Guidance Notes for NNDR1

Guidance Notes for NNDR1: 2013-14

Please read this note before submitting your NNDR1

Introduction

1.    These notes are intended to help local authorities with the calculation of their non-domestic rating income for 2013-14 and the completion of the NNDR1 form.  They do not replace, or override, the legal provisions contained in the Local Government Finance Act 1988 (the 1988 Act), or secondary legislation made under that Act.  Instead, the NNDR1 provides a framework for the calculation of non-domestic rating income, as required by the legislation, and for the provision of information to central Government for statistical purposes.  Authorities should take their own legal advice if they have doubts about what the legislation requires.

Background

2.    2013-14 is the first year of the rates retention scheme.  Further detail about the scheme can be found in the “step-by-step guide” included in the Government’s Policy Statement published on 21 November and which can be found on the Department’s website at https://www.gov.uk/government/publications/business-rates-retention-policy-statement. In brief, however, under the rates retention scheme, authorities will, from 1 April 2013, retain a percentage of the rates income that they collect.  Further percentages will be paid to central government and to an authority’s major precepting authorities[1], if any. 

3.    The amount to be retained, and the amounts to be paid to central government and major precepting authorities are to be fixed at the start of the financial year on the basis of the billing authority’s estimate of its non-domestic rating income for the year.

4.    The basis on which an authority is to make that estimate will be set out in regulations made under the provisions of the 1988 Act.  The Government intends to lay draft regulations for consideration by Parliament early in the New Year. Draft regulations published for consultation can be found at :

https://www.gov.uk/government/consultations/business-rates-retention-draft-regulations.) The requirements for the calculation of non-domestic rating income for the year can be found in schedule 1 to the consultation draft of the Non-Domestic Rating (Rates Retention) Regulations (the retention regulations).

5.    The regulations will also require authorities to calculate the sum due, for that year, to:

i.          the Secretary of State in respect of the “central share” of their non-domestic rating income;

ii.         to their major precepting authorities.  

6.    Calculations of these shares of non-domestic rates income are recorded on the form in the NNDR summary.  Taking the net rate yield at line 36, the summary will automatically calculate the central, major precepting authority and billing authority shares of income under the scheme. 

7.    The Government has proposed that shares will be calculated in accordance with the following percentages as appropriate to the authority’s area:

·         50% central share;

Major precepting authority shares

·         10% where the relevant precepting authority is a two-tier county council which is a fire and rescue authority;

·         9% where the relevant precepting authority is a two tier county council which is not a fire and rescue authority;

·         20% where the relevant precepting authority is the Greater London Authority;

·         1% where the relevant precepting authority is a single purpose fire and rescue authority;

Billing authority shares

·         50% where the billing authority is a unitary authority and the authority is a fire and rescue authority;

·         49% where the billing authority is a unitary authority and the authority is not a fire and rescue authority;

·         40% where the billing authority is a district council in a two tier area;  

·         30% where the billing authority is a London Borough Council or City of London Council

8.    An authority’s calculation of its non-domestic rating income for 2013-14, and the sums due to central Government and major precepting authorities, should be notified to both the Secretary of State and to any major precepting authority that is to receive a share of that income, by Thursday 31 January 2013[2].  Authorities should provide provisional figures to the Secretary of State and major precepting authorities by Monday 7 January 2013. There is no requirement to submit a signed copy of the provisional return.

General guidance on completion of NNDR1

9.    The retention regulations will require a billing authority to calculate its non-domestic rating income for a year by estimating the net payments from ratepayers that will be credited to its collection fund income and expenditure account (ie after having taken account of any rate relief provided to ratepayers and any repayments made to ratepayers) in that year (regardless of whether the payments are due in respect of that year, or previous years).

10. Billing authorities will be required by the Non-domestic Rating (Transitional Protection Payments) Regulations 2013 to estimate the amount of the transitional protection payment for the year.  The retention regulations will require the amount of the transitional protection payment to be added (where transitional relief results in lower receipts from ratepayers), or subtracted (where transitional relief results in higher receipts from ratepayers) from the net income figure.

11. Finally, the draft retention regulations, require billing authorities to further deduct from the net income figure, an amount in respect of the cost of collection and for the rates collected in Enterprise Zone areas, New Development Deal areas and from renewable energy hereditaments, as set out in the draft Non-Domestic Rating (Designated Area) Regulations and Non-Domestic Rating (Renewable Energy Projects) Regulations (copies of which can be found at the address in paragraph 4 above).

