James Walton, Head of Finance, Governance and Assurance, will brief Members on the Business Rates System

The Head of Finance, Governance and Assurance tabled a briefing paper for Members on business rates [copy attached to the signed minutes].  He explained that in 2013 the funding mechanism for Local Government had changed, with 50% of business rates retained locally, of which 1% went to the Fire Authority.  Prior to 2013, 100% of business rates collected had been paid to Central Government.

The Financial Advice Manager explained that the level of business rates payable by a company was based on the rentable value of the property they occupied, multiplied by a multiplier based on the size of the business.  Larger businesses were subject to a higher multiplier.  The Valuation Office was responsible for establishing the rentable value of the property.  It was the practice that business rates increased each year by the rate of the Retail Price Index (RPI), although for 2014/15 this had been capped by the Government at 2%. This capping had led to a lower level of funds than expected being collected. However, a separate Top-up Grant had been received from Central Government to address this shortfall. 

Members noted that Central Government was reducing the level of the Revenue Support Grant paid to Local Authorities, and at its current rate of reduction it was expected that it would cease to be paid by 2020.  Should the Revenue Support Grant be abolished, the income from business rates would form 25% of the Council’s income.  

In answer to a Member’s query, the Head of Finance Governance and Assurance explained that there were a series of mandatory and discretionary reliefs which reduced the level of business rates payable by companies.  The mandatory reliefs were set by Central Government Policy and the discretionary local reliefs were set by the Council.  In answer to a Member’s question the Head of Finance Governance and Assurance explained that mandatory reliefs were part funded by the Government but discretionary reliefs had to be fully funded by the Council and the Council remained liable to pay the Government’s percentage to the Treasury.  He confirmed that all discretionary Local reliefs would be detailed in the Business Rates Policy, but there were none currently agreed. 

The Financial Advice Manager confirmed that businesses with a value of less than £12,000 were not subject to business rates.  Those with a value of between £12,000 and £18,000 did not pay the full amount, the amount paid was on a sliding scale according to value.  Full business rates were only paid by businesses with a value in excess £18,000. 

Members noted that the Council did not have the authority to set its own business rates, the Valuation Office provided the property valuations and the multiplier was set by Central Government.  The only way in which the Council could increase its income from business rates was to encourage the establishment of larger businesses in the County.  The Head of Finance Governance and Assurance referred Members to the Council’s Economic Development Strategy. 

In response to a Member’s query, the Financial Advice Manager confirmed that in buildings where there were multiple units rented by different companies the company occupying the unit was responsible for the payment of the business rates and the owner of the property could apply for relief on any empty units.

A Member asked whether allowance was made by Central Government for Shropshire as a rural county which did not have the same opportunities for the generation of a business rates income stream as urban areas.  The Head of Finance, Governance and Assurance explained that authorities with a disproportionately high income from business rates were subject to a Levy on the excess income, whereas counties with a low level of income received a Top-up payment.  He continued that in some circumstances this may be considered as a disincentive in attracting businesses to the County. 

The Head of Finance, Governance and Assurance confirmed that the Revenue Support Grant was a funding resource and was used for the provision of all Council Services.  He continued that there was no specific link between the payment of business rates and the services a business received from the Council.