TECHNICAL NOTE: NON-DOMESTIC RATES, 2007-08 POUNDAGE CALCULATION
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Purpose
1. This technical note explains how the Scottish Government calculated the non-domestic poundage rates that will apply throughout Scotland for 2007-08. It covers the standard poundage rate, and the supplement paid by larger businesses which meets part of the costs of the Small Business Rates Relief Scheme (SBRRS).
Background
2. Ministers previously announced their intention to equalise the Scottish non-domestic poundage rate with that of England over a 2 year period. In 2006-07, a transitional rate was set at halfway to equalisation. Full equalisation will be achieved in 2007-08.
3. Non-domestic rates are levied on the basis of a national rate poundage multiplied by the rateable value of each non-domestic subject on the valuation roll.
4. The Minister for Finance and Public Service Reform made a Statement to the Scottish Parliament on 13 December announcing that the provisional 2007-08 poundage rate in Scotland would be set at 44.1 pence, and that the larger business supplement would be 0.3 pence. (This gives a rate poundage of 44.4 pence for businesses with rateable values above £29,000).
5. The above figure of 44.1 pence is set to be equal to the rate poundage to be set for England for 2007-08, and will therefore lead to full equalisation. The rate poundage for England (44.1 pence) is allied to the retail price index (RPI), which rose by 3.6 per cent in the year to September 2006.
6. The larger business supplement (0.3 pence) is calculated to meet the costs of the SBRRS, less the portion of the SBRRS costs met by the Scottish Executive. The details of the calculations of this supplement are shown in the annex.
7. In summary, the rate poundage in Scotland in 2007-08 will be 44.1 pence, and for businesses with rateable values above £29,000 it will be 44.4 pence.
8. If you have any queries regarding this note then please contact Jonathan Davidson, Statistical Support for Local Government on 0131-244-7021 or by email to
ANNEX
CALCULATING THE COST OF SBRRS AND THE LARGER BUSINESS SUPPLEMENT
The steps in the calculation are as follows:-
1. Estimate the costs of the SBRRS in 2007-08 from the latest SBRRS returns from councils and the latest data from the Scottish Assessors portal.
2. Calculate the portion of (1) which will be met from the Scottish Government.
3. Subtract (2) from (1) to derive the costs to be met from larger businesses.
4. Estimate the total rateable value of businesses with rateable values above £29,000 and divide into (3) to derive the larger business rate poundage supplement.
5. Round result to the nearest tenth of a pence.
Calculations:-
1. The estimated gross cost of SBRRS in 2007-08 is £23.6 million. The figure is derived by applying the latest (as at October) rateable values from the assessors portal to the costs of the SBRRS reported by councils. Uptake of the SBRRS scheme is assumed to be same as in 2006-07.
2. The deduction from this gross cost is to ensure that larger businesses to not pay for something currently met by central government. The Scottish Executive contribution to the above gross cost is calculated to be £11.8 million. The components of this are:-
- the equivalent of the previous 2p discount for all qualifying subjects with a rateable value of £11,500 or under (the total such rateable value is £547 million) and the contribution is £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 5 per cent relief (total rateable value in such categories is £423 million) and the contribution is £0.9 million.
The total Scottish Executive contribution is therefore £10.9 plus £0.9 million, ie £11.8 million.
3. The remaining cost to be met from larger businesses is therefore £23.6 million less £11.8 million, which is £11.8 million.
4. The total rateable value of subjects with a rateable value over £29,000 is £4,098 million and dividing that into £11.8 million leads to a rate poundage supplement of 0.288 pence.
5. This is 0.3 pence when rounded to the nearest tenth of a pence.
jonathan.davidson@scotland.gsi.gov.uk
Statistical Support for Local Government
Scottish Executive
December 2006