12. In completing the attached NNDR1, billing authorities should take account of the two measures announced by the Chancellor in his Autumn Statement. They were:

• a further one year extension of the temporary increase in Small Business Rate Relief; and

·        extended exemption from rates for empty new builds (which will be exempt from empty property rates for up to 18 months up to state aid limits between 1 October 2013 and 31 October 2016).

Notes on completion of NNDR1

We expect all cells to be completed with +ve figures. The only cells that could have a –ve entered are lines 33 and 35.

Line 1:            Enter the number of hereditaments shown in the local non-domestic rating list for the authority’s area as at 30 September 2012.  This cell is pre-filled with the latest published data from the VOA as at 30 September 2012. 

Line 2:            Enter the aggregate rateable value shown in the local non-domestic rating list for the authority’s area as at 30 September 2012. This cell is pre-filled with the latest published data from the VOA as at 30 September 2012.

Line 3:            This field is calculated. It is the gross rate yield calculated by multiplying the amount entered in line 2 by 0.462 - the proposed small business non-domestic rating multiplier for 2013-14.

Line 4:            Enter your best estimate of the total additional yield generated to finance small business rate relief.  This is the difference between the amount calculated for line 3 and the amount calculated by applying the proposed higher multiplier of 0.471 [using 0.009p as the supplement] to those properties that are not entitled to have their rates bills calculated on the basis of the small business rate multiplier.  For properties that are not entitled to have their rates bills calculated on the basis of the small business rate multiplier, but are eligible for transitional relief, line 4 should include the contribution they make to the cost of the small business rate relief scheme.   

Line 5:            Enter your best estimate of the total cost of small business rate relief for properties within the billing authority’s area.  This is the difference between the amount calculated in line 3 and the total amount of relief given to qualifying properties with a rateable value of not more than £12,000.  As mentioned above, the Chancellor announced at the Autumn Statement that the temporary increase in small business rate relief will be continued for the 2013-14 year.  The cost of relief should be estimated on that basis.

Line 6:            This field is calculated. It is the net cost of small business rate relief calculated by subtracting line 4 from line 5. A +ve figure indicates that in 2013-14 more small business rate relief is to be granted than the additional revenue to finance the scheme will be collected. 

Line 7:            Enter your estimate of lost yield in 2013-14 through the application of 80% mandatory rate relief for properties occupied by charities in the authority's area (section 43(5) and (6)(a) of the Act). NB. The estimate should take account of reductions in rateable values under section 44A of the Act (partly occupied premises).

Line 8:            Enter your estimate of lost yield in 2013-14 through the application of 80% mandatory rate relief for properties occupied by registered Community Amateur Sports Clubs (CASCs) in the authority's area (section 43(5) and (6)(b) of the Act).  . NB. The estimate should take account of reductions in rateable values under section 44A of the Act (partly occupied premises). 

Line 9:            Enter your estimate of lost yield in 2013-14 through the application of 50% mandatory rate relief for rural general stores, post offices, public houses, petrol filling stations and food shops, in the authority’s area (section 43(6A) to (6E) of the Act).

Line 10:          Enter your estimate of lost yield in 2013-14 as a result of the rateable value of a hereditament being apportioned between its occupied and unoccupied parts under section 44A of the Act. NB. The estimate should not take account of hereditaments in receipt of rural rate relief (which should be reflected in line 9), nor small business rate relief (which should be reflected in line 6).

Line 11:          Enter your estimate of lost yield in 2013-14 as a result of premises being unoccupied. This is the loss of yield as a result of there being no liability for non-domestic rates in accordance with the Non-Domestic Rating (Unoccupied Property) (England) Regulations 2008 (SI 2008/386). The threshold, below which rates will not be payable in respect of unoccupied properties will be £2,600 for 2013-14.As mentioned above, the Chancellor announced at the Autumn Statement extended exemption for empty new builds.  They will be exempt from rates for up to 18 months (up to state aid limits) between 1 October 2013 and 31 October 2016.  Your estimate should therefore include your estimate of lost yield from this measure for the period 1 November 2013 until 31 March 2014.

Line 12:          This field is calculated. It is the total mandatory reliefs calculated by summing lines 6 -11.

