Rates retention is an increasingly important focus for Council Revenues and Finance teams. With the appointment of a number of new practitioners to this area, we thought it timely to share some key industry terms and acronyms.
WILKS HEAD & EVE – RATINGS GLOSSARY
Annual Yield – The annual amount of revenue a Billing Authority expects to generate from collecting rates from ratepayers.
Appeals Forecasting – The ability to identify whether an appeal made by a business ratepayer about the level of business rates tax they are paying will be upheld and the corresponding effect this will have on the Billing Authorities income.
Asset Valuation – the process of determining the value of a property or asset held by an individual or business.
Backdated liability – The amount of revenue that is owed to either a Billing Authority or business rate payer following a decision made after an appeal, about the level of tax which that ratepayer should be paying.
Backdated yield – The yield relates to the amount of revenue a Billing Authority can expect to receive from non-domestic rate payments in a specific time frame. This information is typically derived from national non-domestic rates (NNDR1) forms. Backdated yield occurs when the yield figure may not have been calculated correctly initially, leading to a need to re-calculate and seek additional payments where there is a shortfall.
Billing Authority – There are 326 Billing Authorities in England. The Billing Authority is the the Local Council or Unitary Authority responsible for calculating, billing and collecting council tax and business rates payments. It also makes decisions related to eligibility of ratepayers for reliefs, discounts and exemptions.
Blue Sky Valuations – Identifying the likely value of any new or incomplete developments, proposals or planning applications.
Central List – A central rating list has existed in England since 1990. This includes large network properties which don’t naturally sit on local rating lists, for example; electricity, gas, and water supply networks, cross country pipelines, railways and associated buildings and telecommunications networks. Income from these properties are collected by central government. The Department for Communities and Local Government (DCLG) is the billing authority and the Secretary of State for Communities and Local Government has powers to decide who should be listed. It has a typical annual income of around £1.35 billion per year.
Check, Challenge, Appeal – The process introduced by government for businesses to appeal against the level of business rates they are eligible to pay against the 2017 and later rating lists.
“Check“ – it’s important that the rateable value is based on the correct data held about a businesses property. Ratepayers (or their appointed representatives) can check with the Valuation Office Agency (VOA) about the information they hold. For example factual details (such as number of floors, or the description), if data held by the VOA is wrong, changes can be requested by submitting a check.
The VOA will supply the information if they consider it is reasonable to do so and may request more information from the ratepayer. When the ratepayer has confirmed that the information held is accurate, the VOA will notify the ratepayer that the check has been completed.
“Challenge” is the ‘proposal’ stage. If a business does not agree with the outcome of a check, they move to the challenge stage. A proposal must be made within 4 months of the date the check was completed. (This could be 12 months after the ratepayer confirmed the information was correct if the VOA does not notify that the check has been completed). If the VOA does not agree with the proposal and the ratepayer does not withdraw it, the VOA will serve a notice of decision setting out why they are not making the alteration or are making a different alteration from the one proposed.
“Appeal” is the final stage. If an agreement can’t be made with the VOA, ratepayers have the right (under certain circumstances) to appeal their decision. This can be made to the independent tribunal and must be done within 4 months of the date of the VOA decision notice.
Commercial Letting Database – A public database covering the whole of the UK which provides details related to commercial properties which are rented, leased or sold providing a good source for comparable evidence.
Completion Date Determination – Identifying when a new premise appears to be complete for the purposes of serving a completion notice to achieve admission to the rating list.
Completion Notice – Councils issue completion notices for new properties or properties that have had substantial structural alterations. The notice lets ratepayers know when a council thinks that any work on their property is finished or will be substantially finished. There will be a date on the completion notice. From that date, the property will be eligible for council tax or business rates.
e-BAR – a fully detailed report completed and submitted to the Valuation Office Agency on behalf of a Billing Authority identifying properties which need to be added or altered within the Rating List. Reports typically include fully evidenced inspections, plans, maps or photographs of the properties in question in addition to the requirements as set out in the BAR guidance.
Exempt properties – Those properties or premises which may be exempt from paying business rates tax due to an approved set of circumstance such as; empty properties owned by a company in administration, a building that is used wholly for charitable activities or a property used by a community amateur sports club (CASC).
Hereditaments – A property, or part of a property, which is assessed for rates (for business use) or council tax (for domestic use). Compiled and maintained by the Valuation Office Agency the list of hereditaments can include telephone boxes, advertising billboards, pylons as well as shops, factories, warehouses and public buildings like schools, universities and medical practices. A hereditament may incorporate several buildings together like a university campus or just one office in a block.
