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Funding news - 08/12/2010

Small Businesses Benefit From Automatic Rate Relief

New legislation will enable local authorities to automatically apply rates discount through the Small Business Rate Relief Scheme.

The scheme, which awards a percentage rate relief for businesses occupying non-domestic property in England with a rateable value of less than £18,000 (£25,000 in London) requires businesses to submit an annual application to their local authority. The standard scheme applies a 50% discount to properties with a rateable value of less than £6,000 and a scalable discount for properties with a rateable value of between £6,000 and £12,000. Businesses with a rateable value of between £12,000 and £18,000 (£25,000 in London) will have their rate calculated using a ‘small business multiplier’.

Since 01 October 2010, an enhanced rate relief scheme has been in operation, meaning that businesses occupying properties with a rateable value of less than £6,000 will receive 100% rate relief, and doubling the discount for properties with a rateable value between £6,000 and £12,000. Certain rural businesses, non-profit organisations, charity shops and community sports clubs are also included under the scheme.

Businesses had been required to submit an annual application form for the Small Business Rate Relief Scheme, but the upcoming Localism Bill will remove this requirement and enable local authorities to automatically apply the discount for all eligible businesses. The move will benefit current recipients and businesses which haven’t previously accessed their rate relief allocation.

Announcing the change, Local Government Secretary Eric Pickles said:

"Small shops and businesses are crucial to the country's economy and we know they were hit hard by the financial legacy left us. All too often the tax support Government offers is tied up in so much red tape small businesses are put off from getting it. As we rebalance the economy we are determined to give them a helping hand.

"We have already doubled the rate discount small businesses get, but we want to see as many small business ratepayers as possible to claim their tax cuts so we will change the rules so councils can administer the scheme without being caught up in unnecessary Government red tape.

"We shall also let councils set discounts locally and we are considering proposals to let them keep what they collect. This will give councils a genuine financial stake in their local economy and let them target their support at local shops, pubs, post offices and start-up enterprises."

The Federation for Small Businesses (FSB) had long been campaigning for a change to the scheme. John Walker, National Chairman of the FSB, said:

"After rent and wages, rates are the biggest cost to many businesses and steps to help small firms automatically get the relief they are entitled to is welcome news. We have long been calling for small business rate relief to be made automatic and this cash injection will be of great help to many small businesses.

"The onus is now on councils to be creative and not needlessly make small businesses go through an application process when it is obvious they are eligible. We have developed excellent relations with councils across the country through our small business engagement accord and we will be urging them to use their new powers to ensure that all small businesses receive the relief that they are entitled to."

Read the full release on the Department for Communities and Local Government website (opens in new window).

Rate relief schemes are also in operation in Scotland, Wales and Northern Ireland.

Source: DCLG, 08/12/10