Purpose

The authority is required under paragraph 40
of schedule 1 to the Local Government finance Act 2012 to make
calculations, and supply information on their anticipated
collectable business rate income for the following year. This
report sets out the calculations and seeks approval by the
Council’s Chief Financial Officer. These figures will form
part of the funding in relation to the Council’s 2025/26
budget.

The Local Government Finance Act 2012 amended the 1988 Local
Government Finance Act to give local authorities the power to
retain a proportion of funds obtained from business rates collected
in their area.

The Ministry of Housing, Communities and Local Government (MHCLG)
guidance requires that each billing authority should formally set a
Business Rate baseline each year. This baseline will be the
authority’s estimate of the business rates it forecasts to
collect in the following financial year, net of any reductions such
as reliefs and the estimated cost of appeals.

The Government introduced pilot schemes in 2017/18 in advance of
permanent reforms to business rate retention later in the
parliament. Initially only authorities with signed devolution deals
were eligible to participate in a pilot in 2017/18. The pilot for
the West of England (WoE) commenced in 2017/18 and includes Bath
& North East Somerset Council, Bristol City Council, South
Gloucestershire Council, and the West of England Combined
Authority.

The 100% pilot gives the WoE the opportunity to retain 100% of any
business rates growth over the next year, with no downside
financial risk when compared to remaining in the national system.
It also gives the WoE the opportunity to help shape the national
scheme.

In line with the Government’s stated intention for the
reforms to the Business Rate Retention system, authorities
participating in a pilot will not have to pay a Levy on growth
above their Retained Income target and will retain an increased
Local Share of Non-Domestic Rating Income and sums due from
Government paid via Section 31 grant. The Pilot includes the
rolling in of the Revenue Support Grant with WECA receiving a small
share of the business rates to reflect the rolling in of the DfT
Integrated Transport Block and Highways Maintenance Capital Grants;
this is shown in Table 1 below.

In line with the approval process for the Council Tax Base, the
decision on the Business Rate forecast is delegated to the
Council’s Chief Financial Officer. The Ministry of Housing,
Communities and Local Government (MHCLG) requires the council to
submit details of its forecast through a statutory return called
the NNDR1. This return must be submitted by 31st January
2025.

The estimated business rate income for 2025/26 is £70.065m;
of this the Council retains £22.905m after the tariff payment
to the Government is taken into account. A breakdown is shown in
Table 1 below.

Table 1 Business Rate Distribution

Anticipated Business Rate Distribution 2025/26
£m
Bath & North East Somerset Council Business Rate Income (Total
business rates collected after deductions) 70.065
Central Share to Government 0.000
5% Share to WoE Combined Authority (3.503)
1% Share to Avon Fire Authority (0.701)
Deductions for Tariff (42.956)
Bath & North East Somerset Council estimated retained Business
Rates 22.905

As in previous years, the Government has announced a series of
measures that continue to affect the business rates income of Local
Authorities in 2025/26. These changes are:

i. The Non-Domestic Rating Act 2023 gave ministers the powers to
de-couple the small and standard business rating multipliers. It
also formally changed the indexation factor used from the Retail
Price Index (RPI) to the Consumer Price Index (CPI).
ii. The small business rates multiplier will be frozen at 49.9p for
2025/26. The standard multiplier will increase from 54.6p in
2024/25 to 55.5p in 2025/26, based on the September 2024 CPI
(1.6%).
iii. From 1st April 2024, the small business multiplier’s
eligibility will be extended to properties below the threshold for
the national multiplier at £51,000 which are vacant, on the
central list or occupied by charities.
iv. The doubling of Small Business Rate Relief made permanent from
1st April 2017 with changes to eligibility thresholds.
v. Previously rural rates relief was made up of a 50% mandatory
element and this was extended to 100% via a discretionary relief,
compensated via section 31 grant. Following the NDR Act, this
relief is now a mandatory 100% rural relief. Authorities will
continue to be compensated via section 31 grant for 50% of the
relief that they award.
vi. A 100% relief for public lavatories. This scheme was announced
at Budget 2018 and was implemented by the Non-Domestic Rating
(Public Lavatories) Act 2021.
vii. The 2024/25 Retail, Hospitality and Leisure Business Rates
Relief Scheme will provide eligible, occupied, retail, hospitality
and leisure properties with a 40% relief, up to a cash cap limit of
£110,000 per business.
viii. Continuation of Transitional Relief Scheme to help businesses
adjust to the revaluation of their properties, which took effect
from April 2023. The scheme will restrict increases in bills to 25%
for businesses with small properties (up to and including
£20,000 rateable value), 40% for medium properties (up to and
including £100,000 rateable value) and 55% for large
properties (over £100,000 rateable value). Businesses seeing
lower bills as a result of the revaluation will benefit straight
away due to the abolishment of downward transitional relief
caps.
ix. Supporting Small Business Relief from 1st April 2025 for
businesses where the property bill is increasing due to
revaluation, and where a business has lost some or all of their
small business rate relief or rural rate relief.
x. Low Carbon Heat Networks relief will be mandatory from 2025/26
following the Non-Domestic Rating Act 2023.

All the above measures will be compensated through payment of a
section 31 grant. The Council has estimated the impacts of these
reliefs and has included the estimate of grant income in its
2025/26 budget.

At the Autumn Statement, the Chancellor announced that the
government intends to end mandatory relief for public schools from
April 2025. However no change will be made to compensation for
local authorities in 2025-26.

The Council’s budget for 2025/26 also reflects transactions
relating to the business rate pooling arrangements within the West
of England City Region Deal agreement. These arrangements have been
set out in previous budget reports.

The Section 151 Officer is required to estimate the amount of any
surplus or deficit on the Collection Fund relating to Business
Rates as at 31st March 2025. This must be done by the 31st January
2025, and this report also asks the Director of Finance to approve
the balance projected related to Business Rates.

After calculations of current year collection and adjustments to
the business rate base in 2024/25, including making provision for
appeals, it is estimated that the 2024/25 collection fund account
position relating to business rates will be in surplus by
£6.661m. The surplus will be shared between the Council, WECA
and Avon Fire Authority in line the 100% pilot shares. The
Council’s share of the surplus in 2024/25 is
£6.261m.

The overall position of the forecast 2025/26 business rate income
and the forecast 2024/25 surplus on the collection fund have been
taken into account in the overall Council’s budget proposal
which will be presented to Council on the 25th February 2025.

Decision

That the calculation of the Council’s
business rate forecast for the year 2025/26 as set out in this
report be approved. The total forecast Business Rate income for
2025/26 is £70.065m, of which the Council will retain
£22.905m after allowing for the required tariff payment of
£42.956m and the WoE Combined Authority and Fire Authority
shares as shown in Table 1 of the report.

2.2 That the projected surplus on the collection fund as at the end
of 2024/25 related to Business Rates is declared at £6.661m.
The Council’s share of the surplus is
£6.261m.