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Review of Business Rates Relief

Business rates (sometimes called non-domestic rates) are charged on most non-residential properties including shops, offices, pubs, restaurants, warehouses, factories and holiday rental properties. They are collected by local councils.

We are consulting with businesses, residents and the GLA (Greater London Authority) on a review of how we decide our policy on business rates relief (or discounts).

The reasons for consulting on changes to business rates relief is to:

  • provide better value for money for local tax payers
  • give more support to Tower Hamlets organisations which are mainly focussed on helping their local communities
  • be fair, easy to understand and transparent about which organisations get relief and why.

This consultation runs until 25 September and the results will form part of a Tower Hamlets Cabinet report which will be sent for approval by the Mayor of Tower Hamlets later in the year.   

We welcome as many views as possible and encourage you to complete our short survey.

Tell us what you think

 

What you need to know

Some organisations and business types are eligible for discounts on their business rates.  Some discounts are fixed by the government and given out automatically.  Councils also have powers to provide additional local discounts, and these will usually need to be applied for.

In the following cases, the council will automatically apply the business rates relief:

  • exempted buildings and empty property relief
  • transitional relief
  • relief for pubs
  • supporting small business rates relief
  • local discretionary relief scheme 2017
  • local relief for newspapers

In the following cases, ratepayers have to apply for relief:

  • small business rates relief
  • charitable and not for profit rates relief
  • enterprise zone relief
  • hardship relief
  • relief for partly occupied properties
  • local discounts

 

Current Tower Hamlets breakdown by category and numbers of ratepayers who get business rates relief
 Relief type Number of accounts Total value
 Small business rates relief 3,698   £8,874,020
 Mandatory charitable relief  618 £19,109,148 
 Discretionary charitable relief 182  £507,910 
 Discretionary not-for-profit relief 13 £178,349 
 Enterprise relief £0 
 Hardship relief £0 
 Relief for partly occupied properties £0 
 Local discounts £0 
 Exempted buildings and empty property relief 1,743  £10,895,403 
 Transitional relief 9.070  £13,730,527 
 Relief for pubs 87  £84,212 
 Supporting small business rates relief 542  £623,488 
 Local Discretionary Relief Scheme 2,357  £2,055,217 
 Local relief for newspapers £0 
 Totals 18,310  £56,058,274 

 

Please note: Enterprise zone relief, exempted buildings and empty property relief and transitional relief are fixed by national laws, and therefore not part of this consultation.

2015 review and the proposals for changes

The council last reviewed its business rates relief policy in 2015. 

Since then there have been a number of new government changes affecting business rates. In addition the council carried out a full review of all organisations that receive discounts, and received significant feedback from ratepayers about the qualifying process and eligibility for reliefs.

The reviewed proposals within this consultation have been developed using ratepayer feedback, “lessons learnt’ from the last review, and with direct consultation with the Tower Hamlets Council for Voluntary Service (THCVS).

This consultation is about seeking the views of ratepayers and representative groups which will help us to ensure that the council delivers a robust, fair, transparent, and easier to understand process for determining the award of business rate reliefs. 

As mentioned previously, as the rules and qualifying criteria for the majority of the reliefs are fixed by law, we will only be seeking feedback about some of the processes outlined in the document.

Criteria and Guidance document

The full Criteria and Guidance document for business rates is available as part of this consultation. 

The feedback collected during this consultation will form part of a final Criteria and Guidance document, which then becomes the officially adopted council policy on business rates relief.  

You are welcome to feedback general comments on this document. However, the following areas are those which we are seeking specific feedback as they are the areas that the council has control over and will be used to influence the final document.

General Conditions

Mandatory charitable relief can be applied in cases where an organisation is registered as a charity with the Charity Commission and is using the property for charitable purposes. In addition, it may also apply where an organisation is not a registered charity but is using the property for charitable purposes.  In these cases, the council must determine whether or not the use is charitable. Here, it is proposed that the council will use the existing provisions of the Charities Act’s 2006 and 2011 in establishing whether or not to apply mandatory relief.

An organisation may be registered as a charity with the Charity Commission but this does not necessarily entitle them to receive mandatory relief.  The overriding factor relates to what the property is actually being used for. This is especially important to any fee charging organisations, where there must be clear and comprehensive evidence that:

  •  the property in occupation is wholly or mainly used for charitable purposes and;
  • where the organisation is not a registered charity, its purpose is carried out for the Public Benefit as outlined in section 4 of the Charities Act 2011 which states: “if a charity confines the provision of benefits to members, supporters, or subscribers, its purposes may not be carried out for the public benefit. 
  • If this is the case, then mandatory relief will not be awarded to the organisation

Applications for business rates relief are invited from organisations here.

This requires compulsory information and where appropriate, additional documentation such as tenancy agreements and audited accounts.  The information is checked and validated by the council against internal and external datasets and other government held records. 

Where insufficient information has been provided by the organisation, council officers will request further details and documentation before a final decision is made in accordance with the Criteria and Guidance document.

Business rates reliefs are sometimes being used in an attempt to exploit ‘legal loopholes’ to reduce the rate liability, and gain an unfair advantage against other ratepayers in the borough.  The council employs inspectors to visit properties to ensure the accuracy of their records, however there are currently no powers that compel ratepayers to allow inspections to be carried out. 

There have also been occasions where following arranged appointments, the situation at the property appeared to be ‘staged’ so as to look as though it is used for charitable purposes on the day of the visit only.  To tackle this type of dishonest behaviour, it is proposed that in cases where a ratepayer refuses to allow access for an inspection, or where unannounced council visits result in finding that the property appears not be used at all or is not being used by the applicant for charitable purposes, the application will be refused.

Discretionary reliefs

Any reliefs awarded will have a direct impact on the amount of business rates revenue the council can collect. It is important that when the council does allow for a discretionary discount to be given, there is a direct benefit to borough residents and there are number factors shown in paragraphs 5, 6 and 7 of the draft Criteria and Guidance document used to help show who may qualify.  We would welcome any comments about those factors, and how they are applied to applications.

Local discounts

The council is able to exercise its discretion and provide a local relief scheme as long as it considers it reasonable to do so having considered the other interests of those liable to pay Council Tax set by the council.  

Although there is no set budget to fund such reliefs at present, we are seeking comments on what sort of relief would benefit the community as a whole, or to encourage new businesses into the borough, and also how we could fund any new reliefs if these were adopted by the council.

Periodic reviews of relief granted

There is no statutory obligation for any reviews to be carried out.  However, the council does have a duty to ensure that its records are accurate and that reliefs are awarded where a genuine entitlement exists.  The previous practice was to award the relief for a three year period.  However, since regulations require the council to provide 12 months’ notice to end or alter awards of discretionary relief in cases where organisations continue to occupy the same premises, there is a risk that the relief could continue when not appropriate and the council would not be able cancel any reliefs. 

Therefore, it is proposed that awards for the relief will be made for a fixed period in a particular financial year and will automatically cease at the end of the financial year.  This will not require a new application by ratepayers, and where a specific review is not carried out, the relief will be awarded automatically at the start of the financial year.  This will however ensure that the council is able to plan and carry out reviews efficiently without having to provide an additional layer of bureaucracy by having to individually give 12 months’ notice of any potential changes.