Line 13:          Enter the total amount of any discretionary relief the authority expects to grant to charities in 2013-14 (having taken account of apportionment in rateable values under section 44A of the Act - partly occupied premises - where applicable) by virtue of its powers under section 47 of the Act, i.e. ‘top-up’ relief for charitable organisations receiving mandatory rate relief. (NB in previous year’s NNDR1s the figure entered in this line would have been 25% of relief granted.  From 2013-14 onwards, the figure entered should be for the full amount of discretionary relief granted.)

Line 14:          Enter the total amount of any discretionary relief the authority expects to grant to non-profit making organisations in 2013-14 (having taken account of the transitional arrangements and apportionment in rateable values under section 44A of the Act - partly occupied premises - where applicable) by virtue of its powers under section 47 of the Act. (NB in previous year’s NNDR1s the figure entered in this line would have been 75% of relief granted.  From 2013-14 onwards, the figure entered should be for the full amount of discretionary relief granted.)

Line 15:          Enter the total amount of any discretionary relief the authority expects to grant to CASCs in 2013-14 (having taken account of apportionment in rateable values under section 44A of the Act - partly occupied premises - where applicable) by virtue of its powers under section 47 of the Act, i.e. ‘top-up’ relief for CASCs receiving mandatory rate relief. (NB in previous year’s NNDR1s the figure entered in this line would have been 25% of relief granted.  From 2013-14 onwards, the figure entered should be for the full amount of discretionary relief granted).

Line 16:          Enter the total of any discretionary relief the authority expects to grant to sole general stores, post offices, public houses, petrol filling stations and to rural food shops in 2013-14 (having taken account, where applicable, of apportionment in rateable values under section 44A of the Act - partly occupied premises) by virtue of its powers under section 47 of the Act, i.e. ‘top-up’ relief for sole general stores, public houses, petrol filling stations, food shops and post offices receiving mandatory rate relief. (NB in previous year’s NNDR1s the figure entered in this line would have been 75% of relief granted.  From 2013-14 onwards, the figure entered should be for the full amount of discretionary relief granted).

Line 17:          Enter the total of any discretionary relief the authority expects to grant to other rural businesses in 2013-14 (having taken account, where applicable, of apportionment in rateable values under section 44A of the Act - partly occupied premises) by virtue of its powers under section 47 of the Act. (NB in previous year’s NNDR1s the figure entered in this line would have been 75% of relief granted.  From 2013-14 onwards, the figure entered should be for the full amount of discretionary relief granted).

Line 18:          Enter the total of any discretionary relief the authority expects to grant to other businesses in 2013-14 (having taken account, where applicable, of apportionment in rateable values under section 44A of the Act – partly occupied premises).  This is relief given to ratepayers under section 47 of the Act, as a result of the changes made to that provision by virtue of the Localism Act 2011.

Line 19:          This field is calculated. It is the total discretionary reliefs calculated by summing lines 13 -18.

Line 20:          This field is calculated. It is the authority’s gross rate yield after reliefs, calculated by subtracting lines 12 and 19 from line 3.

Line 21:          You should make an allowance for bad and doubtful debts in 2013-14. This should be made on the assumption that the authority has made proper arrangements for securing efficiency and effectiveness in relation to the collection of non-domestic rates.

Line 22:          This cell is pre-filled. The total cost of collection allowance for 2013-14 is £84,000,000 (excluding the element for legal costs referred to below). The formula for an individual local authority provides for 76% of the allowance being determined by the number of hereditaments and 24% of the allowance being determined by rateable value. The formula also provides for a further element to cover reasonable legal costs in respect of any case an authority has brought or defended to clarify the law in respect of liability for, or the ability to enforce, non-domestic rates, where that case was lost and costs were awarded against the authority. To be eligible to include a sum in respect of legal costs, the authority must have met the conditions set out in the published draft regulations (see paragraph 4). These no longer include a requirement that the authority notified the Secretary of State of its intention to bring or defend the proceedings before it did so and the requirement that it notified the Secretary of State of the amount to be claimed by 15 November in the preceding financial year.

