Transitional Relief Calculations
Calcurate has a Transitional Relief calculator at the core of each (English) rate liability calculator. It will therefore take full account of transitional arrangements automatically.
The Transitional Relief calculator is also of course a Transitional Premium calculator, and Calcurate will determine automatically which, if any, will apply. All you need to do is enter the Rateable Values (RV’s) and Calcurate will do the rest. Find out more about Calcurate
What is Transitional Relief?
Before we can answer that, we need to know why we have Transitional Arrangements in the first place, and before that we need to know about Revaluation, but before that we need to know how business rates liability was calculated before there was such thing as transition!
The Rateable Value and the Rate in the Pound before 1990
Each commercial property had a Rateable Value (RV) and the annual business rates charge for that property was determined by multiplying the RV by the “Rate in the Pound” or “Rate Poundage”.
That was the position before 1990. The RV had been determined by a valuation in 1973 and the rate poundage was determined each year by the local council. It would apply to all Non-Domestic properties in their area.
What is a Rating (Business Rates) Revaluation?
In 1990 there was a revaluation and all commercial premises were given a new Rateable Value that would apply from 1st April 1990. The rateable value that applied from 1990 was actually determined by reference to the valuation of the property based on its value in 1988.
Revaluations became a regular occurrence every five (or so) years. Therefore every property would have a new rateable value from the 1st of April in 1995, 2000, 2005, 2010, and 2017. The next revaluation is due in 2023. The Rateable Values that apply from the first of April in those years is based on the value of the property two years earlier.
What happened to the Rate in the Pound?
The local rate in the pound that applied before 1990 was abolished and replaced with the Uniform Business Rate or “UBR”. This was set by the government, not the local council. Therefore the same rate applied to the whole of England. The UBR was replaced in 2005 with the “Non Domestic Rating Multiplier” and “Small Business Non Domestic Rating Multiplier”. Many people still use the term UBR when they talk about the Non Domestic Rating Multiplier.
Why do we have Transitional Arrangements?
This is very simple. If, following the revaluation, your new Rateable Value results in your new business rates bill being significantly higher than it was before the revaluation, you will receive Transitional Relief to bring it down to a more reasonable level. In other words, Transitional Relief is used to cushion the impact of revaluation.
Who pays for that?
You might be thinking “That’s very generous of the government, how do they fund that?”
Well, there is another part of the Transitional Arrangements which is usually referred to as “Transitional Premium” or “Transitional Surcharge”. As you might imagine, this works in the opposite way to Relief. If a revaluation DECREASES your Rateable Value so much that that your new business rates bill is significantly LOWER than it was before the revaluation, you will not be allowed to receive the full benefit of the reduction. You will have to pay a Transitional Premium to bring your bill UP to a more reasonable level. You will still pay less than you did, but not quite as little as you might have hoped. In other words, Transitional Premium is used to pay for the Transitional Relief scheme.
In each year of the five year period between revaluations, the amount of Transitional Relief or Premium will decrease until, hopefully, by the final year your bill will not include any relief or premium and will simply be determined by the RV and the Multiplier.
This was actually written into the schemes for the 2005 and 2010 Rating Lists as there were no (statutory) transitional arrangements in the final year of the 2005 list or the final two years of the 2010 list.
How is Transitional Relief or Transitional Premium calculated in Practice?
This is very complicated, and strictly speaking you do not calculate the amount of relief or premium at all. What you do calculate is the chargeable amount. You do this by reference to The Non-Domestic Rating (Chargeable Amounts) (England) Regulations which are written for every revaluation. To get to the correct liability for any particular day you need to know what a whole lot of letters mean, such as : A,AF,B,BL,C,D,E,H,I,J,K,N,P,Q,R, S,T,U,X,Y,Z
Or you can use Calcurate, which is also written for every revaluation, and Calcurate will do all the calculations for you.