Coronavirus (Covid-19): Non-Domestic Rates related business support FAQs

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Note: updated 15 July 2020

Members of the Scottish Parliament (MSPs) are receiving a large number of enquiries relating to Coronavirus (COVID-19).  SPICe is still responding to enquiries through the usual enquiry process.

However, in response to the high number of enquiries received on support for businesses, including Non-Domestic Rates relief and grants, we’ve pulled together this set of Frequently Asked Questions which may help MSPs in responding to their constituents, and anyone else looking for information on new measures.

This blog looks specifically at Non-Domestic Rates related support for businesses, as opposed to support for employees and the self-employed, and loan schemes extended or made available to businesses. For details on all COVID-19 business support measures, the first place businesses should look for assistance is findbusinesssupport.gov.scot – this website is part of a joint response by Scotland’s Enterprise and Skills system (Agencies, Local Authorities, Scottish Government and business/industry organisations). The Scottish Government has also opened a support helpline, This helpline to handle urgent issues and more detailed questions that can’t be answered on the above FBS site.

For ease of navigation, the information is broken down into the following sections:

Background

UK Government

The UK Government included a series of measures to support businesses as part of its unveiling of the Budget 2020-21 on 11 March 2020. This included expansion of the rates relief for retail, 100% rates relief in 2020-21 for small businesses, and rates discounts for pubs. It went on to announce an update to this, confirming a £20 billion package of support for businesses which replaced and extended these measures, on 17 March. It published Grant Funding Schemes – Small Business Grant Fund and Retail, Hospitality and Leisure Grant Fund guidance in March and Expanded Retail Discount 2020/21: Coronavirus Response – Local Authority Guidance on 2 April, with a separate update clarifying the State aid position. On 2 May, the UK Government announced that it would provide additional funding for the business grant funds scheme in order to support small businesses with ongoing fixed property-related costs, with an additional £617 million being made available for businesses in England.

Barnett consequentials

Support for businesses is, for the most part, devolved, and as a result these measures were applicable to England only.

Under the Barnett formula, the devolved administrations of the UK are given funding allocations as a consequence of spending decisions made by the UK Government on areas that are devolved.  This provides devolved administrations with a population share of the relevant spending which can be spent as the devolved administration chooses. The Scottish Government has, at the time of update, been allocated an additional £4,616 billion in Barnett consequentials for Covid-19 so far, the majority of this to be spent on business support measures.  [Note that where UK Government support applies across the whole of the UK – for example, the furlough scheme, or increased benefit levels – there will be no Barnett consequentials.]

There is, as would be expected, some degree of delay between the UK Government announcing measures which lead to consequentials, and the Scottish Government anouncing how those consequentials will be allocated.

SPICe has explored the Barnett formula in the context of Covid-19 in recent blogs, looking at:

Scottish Government

On 14 March the Scottish Government made an initial announcement about the support which would be made available for businesses, which included—

  • 75% rates relief for retail, hospitality and leisure sectors with a rateable value of less than £69,000 from 1 April 2020 for a year
  • a fixed rates relief of up to £5,000 for all pubs with a rateable value of less than £100,000 from 1 April 2020 for a year
  • grants of at least £3,000 to small businesses in sectors facing the worst economic impact of COVID-19.

On 18 March 2020, the Cabinet Secretary for Economy, Fair Work and Culture announced a £2.2 billion package of support as a result of COVID-19 to support businesses from 1 April 2020 for a year. This announcement supersedes the measures announced on 14 March.

On 15 April, the Scottish Government announced further measures to support small businesses and the recently self-employed, which included £120 million to ensure that, in addition to a 100% grant (£10,000 Small Business grant or £25,000 Retail, Hospitality and Leisure grant) on the first property, the ratepayers of properties qualifying for the grants will also be eligible for a 75% grant on each subsequent property.

