In Budget 2018, the Government announced that it would provide a business rates Retail Discount scheme for occupied retail properties with a rateable value of less than £51,000 in each of the years 2019-20 and 2020-21.
The value of discount will be one third of the bill, and must be applied after mandatory reliefs and other discretionary reliefs funded by section 31 grants have been applied. Importantly it applies to charity shops but state aid rules apply (cumulative €200,000 de minimis threshold across 3 years). Full details of the new Government guidance to local authorities can be found below.
As per the example below, a charity potentially could claim a discount of up to £1,400 per shop. Charities will therefore need to monitor the total amount of state aid (including from other sources) they had received (across the whole organisation) over a three year period to ensure that they do not exceed the thresholds. The Charity Tax Group and Charity Retail Association have previously secured counsel’s opinion that while state aid is applicable for these types of one-off targeted reliefs (as was the case with retail relief in the past) it is not relevant to mandatory and discretionary Business Rates relief allowed to charities occupying and using buildings for charitable purposes, including use as charity shops.
The Government has published guidance to authorities about the operation and delivery of the policy. The Government anticipates that local authorities will include details of the relief to be provided to eligible ratepayers for 2019-20 in their bills for the beginning of that year.
Retail Discount How will the relief be provided?
As this is a measure for 2019-20 and 2020-21 only, the Government is not changing the legislation around the reliefs available to properties. Instead the Government will, in line with the eligibility criteria set out in this guidance, reimburse local authorities that use their discretionary relief powers, introduced by the Localism Act (under section 47 of the Local Government Finance Act 1988, as amended) to grant relief. It will be for individual local billing authorities to adopt a local scheme and determine in each individual case when, having regard to this guidance, to grant relief under section 47. Central government will fully reimburse local authorities for the local share of the discretionary relief (using a grant under section 31 of the Local Government Act 2003). The Government expects local government to apply and grant relief to qualifying ratepayers from the start of the 2019/20 billing cycle.
Central government will reimburse billing authorities and those major precepting authorities for the actual cost to them under the rates retention scheme of the relief that falls within the definitions in this guidance. Local authorities will be asked to provide an estimate of their likely total cost for providing the relief in their National Non-Domestic Rate Return 1 (NNDR1) for 2019-20 and 2020-21. Central government will provide payments to authorities to cover the local share, as per the usual process. 9. Local authorities will also be asked to provide outturn data on the actual total cost for providing the relief, as per the usual process via the National Non-Domestic Rate 3 (NNDR3) forms for 2019-20 and 2020-21. Any required reconciliations will then be conducted at these points.
Which properties will benefit from relief?
Properties that will benefit from the relief will be occupied hereditaments with a rateable value of less than £51,000, that are wholly or mainly being used as shops, restaurants, cafes and drinking establishments. The Government considers shops, restaurants, cafes and drinking establishments to mean:
- i. Hereditaments that are being used for the sale of goods to visiting members of the public: Shops (such as: florists, bakers, butchers, grocers, greengrocers, jewellers, stationers, off licences, chemists, newsagents, hardware stores, supermarkets, etc); Charity shops Opticians; Post offices; Furnishing shops/ display rooms (such as: carpet shops, double glazing, garage doors); Car/ caravan show rooms; Second hand car lots; Markets; Petrol stations; Garden centres; Art galleries (where art is for sale/hire).
- ii. Hereditaments that are being used for the provision of the following services to visiting members of the public: Hair and beauty services (such as: hair dressers, nail bars, beauty salons, tanning shops, etc) Shoe repairs/ key cutting; Travel agents; Ticket offices e.g. for theatre; Dry cleaners; Launderettes; PC/ TV/ domestic appliance repair; Funeral directors; Photo processing; Tool hire; Car hire
- iii. Hereditaments that are being used for the sale of food and/ or drink to visiting members of the public: Restaurants; Takeaways; Sandwich shops; Coffee shops; Pubs; Bars
To qualify for the relief the hereditament should be wholly or mainly being used as a shop, restaurant, cafe or drinking establishment. In a similar way to other reliefs (such as charity relief), this is a test on use rather than occupation. Therefore, hereditaments which are occupied but not wholly or mainly used for the qualifying purpose will not qualify for the relief.
