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Technical Note: Estimating The Poundage Supplement Needed To Meet The Cost Of The Small Business Rate Relief Scheme — 2005-06

DescriptionExplanation of the calculation of the 2005-06 small business rate relief supplement on the poundage rate
ISBN
Official Print Publication Date
Website Publication DateDecember 24, 2004

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    TECHNICAL NOTE: ESTIMATING THE POUNDAGE SUPPLEMENT NEEDED TO MEET THE COST OF THE SMALL BUSINESS RATE RELIEF SCHEME - 2005-06

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    Introduction

    1. This note describes how it has been estimated that a 0.45p 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 2005-06. 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 2005-06 using provisional Valuation Rolls supplied by the Scottish Assessors, previous data on the level of reliefs and take-up of Small Business Rate Relief.
    3. The cost of the scheme in 2005-06

    4. The revised estimate of the total gross cost of the small business rate relief scheme in 2005-06 is 30.5 million.
    5. As at 1 April 2005, the total rateable value of properties with a individual rateable value of 11,500 or less is estimated to be 568.0 million. Of this total, an estimated 100.8 million will be subject to mandatory relief. Properties with a rateable value of between 8,000 and 11,500 will account for a further 151.7 million. These subjects, with a total rateable value of (100.8 million + 151.7 million) = 252.5 million, will receive a relief of 5%, with a gross cost of 252.5 million * 5% * 46.1p = 5.8 million.
    6. 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 20.4 million.
    7. 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

      100.7

      43

      42.9

      50

      9.9

      3500 <= rateable value < 4500

      49.3

      46

      22.4

      40

      4.1

      4500 <= rateable value < 5750

      63.0

      43

      26.9

      30

      3.7

      5750 <= rateable value < 7000

      58.7

      36

      21.0

      20

      1.9

      7000 <= rateable value < 8000

      43.8

      34

      15.0

      10

      0.7

      Total for subjects with RV<8,000

      315.5

      128.3

      20.4

    8. 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 (315.5 million - 128.3 million) * 5% * 46.1p = 4.3 million.
    9. These three components of cost can thus be added together, giving a gross cost of 30.5 million for the scheme (5.8m + 20.4m + 4.3m).
    10. The revised cost of the scheme to be paid by business is calculated as 17.8 million. This is 12.7 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 30.5 million less:
    • the equivalent of the previous 2p discount for all qualifying subjects with a rateable value of 11,500 or under (11.4 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 (1.3 million).

    1. The effective rateable value of subjects with a rateable value over 29,000 is estimated to be 3,897m from 1 April 2005.
    2. The required supplement is therefore 17.8m/ 3,897m = 0.45p (to the nearest 0.05p).
    3. If you have any queries regarding this note then please contact Dr David Signorini, Statistical Support for Local Government on 0131-244-7033 or by email to david.signorini@scotland.gsi.gov.uk.

    Statistical Support for Local Government
    The Scottish Executive

    Dec 2004