In total, by 30 April 2020, having received £2,253 billion in Barnett consequentials from the UK Government, the Scottish Government had allocated £2,296 billion through its package of business rates reliefs and grants.

Further UK measures announced on 2 May led to additional £60 million in Barnett consequentials for business support measures being allocated.

On 2 June, having hinted at further changes the week before during a Chamber statement, the Cabiner Secretary for Economy, Fair Work and Culture announced the extensions of the grant scheme to support small businesses to cover more properties and businesses, including businesses in leased office space.

What support has been made available?

Both the Scottish and UK Governments have taken measures to support businesses. These take the form of Non-Domestic Rates Relief (i.e. reducing bills), and a package of grants.

These reliefs and grants are based on the relevant sector or industry and/or on the rateable value of the property.

In Scotland, the key points to the schemes as introduced are that –

  • All properties across Scotland will be eligible for a 1.6% rates relief on gross bills (including any poundage supplements)
  • Properties in the retail, hospitality, leisure and airport sectors will be eligible for 100% rates relief
  • The ratepayers of small businesses in receipt of Small Business Bonus Scheme relief (SBBS) or in receipt of Rural Relief, or eligible for SBBS and in receipt of certain other reliefs on 17 March 2020, will be eligible for a one-off £10,000 grant.
  • The ratepayers of retail, hospitality and leisure properties with a rateable value between £18,000 and £51,000 will be eligible for a one-off grant of £25,000.
Updates to the schemes
  • On 15 April both grant schemes were extended to include subsequent grants of 75% of the grant value (£7,500 for the small business grants, or £18,750 for retail, hospitality and leisure grants) on any additional eligible properties. For the Small Business Grant Fund, Ratepayers that hold properties with individual rateable values not exceeding £18,000 but with a cumulative rateable value between £35,001 and £51,000 were also potentially eligible.
  • From 11 May, eligibility for the Small Business Grant Fund was expanded to include non-domestic properties which are eligible for the Small Business Bonus Scheme but are in receipt of Charitable Rates Relief.
  • Originally, the Small Business Grant Scheme was only open to single properties (or a primary property where multiple properties were owned) with a Rateable Value no greater than £18,000.
    • On 5 May this was extended to cover retail, hospitality and leisure businesses previously unable to access the Small Business Grant Fund because of their culminative value of their properties, provided that the culminative value of all properties did not exceed £51,000. At this point, eligibility for SBBS was no longer required (as a number of businesses in this bracket would not apply, given that it’s culminative cap is £35,000).
    • From 8 June, the culminative value cap will increase to a maximum of £500,000.
  • Previously, only ratepayers could apply for the Small Business Support Grant. This has now been extended to cover occupants of certain types of shared space. For example shared office, business incubator or industrial space. The space must be leased from a landlord who is the registered ratepayer for the property.

Full detail can be found in the Local Government Finance Circulars:Local Government Finance Circular 6/2020 sets out all relief for 2020-21 (Coronavirus specific relief can be found on page 8).

Local Government Finance Circular 8/2020 sets out the Covid-19 grant funding schemes and guidance, including a full list of all eligible types of business (this replaces Local Government Finance Circular 5/2020 following the expansion of the grant scheme on May 4).

Local Government Finance Circular 9/2020 sets out further guidance covering eligibility for phase 2 of the grant funding schemes.

Local Government Finance Circular 11/2020 sets out further guidance covering eligibility for phase 3 of the grant funding schemes, which extended eligibility of the Small Business Support Grant to certain non-ratepayers.

Which industries are being supported?

There has been a focus on retail, hospitality, leisure across the UK, and, in Scotland, on airports. There is also a focus on supporting small businesses. In Scotland this includes businesses which claim rural relief, or which are eligible for SBBS but in receipt of Nursery Relief, Disabled Relief, Business Growth Accelerator Relief, Fresh Start, Sports Relief, Charitable Rate Relief or Enterprise Areas Relief. In England, rural businesses are eligible for grant funding, and nursery businesses (for whom there is no existing relief scheme in England) will receive a 100% rates relief in 2020-21.

