General
Schedule 1: Local retention of non-domestic rates
67.Section 1(2) and Schedule 1 insert a new Schedule 7B to the LGFA 1988. Schedule 7B replaces the existing provision in Schedule 8 to the LGFA 1988 in respect of England and makes provision for the treatment of non-domestic rates collected by billing authorities.
Part 1: Main non-domestic rating accounts
68.Paragraph 1 places a requirement on the Secretary of State, each year, to keep a main non-domestic rating account and sets the overarching administrative requirements for keeping the account.
69.Paragraph 2 defines the credits and debits to the main rating account for the year. Credits to the account in the year comprise non-domestic rates from ratepayers liable for non-domestic rates under the central list; contributions in aid in respect of hereditaments exempt from local non-domestic rating; payments by billing authorities in respect of any surplus on the collection fund in relation to non-domestic rates; payments in respect of the central share of non-domestic rates; payments by relevant authorities following a local government finance report and any amending report; transitional protection payments made to the Secretary of State and reconciliation payments with respect to amounts disregarded under paragraph 42. Debits to the account in the year comprise payments to billing authorities in respect of any deficit on the collection fund in relation to non-domestic rates; any reconciliation payments due in respect of the central share of non-domestic rates; payments to relevant authorities following a local government finance report and any amending report; transitional protection payments and reconciliation payments with respect to amounts disregarded under paragraph 42. Sub-paragraph (3) provides that a further amount may be debited following a local government finance report. This amount can only be used for the purposes of local government in England, which includes the making of payments to billing and precepting authorities and levying bodies as specified in sub-paragraph (5).
70.Paragraph 3 requires the Secretary of State, as soon as reasonably practicable after the end of the year, to calculate the aggregate of items credited and debited to the main non-domestic rating account for the year. Any resulting credit or debit for that year is to be credited or debited as appropriate to the main non-domestic rating account for the next year. (For example, if the aggregate of credits to the account is greater than the aggregate of debits, the excess is debited from the main non-domestic rating account for that year to produce a nil balance, and credited to the main non-domestic rating account for the next year, and vice versa.)
Part 2: Determination of the central and local share
71.This places a requirement on the Secretary of State for each year to determine the central and local share percentages for each billing authority. Paragraph 5 requires this determination to be set out in a local government finance report, which must be laid before the House of Commons, and sent to each relevant authority as soon as reasonably practicable thereafter. This requirement in respect of the local government finance report replaces the current provisions as to a local government finance report in section 78A of and Schedule 8 to the LGFA 1988, but makes similar provision in relation to the preparation and approval of the local government finance report.
Part 3: Payments to the Secretary of State in respect of the central share
72.Following House of Commons approval of a local government finance report, paragraph 6 places a duty on billing authorities to make payment of the central share to the Secretary of State (which will be the percentage of the billing authority’s non-domestic rating income set out in the local government finance report). The Secretary of State must define “non-domestic rating income” for these purposes in regulations. Paragraph 7 provides for the Secretary of State to make regulations about the administrative arrangements for making such payments, including the time and manner of payments and any necessary payments subsequently to reconcile payments made during the course of the year. Paragraph 8 gives the Secretary of State power by regulations to make provision for deductions from a billing authority’s central share payment, in particular by reference to discretionary relief granted by that authority in accordance with section 47 of the LGFA 1988. This will allow the Secretary of State to give effect to the Government’s commitment to fund certain discretionary rate relief in enterprise zones.
Part 4: Payments by billing authorities to major precepting authorities
73.Paragraph 9 provides for the Secretary of State to make regulations requiring billing authorities to pay a proportion of their non-domestic rating income to major precepting authorities. Payments for a year may not be made unless the local government finance report for the year has been approved by the House of Commons. Paragraph 10 enables regulations about the administrative arrangements in connection with such payments, including certification of calculations and timing of payments. Paragraph 11 gives the Secretary of State power to make regulations to provide for a proportion of any amount deducted from the central share under paragraph 8 to be paid to major precepting authorities.