This cell is pre-filled with the authority's allowance in respect of collection costs, which is calculated by applying the formula:

hereds  x  ACF  x  £63,840,000  +  RV  x  ACF  x  £20,160,000  +  legal costs

                                    1,846,029                                          57,156,181,751

where -

hereds is the number of hereditaments shown in the local rating list entered in line 1;

ACF is the area cost factor for the authority which are published here: http://www.local.communities.gov.uk/finance/1314/tabs1314.htm;

£63,840,000 is 76% of the total allowance for England for 2013-14 of £84,000,000;

1,846,029 is the sum of the number hereds on the VOA list as at 30 September 2012, multiplied by the ACF for all authorities in England;

RV is the aggregate rateable value in the local rating list entered in line 2;

£20,160,000 is 24% of the total allowance for England for 2013-14 of £84,000,000;

57,156,181,751 is the sum of the RV of the hereds on the VOA list as at 30 September 2012 multiplied by the ACF for all authorities in England;

legal costs is the amount (if any) which fulfils the conditions set out in paragraph 2(5) of Schedule 1 to the draft retention regulations.  

Line 23:          The City of London should enter in this line the amount of City of London offset for 2013-14 - £10,538,000.

Line 24:          Enter the sum of your best estimates of:

i.  the total amount of eligible discretionary relief that is to be given to ratepayers under section 47 of the 1988 Act, in respect of hereditaments in an area that is specified for both the purposes of deductions from the central share  and under the Non-Domestic Rating (Designated Areas) Regulations 2013; and

ii.  50% of the amount of eligible discretionary relief that is to be given to ratepayers under section 47 of the 1988 Act, in respect of hereditaments that are in an area specified for the purposes of deductions from the central share only . 

In both cases, relief is eligible if it meets the conditions set out in regulation 6(4) of the consultation draft of the Non-Domestic Rating (Designated Areas) Regulations, and does not exceed the limit on the total de-minimis aid that may be granted in accordance with Commission Regulation(EC) No 1988/2006 in respect of an undertaking. 

Line 25:          Enter your best estimate of the rates yield in an “Enterprise Zone” area; this should be after mandatory, discretionary and small business rate relief have been applied.  This is an area that will be designated in regulations to be made under paragraphs 8 and 39 of Schedule 7B to the 1988 Act.

Line 26:          Enter the total “baseline” amount for the Enterprise Zone areas, as notified to the Department for Communities and Local Government as the figure to be set out in due course in regulations to be made under paragraphs 8 and 39 of Schedule 7B to the 1988 Act.

Line 27:          This field is calculated. It is the total amount of business rates relating to enterprise zones to be retained in 2013-14 calculated by deducting line 26 from line 25.

Line 28:          Enter your best estimate of the rates yield in a “New Development Deal” area; this should be after mandatory, discretionary and small business rate relief have been applied. This is an area that will be designated in regulations to be made under paragraph 39 of Schedule 7B to the 1988 Act.

Line 29:          Enter the total “baseline” amount for the New Development Deal areas, as notified to the Department for Communities and Local Government as the figure be set out in due course in regulations to be made under paragraph 39 of Schedule 7B to the 1988 Act...

Line 30:          This field is calculated. It is the total amount of business rates relating to New Development Deal areas to be retained in 2013-14 calculated by deducting line 29 from line 28.

Line 31:          Enter your best estimate of business rates yield from renewable energy schemes as defined in regulations 5-11 of the Non-Domestic Rating (Renewable Energy Projects) Regulations.  The amount to be entered in line 31 is that calculated in accordance with Part 3 of those Regulations.

Line 32:          This field is calculated. It is the authority’s net rate yield excluding transitional arrangements and rate retention and is calculated by deducting the sum of lines 21 to 23 and lines 27, 30 & 31 from line 20.

Line 33:          Because it is derived from the gross calculated rate yield at line 3, the net rate yield entered at line 32 will not take account of possible increases, or reductions, in an authority’s rates income that would arise from growth, or decline, in the authority’s rate base.  Since the estimate of rates income provided through the NNDR1 will determine the amount of income that can be recognised in an authority’s budget (as well as determining the payments that it will make to central government and major precepting authorities), authorities may want to use line 33 and 34 to reflect any anticipated increase, or decrease, in their rates yield.  At line 33, you should enter any anticipated change in rateable value between 1 October 2012 and 30 September 2013, the mid-point of the 2013-14 financial year. NB A net increase in the total RV should be shown as +ve; conversely any net decrease in total RV should be shown as –ve.