The definitions of retail, hospitality and leisure/tourism in terms of the businesses applicable also vary between the two countries. For example, in Scotland retail and wholesale warehouses, medical practices and banks are eligible for support, whereas in England these businesses are not covered by the new grant schemes.

Other business support measures have been brought in by each government in addition, but these are not tied to the Non-Domestic Rates system so have not been covered in this blog. A separate SPICe blog on wider business support measures was published on 7 May.

Overview of Scottish Government and UK Government schemes

The following tables set out the relief and grants available in Scotland and England, and compares these with existing relief available under the Small Business Bonus Scheme (SBBS) in Scotland or Small Business Rates Relief (SBRR) in England.

One thing that this table shows is that there are existing differences in the thresholds and rates for the Small Business schemes between both countries, meaning that comparing the grant funding in particular is complex.

Scotland, existing and new support measures

Rateable Value Existing relief for small businesses (SBBS) Covid-19 Grant Aid
£0-£15,000 (cumulative value) 100% rates relief on all properties owned £10,000 one-off grant if in receipt of SBBS or eligible for SBBS but in receipt of rural relief, nurseries relief, Disabled relief, Business Growth Accelerator Relief, Fresh Start, Enterprise Areas Relief, Charitable Rates Relief or Sports Relief.  Further grants of £7,500 available against additional properties for small business ratepayers.On 5 May this was extended to cover retail, hospitality and leisure businesses previously unable to access the Small Business Grant Fund because of their culminative value of their properties.  As of 8 June, this is provided that the cumulative rateable value does not exceed £500,000, and individual property values do not exceed £18,000.

This was extended to cover occupants of certain types of shared space, as long as this space is leased from a landlord who is the registered ratepayer for the property.

£15,001-£18,000 (cumulative rateable value) 25% rates relief on all properties
£18,001-£35,000 (cumulative value) 25% on each individual property with a rateable value of £18,000 or less
£18,001-£51,000 (individual rateable value) £25,000 one-off grant for retail, hospitality and leisure businesses, and subsequent grants of 75% of the grant value (£18,750) on any additional eligible properties.
Temporary Covid-19 rates relief  
  • 100% for 12 months for properties in retail, hospitality, tourism and airports sectors (with no rateable value limit) – no application needed
  • 1.6% relief for all properties – no application needed

England, existing and new support measures

Rateable value Existing relief for small businesses (SBRR) Covid-19 Grant Aid
£0-12,000 100% £10,000 if eligible for SBRR or rural rate relief, or for retail, hospital and leisure properties even if not in receipt of reliefs.
£12,001-15,000 Variable rate, e.g. £13,500 gets 50% discount, £14,000, gets 33% discount.
£15,001-51,000 £25,000 grant for retail, hospitality and leisure businesses
Temporary Covid-19 rates relief  
  • 100% for 12 months for “all retail, hospitality and leisure” (with no rateable value limit), and for nursery businesses that pay business rates (Scotland has had Nursery Rates Relief since 1 April 2018)

What if someone owns more than one property?

The Scottish grant scheme as originally announced was based on one-off payments, so only one claim could be made per ratepayer. If someone owns multiple properties, then they must choose a primary property to make a claim against. On 15 April, the Scottish Government changed this approach, announcing that small business rate payers would be able to claim for subsequent 75% (£7,500) grants on additional properties. If a ratepayer owns properties which qualify for both grant schemes, they are only able to claim one 100% grant – it isn’t possible for one business to claim a full grant on both schemes. As noted, the culminative value cap on claims for multiple retail, hospitality and leisure properties has been expended in Scotland – as of 8 June, the Small Business Grant Fund could apply for retail, hospitality and leisure businesses whose properties have a culminative value below £500,000 provided that individual properties rateable values do not exceeed £18,000.

