Terms of Reference

TERMS OF REFERENCE: INVESTIGATION INTO A SMALL BUSINESS RATE RELIEF (SBRR) SCHEME

Policy background

Small businesses pay a higher proportion of turnover in rates than larger business and reflecting this the Government introduced a scheme in England in 2005, under which occupiers of business below a rateable value threshold pay a lower rate in the pound. This followed a broadly similar scheme which was introduced in Scotland in 2003. More recently Wales has followed suit though the scheme introduced there this year is significantly different from both the Scottish and English schemes, in terms of funding and scope. There is an element of the Welsh scheme that also addresses the issue of maintaining post office services.

The Government consulted on a small business relief scheme in a policy paper in March 2005. It decided not to proceed with a scheme at that time because it had reservations about the effectiveness of introducing an SBRR scheme. In particular, NI did not have the same scale of big business found in England and Scotland – which is necessary as larger businesses pay a supplement to fund the schemes there. Furthermore, initial evidence from the Scottish scheme introduced in 2003 had concluded that SBRR was not effective as the relief was too thinly spread; it added a major complication to the rating system and take up was low.

It was decided, however, that a review of the case for introducing small business rate relief in Northern Ireland should be carried out during 2007, which could draw from the experience of the other schemes, though not be fettered by them

The broad aim of a small business rate relief scheme would be to support the growth and sustainability of small business in Northern Ireland and if feasible, help maintain services in disadvantaged areas.

Although these aims may be worthy, as with all new policies of this Assembly any decision on proceeding with such a scheme will be have to be made in the light of alternative ways of providing support and most importantly other Departmental spending priorities.

The Terms of Reference for the review are to:

Establish if there is sufficient rationale for introducing a small business rate relief scheme.
Consider if such a scheme should be independently funded or paid for by charging larger business a supplement
Consult with stakeholders, considering arguments given for and against such a scheme. Consider in the wider context of the removal of industrial derating.
Consider the success of similar schemes in Scotland and England (which started in 2003 and 2005 respectively).
Examine the SBRR scheme in Wales, which commenced in April 2007.
Examine the options for a SBRR scheme in the Northern Ireland context, providing an estimate of cost for each option.
Consideration should be given to the thresholds for relief than should be applied, as well as any other eligibility criteria.
There is strong independent evidence that the benefit of a business rate exemption will pass to the landlord in the medium to longer term, as the landlord is able to charge higher rents and most small businesses (particularly retail) rent. This matter needs to be considered in gauging the effectiveness of any small business rate relief scheme
Provide associated impact analysis: Equality Impact Assessment and New Targeting Social Needs Analysis.
Assess the State Aid implications of introducing a SBRR.
Make recommendations based on consultation with stakeholder groups, evidence obtained and analysis carried out.