Non-domestic rates, or ‘business rates’, are a tax on non-domestic property. Rates have been in existence in some form since the Poor Law of 1601, though a standardised system of non-domestic rating dates to the Rating and Valuation Act 1925. The current system dates from the Local Government Finance Act 1988.
Rates are levied on business properties on the basis of their rateable value and the national multiplier, and the amount payable may then be subject to a number of reliefs or exemptions. Business rates are charged on most non-domestic properties, like shops, offices, pubs, warehouses, factories, holiday homes and guest houses. Local authorities are responsible for sending these bills, deciding whether to apply any exemptions or reliefs to individual businesses and also the collecting payment. In England, the revenue is partly pooled at central government level and redistributed, and part is retained locally. In Scotland and Wales, the rates collected are pooled at the devolved level and redistributed to the billing authorities via a needs-based formula. Scotland also operates a Business Rate Incentive Scheme.
The government has pledged to introduce 100% local business rates retention, which would allow local government to keep the rates they collect from business, by the end of the current Parliament. It will be implemented by the Department for Communities and Local Government. The Department is also carrying out a 'fair funding review' of the funding needs of local authorities, which will set the funding baselines for the start of 100% business rates retention. Devolution of additional responsibilities may also be involved in order to make the changes fiscally neutral to central government.
The NAO is carrying out a value-for-money study on the Department’s plans to design and put in place 100% business rates retention. They are examining whether the Department has clear objectives and a good grasp of the challenges involved in delivering this project; whether it has learned lessons from similar work in the past; and whether its approach, timetable and resourcing are realistic.