In England, according to guidance, the Small Business Grant Fund (the £10,000 grant) and the Retail, Hospitality and Leisure Grant (the £25,000 grant) are limited to “one grant per Hereditament” (land or property). This doesn’t mean, however, that businesses in England can automatically claim multiple grants.

The following example explains this in the context of the £10,000 grants available for properties in receipt of small business rates relief. It should be noted that although this covered much of the original basis for garnt support, schemes have since been extended well beyond simply using these schemes as qualifying criterion.

Small business schemes

When comparing schemes it is useful to understand that the terms for SBRR, one of the qualifying criteria for the Small Business Grant Fund (the other being sector), differ from the Scottish SBBS scheme when it comes to multiple properties.

In England, SBRR guidance states that once a business acquires a second property, SBRR can continue be claimed on the first for 12 months. After that, it can still be claimed on the main property only if none of the other properties have a rateable value above £2,899, and/or the total rateable value of all your properties is less than £20,000 (£28,000 in London).

In Scotland, SBBS is cumulative, so takes in to account the value of all properties owned. If someone owns multiple properties, and has a cumulative RV below £15,000, they will receive 100% rates relief on each property. For properties with a cumulative RV of £15,001-18,000, a 25% discount is applied to each property. For properties with a cumulative rateable value between £18,001 and £35,000, a 25% discount is applied to each individual property with a rateable value not exceeding £18,000. Ratepayers can save a maximum of £7,470 in 2020-21 using SBBS.

What this means in practice

It’s important to re-emphasise here that the £10,000 grant qualifications differ between the two countries. In both Scotland and England, a property can either be eligible for SBBS/SBRR to claim, or can be a property used for retail, hospitality or leisure.

  • In Scotland the individual rateable value of a property must be below £18,000, and, as of 8 June, retail, hospitality and leisure businesses with a culminative property value up to £500,000 can apply. Additional grants will be capped at 75% (£7,500).
  • In England, the individual rateable value of properties must be below £15,000. Additional grants paid are at 100%, i.e. the full £10,000.

Essentially, the Scottish approach has focused on support for the smallest of businesses, though Cabinet Secretary for Finance Kate Forbes highlighted in her statement that businesses should think of others when applying for grants:

“While many businesses are in difficulty, some are doing better than others or can pull through from their own resources.

Just as we ask the public only to buy what they need in the supermarkets, we are asking businesses who do not need this vital help to refrain from claiming additional support unless absolutely necessary so we can direct as much help as possible to those who need it most.”

 Cabinet Secretary for Finance, 15 April 2020

Which measures are more generous, those in Scotland or those in England?

As measures in Scotland differ from those in England and Wales, SPICe has been asked to clarify whether businesses in Scotland are losing out.

Within both England and Scotland, Grant Schemes are capped by the EU’s Temporary Framework on State Aid which raised the cap from 200 000 EUR to 800 000 EUR per undertaking for awards made until 31 December 2020 for companies in financial difficulty.

As noted, the thresholds make comparing which schemes are more generous complicated –

  • a property with a rateable value of £16,000 in Scotland would already be eligible for SBBS, so on a standard basis would receive a 25% discount on rates bills, and the ratepayer would be eligible for a £10,000 grant plus potential supplementary grants under Covid-19 support measures. A property in England with a rateable value of £16,000 would not be eligible for SBRR so would not have been receiving a long-term discount, but it would be eligible for a £25,000 Covid-19 grant if it was in the tourism, hospitality or leisure sectors.
  • Although businesses in England can claim multiple 100% grants, unlike in Scotland where additional grants are capped at 75%, there are instances in England where small businesses would in effect be capped at claiming one grant. As of 8 June, the cap on culminative value in Scotland was raised from £51,000 to £500,000.
  • The qualifying purposes for grant funds within Scotland cover a number of properties and businesses that would not be eligible under the UK Government’s scheme.