Part 5: Principal payments in connection with local retention of non-domestic rates
74.Paragraph 12 requires the local government finance report for a year to specify the basis on which the Secretary of State intends to calculate which relevant authorities will make payments to and which relevant authorities will receive payments from the Secretary of State and calculate the amounts of each payment to or from relevant authorities. Before making such a report, the Secretary of State must notify local government representatives of the general nature of the basis of calculation.
75.Following House of Commons approval of a local government finance report, paragraph 13 requires the Secretary of State to calculate the payments that are to be made and received by relevant authorities. Relevant authorities must be notified of the calculations as soon as practicable after they have been made. The Secretary of State may revise the calculations by making one further set of the calculations and may do this at any time before the end of the year following the year to which the report relates provided an amending report has not since been approved by the House of Commons.
76.Paragraph 14 places a duty on relevant authorities and the Secretary of State to make payments required of them following the local government finance report and makes provision about how payments are to be made.
77.Paragraph 15 provides for the Secretary of State to make reports amending the basis of calculation specified in the local government finance report for a year at any time before the end of the year following the year to which the report relates. Notification and laying arrangements are as for a local government finance report prepared under paragraph 5. Paragraph 16 provides for the Secretary of State, following approval of an amending report, to make the necessary calculations and for a revised set of calculations to be made if needed and to notify each relevant authority of the outcome. Paragraph 17 sets out the provision for the making of payments following an amending report. Any payments following an amending report must take place after the end of the year in which the amending report is made. Paragraph 18 has the effect of making the provisions in this Part subject to Parts 9 (pooling of authorities) and 10 (designation of areas and classes of hereditament) of the Schedule.
Part 6: Levy accounts
78.Paragraph 19 requires the Secretary of State, each year, to keep a levy account. Paragraph 20 defines the credits and debits to the levy account for the year. Credits to the account in the year comprise levy payments from relevant authorities, repayments of safety net payments on account and payments by the Secretary of State to guarantee safety net payments in the event of insufficient levy income. Debits to the account in the year comprise safety net payments and safety net payments on account to relevant authorities, and any distribution of the remaining balance to one or more relevant authorities.
79.Paragraph 21 makes accounting provision for calculating, after the year end, the aggregate of items credited and debited to the levy account for the year. Any resulting credit or debit for that year is then credited or debited as appropriate to the levy account for the next year as an item of account.
Part 7: Levy payments, safety net payments and distribution of remaining balance
80.Paragraph 22 gives the Secretary of State the power to make regulations about the calculation of levy payments. Such calculations may only be made for a year after the end of that year – so calculations for the financial year 2014-15, for example, may only be made after the end of that financial year (i.e. after March 2015). Paragraph 23 requires the Secretary of State to calculate the levy payments required from relevant authorities for a year and to notify relevant authorities as soon as practicable after doing so. Paragraph 24 places a requirement on relevant authorities to make levy payments as determined by the Secretary of State.
81.Paragraph 25 allows the Secretary of State to make regulations about calculating whether a safety net payment should be made to a relevant authority for a year and, if so, the amount of the safety net payment. As with levy payments, such calculations may only be made for a year after the end of that year. Paragraph 26 requires the Secretary of State to make the safety net payment calculations and to notify relevant authorities as soon as practicable after doing so. The Secretary of State must make safety net payments in instalments of such amounts and at such times as the Secretary of State determines with the Treasury’s consent (paragraph 27).
82.Paragraph 28 enables the Secretary of State to provide for a relevant authority to request that the Secretary of State calculates before the end of the financial year whether the Secretary of State is likely to be required to make a safety net payment to it for that year. Regulations may specify the time and manner in which requests may be made, the circumstances in which the Secretary of State may or must make a calculation in response to a request and about the calculation of a payment on account in addition to provisions about the timing of such calculations and making of such payments.
83.Paragraph 29 requires the Secretary of State to calculate each year whether there is a remaining balance on the levy account and sets out how that calculation must be made. Paragraph 30 provides that the Secretary of State may distribute the whole or part of any remaining balance for a year among one or more relevant authorities. Where the Secretary of State decides to do so, the basis of calculation for distribution will be as set out in regulations, and the Secretary of State must distribute any such payments in accordance with the paragraph and in any event within that financial year.
