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Nursery discount rate relief policy

Most nurseries are entitled to 100% rate relief and will pay nothing in 2020-2021. This relief will be available to those properties occupied by providers on Ofsted’s Early Years Register and which are mainly used to provide the Early Years Foundation Stage.

Contents

  1. Introduction
  2. Legislative framework
  3. Scheme statement
  4. Duration of the discount
  5. Eligibility criteria
  6. Amount of relief available
  7. The cash cap
  8. Splits, mergers and changes to existing properties
  9. Appeals
  10. Applying for the nursery discount scheme
  11. Policy review

1. Introduction

As part of the response to the Covid-19 pandemic, the Government announced a business rates nursery discount on 18 March 2020. At the Budget on 3 March 2021, the Government announced that the Nursery Discount would continue to apply at 100% for eligible properties for the first three months of 2021 from 1 April 2021 to 30 June 2021. Subsequently, from 1 July 2021 to 31 March 2022, the Nursery Discount will apply at 66%. From 1 July 2021, the relief will be capped at £105,000 per business.

2. Legislative framework

The award of any discount is at the discretion of Leicester City Council (“the Council”) and is made under Section 47 of the Local Government Finance Act 1988, as amended.

3. Scheme statement

It is the intention of the Council to exercise its powers under the above Act to award business rates discount to all ‘qualifying’ ratepayers. This policy follows Government guidance.

4. Duration of the discount

The relief is only applicable for the financial year 2021/22 (1 April 2021 to 31 March 2022). This discount is fully funded by the Government.

5. Eligibility criteria

Properties that will benefit from this discount are those occupied by providers on the Ofsted’s Early Years Register and wholly or mainly used for the provision of the Early Years Foundation Stage.

To qualify for the discount the relevant property should be wholly or mainly used for the above qualifying purpose.  This is a test on use rather than occupation and those properties which are occupied but not wholly or mainly used for the qualifying purpose will not be eligible for the discount.  Those nurseries which have closed temporarily due to the government’s advice on COVID19 will be treated as occupied for the purposes of this discount.

The Council will use all available sources of information to identify those nurseries that are eligible for the discount, including those from our education section.

Eligibility for the discount and the discount itself will be assessed and calculated on a daily basis.

6. Amount of relief available

6.1 Subject to the cash cap outlined in section 7, the total amount of this Government funded discount for 2021/22 is:

  1. For chargeable days from 1 April 2021 to 30 June 2021: 100% of the chargeable amount, and
  2. For chargeable days from 1 July 2021 to 31 March 2022: 66% of the chargeable amount.

The relief will eb applied after mandatory and other discretionary reliefs have been applied, excluding those where we have used our wider discretionary relief powers introduced by the Localism Act, which are not funded by the Government.

6.2 The eligibility for the discount and the discount itself will be assessed and calculated on a daily basis, subject to the cash cap.  The following formula will be used to determine the amount of relief to be granted for a chargeable day for a particular property in the financial year 2021/22:

Amount of relief to be granted = V x percentage Nursery Discount as set out in section 6.1 above, where V is the daily charge for the property for the chargeable day after the application of any mandatory relief and any other discretionary reliefs, excluding those where local authorities have used their discretionary relief powers introduced by the Localism Act which are not funded by the Government.

6.3 This will be calculated ignoring any prior year adjustments in liabilities which fall to be liable on the day.

6.4 Ratepayers that occupy more than one property will be entitled to relief for each of their eligible properties.

7. The cash cap

7.1. No cash cap will apply for the period between 1 April 2021 and 30 June 2021.

7.2. From 1 July 2021, a ratepayer may only receive Nursery Discount relief of up to £105,000 in 2021/22, ignoring any relief for the period before 1 July 2021.

7.3 No person can in any circumstance exceed the £105,000 cash cap across all of their hereditaments.

7.4 Where a person has a qualifying connection with another person then those persons should be treated as one person for the purposes of the cash cap. Persons shall be treated as having a qualifying connection where:

  1. Both persons are companies, and
    1. one is a subsidiary of the other, or
    2. both are subsidiaries of the same company; or
  2. where only one person is a company, the other person (the “second person”) has such an interest in that company as would, if the second person were a company, result in its being the holding company of the other.

7.5. In cases where it is clear to the Council that the ratepayer is likely to breach the cash cap, the Council will withhold the discount. Otherwise, the Council may include the discount in bills and ask the ratepayer, on a self-assessment basis, to inform the Council if they are in breach of the cash cap.

8. Splits, mergers and changes to existing properties

The discount will be applied on a day to day basis using the formula set out above. A new property created as a result of a split or merger during the financial year, or where there is a change of use, should be considered afresh for the discount on that day.