When looking at the long-term picture, it may be that the difference in the grant funding a business that a single property receives is offset by differences in eligibility for SBBS and by the Scottish Government’s decision to offer a 1.6% rates relief for all businesses in 2020-21. The differences between how the schemes work for businesses with multiple properties will mean quite different stories for individual busnesses in each country. In addition, the poundage is lower in Scotland than the multiplier in England (49.8p versus 49.9p) and Scotland has three NDR rates (the poundage, Intermediate Property Rate at 1.3p and Higher Property Rate at 2.6p) while England only has two rates. Because of the differences in schemes and how they have been targeted, it isn’t possible to generalise about whether the measures in one country are more generous or fair than the other.

Scottish Government stance

When providing an update on the phase one of business support grants on 17 April, Finance Secretary Kate Forbes said:

“We are doing everything we can to support business at this very difficult time and will continue to listen to and engage with the sector. Our total support for Scottish business now exceeds the £2.2 billion passed on from the UK Government.

“We promised to pass every penny received from the UK Government on to businesses in Scotland and we are. Our priority remains to protect lives but we are doing all we can to protect livelihoods too.”

 Cabinet Secretary for Finance, 17 April 2020

Who can claim?

The eligible claimant of grants is the ratepayer. In this instance, “ratepayer” is understood to be the ratepayer as at 17 March 2020 as per the local authority’s records.

Eligibility is primarily based on property, not on business, so if someone has two or more businesses operating from a single property (for valuation and NDR billing purposes), then only one grant would be available.  Under the orginal scheme, if an individual or business paid a service charge which contributed towards business rates to the ratepayer of a building, for instance if they let an office space within a building, they would not be eligible for business support grants, but the ratepayer would be. However, as per changes announced on 2 June, the Small Business Support Grant has been extended to cover occupants of certain types of shared space. For example shared office, business incubator or industrial space. The space must be leased from a landlord who is the registered ratepayer for the property.

A list of the purpose of businesses which are eligible for the first tranche of grants is set out in Table 1 of Local Government Finance Circular 8/2020. This is not an exhaustive list – local authorities will be expected to use this as a guide when determining whether a business is eligible. The criteria for eligibility for phase two of the scheme, which introduced additional grants, are set out in Local Government Finance Circular 9/2020. Finally, eligibility criteria for phase 3 are set out in Local Government Finance Circular 11/2010.

To qualify for a grant a property should be wholly or mainly being used for one or more these purposes as at 17 March 2020. A list of exclusions is also set out in circular 8/2020.

Eligible properties for 100% Covid-19 rates relief are set out in the schedules of The Non-Domestic Rates (Coronavirus Reliefs) (Scotland) Regulations 2020.

Self-catering accommodation and caravans are considered eligible for grant funding if receipts represent a primary source (for example, one third or more) of earnings for the ratepayer and the property has been let out for 140 days or more in financial year 2019-20.  Local Authorities may specify any additional evidence they require (for example, records of bookings, a copy of public liability insurance cover or a website) in order to confirm eligibility.

What are the timelines for claiming grants?

In Scotland businesses were able to apply for grants from 24 March 2020 onwards, and they will be available to 31 March 2021.

Businesses eligible for supplementary small business grants were able to make applications from 5 May 2020 onwards.

The EU Temporary Framework for State Aid requires that awards be made before 31 December 2020 to be covered by the 800 000 EUR limit per undertaking.

How do businesses claim for grants and reliefs?

Covid-19 rates reliefs (1.6% for all properties and 100% for properties in the retail, hospitality, leisure and airport sectors) will be applied automatically by local authorities when billing for Non-Domestic Rates, so businesses should not need to take any action.

Applications for grants need to be made through the relevant local authority for a property. The mygov.scot web page for Covid-19 business support allows users to link through directly to the business support page for each council.

Ailsa Burn-Murdoch, Senior Researcher; Financial Scrutiny Unit