The list set out above is not intended to be exhaustive as it would be impossible to list the many and varied retail uses that exist. There will also be mixed uses. However, it is intended to be a guide for authorities as to the types of uses that Government considers for this purpose to be retail. Authorities should determine for themselves whether particular properties not listed are broadly similar in nature to those above and, if so, to consider them eligible for the relief. Conversely, properties that are not broadly similar in nature to those listed above should not be eligible for the relief.
- i) Hereditaments that are being used for the provision of the following services to visiting members of the public: Financial services (e.g. banks, building societies, cash points, bureaux de change, payday lenders, betting shops, pawn brokers; Other services (e.g. estate agents, letting agents, employment agencies) − Medical services (e.g. vets, dentists, doctors, osteopaths, chiropractors); Professional services (e.g. solicitors, accountants, insurance agents/ financial advisers, tutors); Post office sorting offices
- ii. Hereditaments that are not reasonably accessible to visiting members of the public. Generally speaking, the government also does not consider other assembly or leisure uses beyond those listed at paragraph 11 to be retail uses for the purpose of the discount. For example, cinemas, theatres and museums are outside the scope of the scheme, as are nightclubs and music venues which are not similar in nature to the hereditaments described above. Hereditaments used for sport or physical recreation (e.g. gyms) are also outside the scope of the discount. Where there is doubt, the local authority should exercise their discretion with reference to the above and knowledge of their local tax base.
How much relief will be available?
The total amount of government-funded relief available for each property for 2019- 20 and 2020/21 under this scheme is one third of the bill, after mandatory reliefs and other discretionary reliefs funded by section 31 grants have been applied, excluding those where local authorities have used their discretionary relief powers introduced by the Localism Act which are not funded by section 31 grants(As required in the NNDR3 guidance notes, the former categories of discretionary relief prior to the localism act (i.e. charitable/CASC/rural etc. top up and not for profit); should be applied first in the sequence of discretionary reliefs and, therefore, before the retail discount. There is no relief available under this scheme for properties with a rateable value of £51,000 or more. Of course, councils may use their discretionary powers to offer further discounts outside this scheme. However, where an authority applies a locally funded relief, sometimes referred to as a hardship fund, under section 47 this is must be applied after the Retail Discount.
The eligibility for the relief and the relief itself will be assessed and calculated on a daily basis. The following formula should be used to determine the amount of relief to be granted for a chargeable day for particular hereditament in the financial year 2019-20: Amount of relief to be granted = V where 3 V is the daily charge for the hereditament for the chargeable day after the application of any mandatory relief and any other discretionary reliefs, excluding those where local authorities have used their discretionary relief.
This should be calculated ignoring any prior year adjustments in liabilities which fall to be liable on the day. Ratepayers that occupy more than one property will be entitled to relief for each of their eligible properties, subject to State Aid De Minimis limits.
Annex A: Calculation examples for 2019/20
Example 2: An occupied charity shop with a rateable value of £40,000
- Gross rates (before any reliefs) = £40,000 x 0.491 = £19,640
- Net rates after charity relief: = £3,928
- Retail discount (1/3): = -£1,309 Rates due (after charity relief and retail discount): = £2,619
Annex B: State Aid
Awards such as Retail Discount are required to comply with the EU law on State Aid. In this case, this involves returning the attached declaration to this authority if you have received any other de minimis State Aid, including any other Retail Discount you are being granted for premises other than the one to which this bill and letter relates, and confirming that the award of Retail Discount does not exceed the €200,000 an undertaking can receive under the de minimis Regulations EC 1407/2013. (An undertaking is an entity which is engaged in economic activity. This means that it puts goods or services on a given market. The important thing is what the entity does, not its status. Therefore, a charity or not for profit company can be undertakings if they are involved in economic activities. A single undertaking will normally encompass the business group rather than a single company within a group. Article 2.2 of the de minimis Regulations (Commission Regulation EC/ 1407/2013) defines the meaning of ‘single undertaking’)