Historic Appeals – a review of appeals that have been made to the VOA in the past related to adjusting business rates payments and tracking the outcome of those appeals as a means to predict future appeals based on a similar set of circumstances.
Increasing Yield – the yield is the expected revenue which will be generated over the course of a given year from business rate payments made to a Billing Authority. Opportunities exist to increase this through a number of services, for example; identifying missing and undervalued properties not currently on the VOA’s rating list, identifying renewable energy businesses, reviewing the validity of relief and exemption statuses and pushing through completion notices.
List Forecasting – The ability to review any appeals made by businesses on the current ratings list and forecast the likelihood of whether that appeal will be successful or fail and the related impact this will have on a Billing Authorities yield.
Local List – Non-domestic rateable properties (known as “hereditaments”) fall either into a local rating list or the central rating list. There is a single local rating list for each billing authority in England and Wales. The majority of rateable value is contained in local rating lists (over 95 per cent across England and Wales). The local list a hereditament appears in, is determined by its location. These lists are subject to variation, between revaluations, as a result of VOA alterations to maintain correctness, for example to reflect physical changes (either to the property or the locality) and appeals.
Losses on Appeal – Business rate payers have the ability to appeal against the level of rates they pay to Billing Authorities or related exemptions, reliefs or discounts they receive. If a business rate payer is successful in that appeal it will mean a loss of revenue to the Billing Authority responsible for collecting rates from that Business.
MCC – Material Change of Circumstances – Appeals can be made to the VOA about the rates a business pays on the basis of an MCC. An MCC must affect one of the following 5 areas;
- The physical state or enjoyment of the property
- The category or use of the property
- The amount of minerals or other materials in or extracted from the property
- How other premises are used or occupied in the locality of that property
- Things that affect the physical state of the locality where the property is located
MCC Improvements – In some cases MCC’s occur that can positively impact a property which may result in it experiencing an improvement of some kind. For example, better footfall or traffic due to an improved road layout or increased business activity due to reduced number of vacant properties around it. In this case the property may be eligible to pay a higher level of business rate.
Missing Assessments – Identifying properties which are missing from the Valuations List, which means they are not currently liable for any kind of business rates payment to the Billing Authority.
MRR – Mandatory Rate Relief- Some properties are automatically entitled to relief of all or part of their rates bill provided they meet certain legislative criteria. Five categories of current mandatory relief are:
- Rural village shops
- Charities
- Community & Amateur sports clubs (CASC)
- Partially empty properties
- Empty Properties
National Valuation Unit – Part of the VOA, this unit hold statutory accountability for the Central Rating Lists in England and Wales.
Net Collectible Debit (NCD) – is the income that local authorities would collect in each year if everyone liable for Council Tax or Business Rates paid it in full.
Notional Valuation – the value of a property based on its actual use rather than intended or best possible use.
NNDR 1 – is a form requiring completion by Billing Authorities so that they can calculate their non-domestic ratings income as required by regulation 3 of the Non-Domestic Rating (Rates Retention) Regulations 2013 (SI 2013/452) (as amended); and estimate the surplus or deficit on the collection fund for 2018-19, as required by regulation 13.
NNDR 3 – is a form requiring completion by Billing Authorities so they can calculate their certified non-domestic rating income as required by Regulation 9 of the Non-Domestic Rating (Rates Retention) Regulations 2013 (SI 2013/452) (as amended); and calculate the final sums due by way of section 31 grant in compensation for certain Government funded rates relief measures.
Quantum Allowance – An allowance which reduces the rates payable for an occupier where they occupy a building or floors of a significant size which would lead to a quantum allowance being applicable.
Rates Avoidance – The practice of exploiting the system to avoid paying business rates which are properly due. Although not illegal it involves misusing business rates law with the purpose of avoiding having to pay business rates. A full list of method and scales of rates avoidance can be found here >
Rates Exemption – Under certain circumstances a property may be exempt from having to pay business rates such as;
- agricultural land and buildings, including fish farms
- buildings used for training or welfare of disabled people
- buildings registered for public religious worship or church halls
A list of the latest information on rates exemptions can be found here >
Rates Forecasting – The ability to help Billing Authorities budget more effectively through the identification of potential increases in business ratepayers in a specific area in a specific timeframe and similarly to identify possible refunds due to any successful appeals.
