is a sensitive and complex policy which has been in need of a major review for some time now. I think the approach in this paper is realistic and fair to all concerned. While I believe it represents a sensible financial compromise to everyone affected, the follow up of public consultation will be essential in enabling us to review the proposed policy before reaching a final conclusion.
Contact: Nicholas Clayton
Paul Naylor
Email:
Ashford Borough Council Discretionary Rate Relief Policy
SECTION 1
Scope
A National Non-Domestic Rate (or business rate) applies to most non-domestic properties. This tax may only be used to support local authority funding (including Police, and Fire and Rescue Services) and forms part of central government’s national funding arrangements for authorities. Up to April 2013 all business rates collected will be paid over to a national pool for redistribution. This will change from April 2013, when part will be paid over to Government for redistribution and part will be retained more directly by local authorities. The new system has implications for funding the cost of awarding rate relief.
Local authorities have a legal duty to award mandatory rate relief to registered charities, registered community amateur sports clubs, and to certain qualifying rural businesses. Funding arrangements for these reliefs change from April 2013 as the proportion to be funded locally arising from new applications increases.
The council expects to see how clubs or organisations are trying to help themselves to be self sufficient wherever possible. Whilst income can be received by external grants from other bodies such as the lottery or another public sector body, charging subscriptions and running fundraising events can also raise income.
This policy is not concerned with the issue of wider business rate discounts – this will be subject to a further policy.
Local authorities also have the legal power to exercise the discretion to reduce the rate liability on top of any mandatory relief that applies and to organisations that do not qualify for mandatory relief, providing certain legal criteria are met. Local authorities are expected to determine their own criteria to guide decision-making about discretionary relief. However, this is subject to their overriding obligation that except for the limited circumstances specified relief may only be granted if it would be reasonable to do so having regard to the interests of council tax payers in an area.
Many of those organisations will be operating on the margins of viability but nevertheless making an important contribution to the council’s priorities . Business rates can often be a significant element of each stakeholders’ overheads. Removing or reducing that overhead can be an equally significant factor in retaining their presence in the community.
The council brings those issues together through this policy and how it uses discretionary rate relief to support those organisations, businesses and individuals who through their activities in the borough contribute in some way to the successful achievement of the council’s priorities. Public funds are not however unlimited: a proportion of the costs of relief granted is borne by council tax payers. In making decisions the council must be confident that money invested in this way will be repaid in economic and community benefit.
The purpose of this policy is to set down the council’s principles, criteria and process to be applied in exercise of its legal discretion over rate relief. It covers:
· Charitable (non-registered charities and other qualifying not-for-profit organisations) relief
· Rural rate relief
· Hardship relief
In carrying out the process we will not be influenced by ethnic origin, race, gender, sexual orientation or religion. In processing applications those involved will be treated fairly, with respect and courteously at all times.
Types of relief
Historically, section 47 of the Local Government Finance Act 1988 gave billing authorities the discretion to award relief in two circumstances:
a) Where the ratepayer is a registered charity or certain other charitable organisation
b) Where the ratepayer is an organisation, which is not established or conducted for profit and whose main objects are as set out below
Section 69 of the Localism Act 2011 amends Section 47 to allow for discretionary rate relief to be awarded in any circumstances if it would be reasonable to do so in the interests of local taxpayers. However, this policy is not concerned with the issue of these wider business rate discounts – this will be subject to a further policy. Instead this draft policy relates solely to those more limited circumstances which previously applied and which continue to apply under the Localism Act. Section 49 of the Local Government Finance Act 1988 also allows for ‘Hardship’ relief to be granted to any organisation in acute difficulties.
Registered charities are entitled to a mandatory rate relief of 80% for properties which are occupied for charitable purposes. The council has discretionary powers to award further rate relief of up to 20% (this is commonly referred to as ‘top up’ relief).
The council has the discretion to award relief of up to 100% to organisations which are not established for profit. It can only do so where the organisation’s main objectives are either: charitable, philanthropic, or religious; or are concerned with either education, social welfare, science, literature, or the fine arts.
Neither the 1988 Act, nor its subsequent amendments include statutory definitions of terms covering ‘charity’ or ‘charitable purposes’ etc. Up to now the council’s discretionary rate relief policy has not expanded on the statutory terms used above. For the purposes of new policy definitions are taken from the Charities Commission manual and appended to the draft policy.