PRESTON TAIT - 2000 TRANSITION SCOTLAND
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%
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.
SCOTLAND INCREASES IN RATEABLE VALUES

SMALLER PROPERTIES (RV under 1000)
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% for small properties (under 10,000) in the first year of the revaluation. That transition difference will then be reduced by 25% in each subsequent year.

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

2000 Revaluation R.V. increased to 10,000

10,000 @ 45.8p Payable 4,580

But limit 3,912 plus 5% = 4,107 plus inflation


LARGER PROPERTIES (RV over 10000)
For those faced with an increased rateable value (properties over 10,000) 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 7.5% in the first year of the revaluation rising by 25% of the transition difference in each subsequent year.

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

2000 Revaluation R.V. increased to 46,000

46,000 @ 45.8p Payable 21,068

But limit 13,203 plus 7.5% = 14,193 (plus inflation)

In 2001 transition difference is reduced to 0.77 of the original amount

In 2002 to 0.678
In 2003 to 0.261
SCOTLAND DECREASES IN RATEABLE VALUE

SMALLER PROPERTIES ( R.V. UNDER 10,000)
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. For each subsequent year the transition difference is reduced by 25% each year until 2004 when transition disappears altogether.

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

2000 Revaluation R.V. decreased to 9,000

9,000 @ 45.8p Payable 4,122

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


PROPERTIES OVER 10000.
The situation is the same for large properties with a decreased valuation where the limit on any reduction in payment is also 5% with inflation of 2.5% added back then for each subsequent year the transition difference is reduced by 25% each year until it disappears in 2004.

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

2000 Revaluation R.V. decreased to 26,000

26,000 @ 45.8p Payable 11,908

But limit 22,494 less 5% = 21,369 plus inflation.

Next year the transition difference is reduced by 25%

In 2001 transition difference is reduced to 0.77 of the original amount

In 2002 to 0.678
In 2003 to 0.261