Rates Relief – Some business properties are eligible to receive discounts from their Local Authority on the level of business rates they pay subject to meeting certain criteria. There are currently eight main types of relief a business may be subject to;
- small business rate relief
- rural rate relief
- charitable rate relief
- enterprise zone relief
- hardship relief
- retail discount
- exempted buildings and empty buildings relief
- transitional relief
A more detail explanation of each type of business rate relief can be found here >
Rates Retention – Historically business rates have been collected by Billing Authorities and then passed onto Central Government to then redistribute those rates collected as it saw fit. In October 2015 the government announced its intention to allow Billing Authorities to retain a percentage of these rates and a number of pilots are now underway with the ultimate goal of all authorities retaining 50 to 75% of their own business rates collection by 2020/21.
Rating List – This is a list of all non-domestic properties in a Billing Authority’s area which provides their rateable value and related information such as number of properties, number of properties added or removed and number of properties that saw their rateable value increase, decrease or stay the same.
RV – Rateable Value – Valuation Officers determine a rateable value for every non-domestic property in the country. This value is used to determine the amount of rates that a ratepayer is liable to pay. The rateable value is based broadly, on the annual rent that the property could have been let for on the open market on the antecedent valuation date, subject to various assumptions.
Renewable Energy Retention – Billing authorities can keep all of the business rates generated from new renewable energy projects. These projects are defined as Onshore wind power, Offshore Wind Power, Hydroelectric Power, Biomass, Energy from waste combustion, Anaerobic digestion, landfill and sewage gas, Advanced thermal conversion technologies – gasification and pyrolysis, Geothermal power and Photovoltaics.
Revenues Assurance – is an end-to-end service offered by Wilks Head and Eve, enabling Billing Authorities to fully maximise their rates revenue and benefit from the governments rates retention agenda. Operating a number of services designed to maximise the amount of business rates collected by the Billing Authority the service includes rates forecasting, identification of missing and undervalued properties, reliefs and exemption validity checks, completion notice reviews, central list cross-checking and renewable energy projects reviews. Ultimately the service is designed to reduce the resource burden associated with managing an operational NNDR service.
RRR – Rural Rate Relief – In England businesses are entitled to rural rate relief if their business is in a rural area with a population below 3,000. This is with the aim of helping retain essential commercial services in rural areas.
Organisations will not pay business rates if their business is in an eligible area and either:
- the only village shop or post office, with a rateable value of up to £8,500
- the only public house or petrol station, with a rateable value of up to £12,500
SBRR – Small Business Rates Relief – Is a relief scheme within the business rates system to help small businesses meet the cost of their rates by reducing the amount they need to pay if they meet eligible criteria.
Small Business Rates Relief is available if;
- A property’s rateable value is less than £15,000
- A business uses only one property – relief still may be possible if a business uses more
Undervalued Assessments – some properties on the rating list maybe undervalued which means they may not be paying the correct level of business rates and may be required to pay more.
Valuation List – A list of all domestic properties in a Billing Authority’s area that shows their rateable value and therefore the amount of business rates they are eligible to pay to that Billing Authority.
Valuation Tribunals – The Valuation Tribunal for England (VTE) is a judicial statutory body. It deals with appeals about Council Tax and non-domestic (business) rates. It is supported in its work by the Valuation Tribunal Service.
Valuer – A specialist providing advice on the value of a property which will ultimately help calculate its rateable value or tax band.
VOA – Valuation Office Agency – Employing more than 3,600 staff, they are responsible for compiling and maintaining lists detailing the rateable value of 1.9 million commercial properties and council tax bands for 25 million domestic properties. Part of HM Revenue & Customs, VOA officers are responsible for the assessment of all domestic (council tax) and non-domestic (business rates) properties in the country. They provide the government with valuations and property advice needed to support taxation. Find out more about the valuation office agency here >
VOA End Allowances – There are a number of allowances which can be applied to a valuation where they are applicable to that particular assessment in the rating list including quantum, layout, split site etc.
VOA Temporary Allowances – Temporary allowances are applied by the Valuation Office where as a result of a temporary situation, it has an adverse effect on a business this can include building works, bridge closures etc.
Yield Based Charging – a results-based charging mechanism, based on the yield increase a client will achieve following a review of non-domestic properties in a Billing Authorities locality and any resulting additions to the list.
Yield Increase / Yield Maximisation – the additional amount of revenue a Billing Authority might be expected to achieve following a review of their non domestic properties list to identify areas like;
- Missing or undervalued assessments
- Renewable Energy based businesses
- Relief & Exemptions which may no longer be valid
- Properties which may no longer sit within the Central List