84.Paragraph 31 has the effect of making the provisions in this Part subject to Parts 9 (pooling of authorities) and 10 (designation of areas and hereditaments) of the Schedule.
Part 8: Transitional protection payments
85.Section 57A of the LGFA 1988 requires the Secretary of State to put in place a transitional relief scheme to protect ratepayers from large increases in their rates bills as a result of revaluation. Paragraphs 32 and 33 enable the effects of this transitional relief scheme to be taken account of in the rates retention scheme through separate financial adjustments in regulations under paragraphs 32 and 33.
86.Paragraph 32 therefore enables the Secretary of State to make regulations about the calculation of the amounts that would be payable to billing authorities were a transitional relief scheme not in place. The making of any transitional protection payment by the Secretary of State to a billing authority, or by a billing authority to the Secretary of State as appropriate following calculations under paragraph 32 may be set out in regulations under paragraph 33.
Part 9: Pooling of authorities
87.Paragraph 34 enables the Secretary of State to designate two or more relevant authorities as a pool of authorities. Designations may not be made unless each authority covered by the designation agrees to it. A designation generally only has effect for a year if it is made before the Secretary of State gives notification under paragraph 12(2) (notification of general basis of calculation to be specified in local government finance report for the year). Once made, a designation continues to have effect unless it is revoked by the Secretary of State. The Secretary of State must revoke a designation if requested to do so by one of the authorities within the pool. A designation must include conditions about the administration of the pool, including a requirement for the appointment of a lead authority and steps that are to be taken if the designation is revoked (paragraph 35). Designations may be varied by the Secretary of State following consultation with the members of the pool.
88.Paragraph 36 provides that a pool of authorities is to be treated as a relevant authority for the purposes of Part 5 of the Schedule ( principal payments in connection with local retention of non-domestic rates). This does not prevent a local government finance report from also making provision in relation to the individual authorities within the pool. Paragraph 37 makes similar provision in respect of regulations about levy payments and safety net payments.
89.Paragraph 38 makes further provision about the effect of designation. It provides that notification requirements apply to individual authorities within a pool. As to payments and receipts, it provides that authorities within a pool are jointly and severally liable to make payments and that payments from the Secretary of State under Part 5 or Part 7 shall be made to the lead authority.
Part 10: Designation of areas and classes of hereditament
90.Paragraph 39 enables the Secretary of State to make regulations to designate one or more areas in which a proportion of non-domestic rates are to be disregarded from any calculations under paragraph 6, 7, 9, 10, 13, 16, 23, 26, 28 or 30 of the Schedule for a specified period. Paragraph 40 provides equivalent provision for the Secretary of State to make regulations designating one or more classes of hereditament, for which a proportion of non-domestic rates are to be disregarded from any calculations under paragraph 6, 7, 8, 9, 10, 13, 16, 23, 26, 28 or 30 of the Schedule for a specified time. Regulations made under paragraph 39 or 40 may make provision for payments to major precepting authorities to take account of the designated area or class of hereditament. Paragraph 41 enables regulations under paragraph 39 or 40 to include provision requiring a billing authority to make a payment out of the proportion disregarded to a relevant authority. Paragraph 42 allows regulations to make provision for the estimate of amounts to be disregarded and for their reconciliation.
Part 11: Supplementary
91.Paragraph 43 provides that the Secretary of State may direct a relevant authority to make calculations or supply information to the Secretary of State and for the certification of such calculations and information. The Secretary of State may make his own calculations or assumptions where an authority fails to comply and must notify the authority where this is the case.
92.Paragraph 44 gives the Secretary of State power to make by regulations the same provisions as can be made by direction under paragraph 43 of the Schedule. This allows the regulations that will be made to implement the rates retention system to make provision for calculations and the supply of information, rather than having separate directions. Paragraph 45 defines key terms in the Schedule.
