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Committee for Finance and Personnel Report (2007-2011 Mandate)

Research Paper: Follow Up To Committee Meeting 12/09/07 SMALL BUSINESS RATES RELIEF (SBRR)

Research and Library Services

Follow up to Committee Meeting 12/09/07 

  1. Did UK businesses have to apply for Small Business Rates Relief / was it applied automatically on the basis of rateable value?

In England, it is necessary for businesses to apply for any rates relief; it does not apply automatically 1. Due to lower than anticipated take-up, this requirement was subsequently reduced from an annual to a five yearly one.

In Scotland, businesses must apply for SBRR if they are eligible for relief of 10% or more. However, all subjects with a rateable value of £11,500 or less automatically receive 5% relief by default 2.

The Welsh scheme automatically applies the rates relief to rates demand bills when they are issued by local authorities 3.

  1. The FSB proposed a £3bn ‘Rates Reinvestment Fund’. Did this apply to Northern Ireland, or the UK as a whole?

The £3 billion ‘Rates Reinvestment Fund’, is being proposed by the FSB in the context of a wider economic assistance package for post-conflict in Northern Ireland 4.

  1. Estimation of potential costs:

In terms of current revenue, the Department of Finance and Personnel estimates that over £450 million is taken in non-domestic rates per annum. Over a ten year period this would amount to £4.5 billion 5.

Based on the UK systems of relief on the basis of ‘rateable value’, the likely (re-distributive) savings to small businesses (and associated costs for larger businesses) are as follows 6:

  • If the Scottish system were to be introduced in NI, this would involve the re-distribution of £13.5 million. The average individual firm would receive a £384 rate support, subsidised by an additional 1.62p on the poundage paid by larger businesses. There would also be high administrative costs associated with this, given the requirement for individual application.
  • If the English system was adopted, the re-distributed burden would be £21 million. Rate support to the average individual firm would be £601, with a supplementary rate of 2.29p for larger businesses 7. The administrative costs of such a system might be considerable, since it also requires individual companies’ applications.

Information regarding the potential costs on the basis of TSN areas would necessitate details as to the distribution of small companies’ rateable values. This is not readily available, but might be considered in the context of the rating review.

3 (b) What is meant by ‘size’?

The UK system of ‘rateable value’ assumes that the rental value of a company is an effective proxy for ‘size’.

Alternative methodology could assess ‘size’ on the basis of company turnover, for example. However, this might create additional administrative burden and would be subject to more fluctuation than rental value.

  1. Which Northern Ireland businesses would qualify for relief, based on the UK limits?

Information as to the proportion of eligible local businesses is not available 8. However, the Office of the Deputy Prime Minister recently conducted research in England regarding the propensity or inclination of small businesses to claim relief. This study considered the sectors most likely to benefit and reported as follows: retail (35%), manufacturing (15%), financial services (12%), hotels and restaurants (10%), and others (28%).

  4. “Proposals for a Financial Package for Northern Ireland”, Federation of Small Businesses
  5. “Proposals for a Financial Package for Northern Ireland”, Federation of Small Businesses
  6. “Rate Reliefs for Businesses in Northern Ireland: A Policy Paper”, DFP, March 2005
  7. “Rate Reliefs for Businesses in Northern Ireland: A Policy Paper”, DFP, March 2005
  8. As confirmed by DFP official on 12 September, most local ‘small post offices’ would qualify for Small Business Rates Relief, under the UK thresholds.

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