9. Appeals

An appeal process will be open to all business rate payers who feel that they meet the eligibility criteria of this policy but have not received the discount.

An appeal may only be made on the following grounds:

  1. The premises is of a type specifically stated as being eligible for the discount, and the council has by error omitted to grant relief.

All appeals must be made in writing by contacting the business rates team through the contact details on the Council’s website.

Appeals will be judged in line with the policy and decided at the sole discretion of the Director of Finance in consultation with the Revenues & Benefits Manager. All appeals will be reviewed within 2 weeks of submission of all required information.  All decisions taken on appeals are final and the outcome will be recorded and delivered to the business in writing. If an appeal is successful, the rate discount will be backdated for the full eligible period within that financial year. Appeals can only be made for the current financial year (2021/22).

If an appeal is unsuccessful the only further recourse available to applicants is a judicial review. A judicial review is the means by which the decisions of billing authorities under discretionary rating powers may be questioned.

10. Applying for the nursery discount scheme

The council will automatically apply the relief to those rating assessments that meet the criteria.

For any further enquiries the ratepayer should contact the council at: business.rates@leicester.gov.uk 

11. Policy review

The policy is to be applied in line with Government guidance and will be reviewed following any other changes announced by the Ministry of Housing, Communities & Local Government.

Appendix 1: Calculation examples for 2021/22

The Nursery discount is always calculated after mandatory relief and other discretionary reliefs funded by section 31 grant. Ignoring cash caps:

Example 1: An occupied nursery with a rateable value of £40,000

Amount

Gross rates (before any reliefs) = £40,000 x 0. 499:

= £19,960

Nursery Discount (100% from 01/04/21 to 30/06/21, £19,960 x 91/365):

=-£4,976

Nursery Discount (66% from 01/07/21 to 31/03/22, £19,960 x 0.66 x 274/365):

=-£9,889

Rates due (after Nursery Discount):

= £5,094

 

Example 2: An occupied nursery with a rateable value of £100,000

Amount

Gross rates (before any reliefs) = £100,000 x 0.512:

= £51,200

Nursery Discount (100% from 01/04/21 to 30/06/21, £51,200 x 91/365):

=-£12,765

Nursery Discount (66% from 01/07/21 to 31/03/22, £51,200 x 0.66 x 274/365):

=-£25,367

Rates due (after Nursery Discount):

= £13,068

 

Example 3: An occupied nursery run by a charity with a rateable value of £40,000

Amount

Gross rates (before any reliefs) = £40,000 x 0.512

= £20,480

Net rates after charity relief (80%):

= £4,096

Nursery Discount (100% from 01/04/21 to 30/06/21, £4,096 x 91/365):

=-£1,021

Nursery Discount (66% from 01/07/21 to 31/03/22), £4,096 x 0.66 x 274/365):

=-£2,029

Rates due (after charity relief and Nursery Discount):

= £1,045

 

Example 4: An occupied nursery with a rateable value of £13,500 eligible for Small for Small Business Rate Relief (SBRR)

Amount

Gross rates (before any reliefs) = £13,500 x 0.499

= £6,737

Net rates after SBRR (50%):

= £3,368

Nursery Discount (100% from 01/04/21 to 30/06/21, £3,368 x 91/365):

=-£840

Nursery Discount (66% from 01/07/21 to 31/03/22, £3,368 x 0.66 x 274/365):

=-£1,669

Rates due (after SBRR and Nursery Discount):

= £860

 

Example 5: An occupied nursery with a rateable value of £10,000 eligible for Small Business Rate Relief (SBRR)

Amount

Gross rates (before any reliefs) = £10,000 x 0.499

= £4,990

Net rates after SBRR (100%):

= £nil


Rates bill is nil and, therefore, no Nursery Discount applies

 

Example 6: An occupied nursery with a rateable value of £40,000 eligible for Transitional Relief (TR) for Transitional Relief (TR) & receiving Revaluation Discretionary Relief

Amount

Gross rates (before any reliefs) = £40,000 x 0.499

= £19,960

Transitional Relief (say):

=-£1,500

Net rates after Transitional Relief:

= £18,460

Net rates after Revaluation Discretionary Relief (say):

= £15,460

Nursery Discount (100% from 01/04/21 to 30/06/21, £15,460 x 91/365):

=-£3,854

Nursery Discount (66% from 01/07/21 to 31/03/22, £15,460 x 0.66 x 274/365):

=-£7,660

Rates due (after TR, revaluation relief and Retail Discount):

= £3,946