PRESTON TAIT - 2000 TRANSITION ENGLAND
TRANSITION

Transition can be a penalty or a subsidy depending on whether the R.V. has increased (losers) or decreased (gainers).
Actual increases or decreases in rates payments due to a change in R.V. will be geared to the previous years liability.

The original idea of transition was to spread the impact of revaluation more evenly. Those to pay less capped in order to help those who should be paying more.

Each year any property suject to transition also has it's rates bill increased by inflation as follows:
2000 - 2001 1.1%
2001 - 2002 3.3%
2002 - 2003 1.7%
2003 - 2004 1.7%
What are transitional arrangements and why do we have them?
Property values normally change a good deal between each revaluation. Transitional arrangements help to phase in the effects of these changes on ratepayers’ bills. To help pay for the limits on increases in bills after a revaluation, there also have to be limits on reductions in bills.
The transitional scheme introduced in England following the revaluation in 2000 make sure that each Business Rates bill did not change beyond certain limits in 2000/01 because of the revaluation. Many bills changed by less than these amounts and the final amount depended on a number of things that are described more fully in the next section.
Under the transitional relief scheme, limits continue to apply to yearly increases and decreases in the following years over the life of the scheme until the full new amount is due (rateable value times the multiplier).
This applies only to the bill based on your property at the time of the revaluation. If there are any changes to the property after the revaluation date, transitional arrangements will not normally apply to the part of your bill that applies to any increase in rateable value due to those changes.

How are increases limited?
Transitional limits apply if, in any year, the amount you would have to pay (based on your rateable value times the multiplier) is higher than the previous year’s bill (based on the amount due on 31 March) by more than the amounts shown below. If this is the case, your bill will be increased by these amounts.
Year Small property
(rateable value of less than £12,000 or £18,000 in Greater London)
Large property
(all others)
2000/01 5% 12.5%
2001/02 7.5% 15%
2002/03 7.5% 17.5%
2003/04 7.5% 17.5%
2004/05 7.5% 17.5%

But remember, after these limits have been applied to your bill, your bill will still increase in line with inflation. This is based on the retail price index in the previous September. Inflation was 1.1% for 2000/01 and 3.3% for 2001/02.

Are reductions in bills limited too?
Yes. Transitional limits also apply if, in any year, the amount you would have to pay (based on your rateable value times the multiplier) is lower than the previous year’s bill (based on the amount due on 31 March) by more than the amounts shown below. If this is the case, your bill will be reduced by these amounts.
Year Small property
(rateable value of less than £12,000 or £18,000 in Greater London)
Large property
(all others)
2000/01 5% 2.5%
2001/02 5% 2.5%
2002/03 10% 5%
2003/04 12.5% 7.5%
2004/05 25% 15%

But remember, after your bill has been reduced by these limits, your bill will still increase in line with inflation. This is based on the retail price index in the previous September. Inflation was 1.1% for 2000/01 and 3.3% for 2001/02, 1.7
WHERE TRANSITION IS NOT APPLICABLE - DEMOLITIONS ETC.

Any reduction to a rateable value with an effective date after 1st April due to a part demolition of the premises or some other alteration will have the ratio of that reduction applied to rates payments so that for example where a property had been increased in value by 10 times at the revaluation but was subject to transition ( where the actual payments were only increased by 10%) , a demolition of half of premise would lower the rates bill by a half, whereas any reduction as a result of an appeal with a 1st April effective date may have made no difference to payments. This is known as an N over J fraction.
(N being the revised value, J being the original value).


EXAMPLE

Property at 10,000 in 1999 increased to 100,000 in year 2000.
Rates payments only increased from 4,890 by 10% plus inflation to 6,454. Property then half demolished in May 2001 reducing the rateable value to 50,000. By N over J (50,000 over 100,000) the rates payments are reduced by a half with effective date 1st May 2001.


If the property had been overvalued and appealed to 50,000 as at 1st April 2000 (with no demolition having taken place) the new theoretical liability would be 50,000 at 41.6 pence or 20,800 still way above the transition limit of 6,454 with no immediate difference to payments.
ENGLAND INCREASES IN RATEABLE VALUE

SMALLER PROPERTIES (RV under 12000)

For those faced with an increased rateable value the drop in the uniform business rate will help to offset any increase in valuation. In any event payment will not increase by more than 5% plus inflation for small properties (under 12,000 or 18,000 in London) in the first year of the revaluation.

Example: 1999 payment R.V. 8,000 @ 48.9p Paid 3,912

2000 Revaluation R.V. increased to 12,000

12,000 @ 41.6p Payable 4,992

But limit 3,912 plus 5% = 4,108 (plus inflation)


LARGER PROPERTIES
For those faced with an increased rateable value (properties over 12,000 or 18,000 in London) the drop in the uniform business rate will help to offset any increase in valuation. In any event payment will not increase by more than 12.5% in the first year of the revaluation rising to 17.5% in the later years.

Example: 1999 payment R.V. 27,000 @ 48.9p Paid 13,203

2000 Revaluation R.V. increased to 46,000

46,000 @ 41.6p Payable 19,136

But limit 13,203 plus 12.5% = 14,853 (plus inflation)
ENGLAND DECREASES IN RATEABLE VALUE

SMALLER PROPERTIES (1999 Value Under 12,000 or 18,000 in London)
Unfortunately those who have a reduction in their R.V. will hardly benefit as the limit on payment for small properties will be a 5% drop on the previous years bill with inflation added back. This for the first two years of the revaluation.

Example: 1999 payment R.V. 10,000 @ 48.9p Paid 4,890

2000 Revaluation R.V. decreased to 9,000

9,000 @ 41.6p Payable 3,744

But limit 4,890 less 5% = 4,646 plus inflation.


LARGER PROPERTIES (over 12000 (18000 in London)
The situation is even worse for large properties with a decreased valuation where the limit on any reduction in payment is 2.5% added back for the first two years then rising to a 5%, 7.5% and finally 15% allowable drop.

Larger properties therefore with a no change or decreased value will not be allowed to pay less and may still be paying more than the preceding year's bill if inflation is over 2.5%!

Example: 1999 payment R.V. 46,000 @ 48.9p Paid 22,494

2000 Revaluation R.V. decreased to 26,000

26,000 @ 41.6p Payable 10,816

But limit 22,494 less 2. 5% = 2,190 plus inflation.