Line 34:          This field is calculated. It is the figure at line 32 multiplied by the small business multiplier for the year of 0.462.

Line 35:          In accordance with proper accounting practice, authorities will have to recognise, in their budgets and accounts, future reductions in revenue due to successful appeals.  You should enter the total estimated net reduction in yield in respect of the 2010 rating list (excluding any reductions that have already occurred).  This should be calculated as the gross rate yield after reliefs (line 20) multiplied by the authority’s estimate of the percentage reduction in rateable value that will occur in 2013-14.  You will need to make your own judgement about what is appropriate to include here based on local intelligence.

Line 36:          This field is calculated. It is the net rate yield (after adjustments) calculated by adding lines 32 and 34 and subtracting line 35.

Line 37:          Enter your best estimate of the amount of the increase in rate yield for 2013-14 which will result from the deferral of full rate decreases by the application of the limits contained in regulation 9(3) of the Non-Domestic Rating (Chargeable Amounts) (England) Regulations 2009 (SI 2009/3343).

The increase is the sum of the difference, for each day of the year, between the full rate bill (the rateable value multiplied by the proposed 2013-14 small business non-domestic rating multiplier of 0.462 and the amount of the transitional rate bill for all hereditaments subject to the limit on decreases. No account should be taken of empty property or of any reliefs. Authorities should also not take into account the contribution to the cost of the small business rate relief scheme paid by those ratepayers that receive transitional relief but not small business rate relief; this should be reflected in line 4 (see above).

Line 38:          Enter your best estimate of the amount of the reduction in rate yield for 2013-14 as a result of the application of the Non-Domestic Rating (Chargeable Amounts) (England) Regulations 2009 (SI 2009/3343), under which increases in bills caused by the revaluation on 1 April 2010 are being phased in.

The reduction is the sum of the difference, for each day of the year, between the full rate bill (the rateable value multiplied by the proposed 2013-14 small business non-domestic rating multiplier of 0.462 and the reduced rates bills of all hereditaments subject to the transitional limit on increases. No account should be taken of empty property or of any reliefs. Authorities should also not take into account the contribution to the cost of the small business rate relief scheme paid by those ratepayers that receive transitional relief but not small business rate relief; this should be reflected in line 4.

Line 39:          This field is calculated.  It is the net cost of transitional relief calculated by subtracting line 37 from line 38.

                        If the net cost results in a negative figure the authority will be required to make a transitional protection payment of this amount to the Secretary of State.

If the net cost results in a positive figure the authority will receive a transitional protection payment of this amount from the Secretary of State.

Line 40:          This field is calculated. It is the net rate yield after transitional arrangements calculated by subtracting line 39 from line 36.

NNDR Summary

13. This is based on the figure shown in line 36.  The form calculates automatically for your authority, the percentage shares of your estimated net rates yield that

a)    your authority will pay to DCLG in central share.  This is calculated as 50% of line 36, less the relief you estimate providing in Enterprise Zone areas (line 24).  (Central government has undertaken to fund such relief and this is the means by which it will do so.)

b)    your authority will retain;

c)    your authority will pay to your county council or the Greater London Authority, if applicable; and

d)    your authority will pay to your fire authority, if applicable.

14. The form also allow you to enter the breakdown of line 31.  This is not automatically calculated.  The breakdown should reflect how much of the business rates yield from renewable energy schemes is to be retained by the billing authorities and how much is to be paid to a county council as the planning authority responsible for granting planning permission.

Certification

14. Entries made in lines 3, 12, 19, 20, 36, 39 and 40 must be certified by the Chief Financial Officer for the authority as being made in accordance with Schedule 1 to the draft retention regulations.

15. Chief Financial Officers must further certify that they are satisfied the authority has made proper arrangements for securing economy, efficiency and effectiveness in relation to the collection of non-domestic rates.

16. Once the form has been certified, it must be returned to the Department for Communities and Local Government by no later than Thursday 31 January 2013. The completed forms should be addressed to Sheela Vyas, Department for Communities and Local Government, Zone 5/J6, Eland House, Bressenden Place, London SW1E 5DU. We will also accept either a faxed copy of the completed form (fax number 0303 444 3294) or scanned versions of the signed form in .pdf format.

17. An electronic version of the form should be returned by Thursday 31 January 2013 to nndr.statistics@communities.gsi.gov.uk.

Department for Communities and Local Government

December 2012