Estimating the poundage supplement needed to meet the cost of the Small Business Rate Relief scheme - 2006-07
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Technical note: Introduction
1. This note describes how it has been estimated that a 0.4p supplement on the rate poundage of non-domestic subjects with a rateable value over £29,000 is required to meet the additional costs of the small business rate relief scheme in 2006-07. The methodology was explained in the Technical Note to the 2003-04 supplement (which can be found at http://www.scotland.gov.uk/consultations/enterprise/poundagesupp.pdf), and only revised figures are included here.
2. The total net costs to be met by the supplement have been estimated for 2006-07 using data taken from the Scottish Assessors Association Portal representing the Valuation Roll at the start of October 2005. In addition, previous data on the level of reliefs and take-up of Small Business Rate Relief have also been used.
The cost of the scheme in 2006-07
3. The revised estimate of the total gross cost of the small business rate relief scheme in 2006-07 is £27.9 million.
4. As at 1 October 2005, the total rateable value of properties with a individual rateable value of £11,500 or less is estimated to be £544.4 million. Of this total, an estimated £96.4 million will be subject to mandatory relief. Properties with a rateable value of between £8,000 and £11,500 will account for a further £150.3 million. These subjects, with a total rateable value of (£96.4 million + £150.3 million) = £246.7 million, will receive a relief of 5%, with a gross cost of £246.7 million * 5% * 44.9p = £5.5 million.
5. For properties with a rateable value of less than £8,000, a proportion will be eligible for higher level relief of 10% or more. Provisional data submitted to the Scottish Executive by Local Authorities has been used to estimate this proportion in each valuation band, and is summarised in the table below, giving a gross cost of relief of £18.3 million. Please note that for clarity the figures presented in this table have been rounded.
Rateable values summary table | Rateable value excluding mandatory reliefs and vacant properties | Effective RV of subjects in receipt of higher level relief as % of all subjects | Estimated effective rateable value of businesses in receipt of higher level relief | Relief % | Estimated gross cost of SBRRS - 2003-04 |
| £m | % | £m | % | £m |
| 0 < rateable value < 3500 | 92.8 | 44 | 41.0 | 50 | 9.2 |
| 3500 <= rateable value < 4500 | 44.7 | 45 | 20.2 | 40 | 3.6 |
| 4500 <= rateable value < 5750 | 61.4 | 40 | 24.3 | 30 | 3.3 |
| 5750 <= rateable value < 7000 | 55.5 | 34 | 18.7 | 20 | 1.7 |
| 7000 <= rateable value < 8000 | 43.3 | 28 | 12.0 | 10 | 0.5 |
| Total for subjects with RV<£8,000 | 297.8 | | 116.1 | | 18.3 |
6. The properties with a rateable value of less than £8,000 which do not qualify for higher level relief will still receive basic level Small Business Rate Relief at 5%. This will cost an additional (£297.8 million - £116.1 million) * 5% * 44.9p = £4.1 million.
7. These three components of cost can thus be added together, giving a gross cost of £27.9 million for the scheme (£5.5m + £18.3m + £4.1m).
8. The revised cost of the scheme to be paid by business is calculated as £16.1 million. This is £11.9 million less than the total gross cost of the scheme but it ensures that big business does not pay for something currently met by central government. It is £27.9 million less:
• the equivalent of the previous 2p discount for all qualifying subjects with a rateable value of £11,500 or under (£10.9 million).
• the cost of increasing the basic relief for small properties occupied by businesses with a cumulative rateable value of more than £11,500, or for those in receipt of mandatory or discretionary relief, from a 2p discount to a 5% relief (£1.0 million).
9. The effective rateable value of subjects with a rateable value over £29,000 is estimated to be £3,968m at 1 October 2005.
10. The required supplement is therefore £16.1m/ £3,968m = 0.4p (to the nearest 0.1p).
11. If you have any queries regarding this note then please contact Local Government Finance Statistics on 0131-244-7033 or by email to lgfstats@scotland.gsi.gov.uk.
Statistical Support for Local Government
Scottish Executive
November 2005