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The Rating (Former Agricultural Premises And Rural Shops) Bill


 

These notes refer to the Rating (Former Agricultural Premises and Rural Shops) Bill
as introduced in the House of Commons on 16 March 2001

The Rating (Former Agricultural Premises And Rural Shops) Bill


EXPLANATORY NOTES

INTRODUCTION

1. These explanatory notes relate to the Rating (Former Agricultural Premises and Rural Shops) Bill as introduced in the House of Commons on 16th March 2001. They have been prepared by the Department of the Environment, Transport and the Regions in order to assist the reader of the Bill and to help inform debate on it. They do not form part of the Bill and have not been endorsed by Parliament.

2. The notes need to be read in conjunction with the Bill. They are not, and are not meant to be, a comprehensive description of the Bill. So where a clause or part of a clause does not seem to require any explanation or comment, none is given.

SUMMARY

Non-agricultural premises on what had previously been agricultural land and buildings

3. The bill establishes a 50% mandatory rate relief scheme for land and buildings used for non-agricultural purposes on what had been agricultural land and buildings for at least 183 days during the year prior to the date on which the provisions come into force. The mandatory relief will not be available to stud farms which already benefit from an existing concession that reduces their rateable value. Local authorities will have a discretionary power to increase the relief to 100% where they feel the changed use will be of benefit to the wider community - new stud farms on previously agricultural land will also be able to qualify for this discretionary relief.

4. Both mandatory and discretionary relief will initially be limited to maximum of 5 years, with a provision for this to be extended by Order made by the Secretary of State. However, premises that include land and buildings already qualifying for relief prior to any extension will only receive relief for a maximum of 5 years from the date the original land and buildings first qualified for relief. It is intended that relief will be limited to properties with rateable values of less than £6,000.

Extension of mandatory 50% rate relief to village food shops

5.     The bill also extends mandatory 50% rural rate relief, currently only available to the sole village general store and post office to all village shops that sell mainly food for human consumption, excluding the provision of catering and confectionery. The shops must have a rateable value of not more than £6,000, the same as the existing threshold for general stores and post offices, and be situated in a qualifying settlement. Food shops receiving mandatory relief will also be eligible for top-up relief of up to 100% at the discretion of the local authority.

6.     The Bill will extend to both England and Wales but allows for separate commencement powers to be exercised by the National Assembly for Wales and for the power to make orders in relation to Wales to be exercised by the Assembly.

BACKGROUND

Non-agricultural premises on what had previously been agricultural land and buildings

7.     Land and buildings used in connection with agricultural operations on the owner's own farm are exempt from non-domestic rates, but non-agricultural activities are rateable. Therefore, farmers face a new rate liability when moving any of their property from agricultural to non-agricultural uses. This is perceived as a barrier to diversification into non-agricultural activities.

8.     On 30 March 2000 the Prime Minister announced the Government's Action Plan for Farming in which commitment was given to consult on extending rate relief to new horse enterprises linked to farms to assist farmers to diversify. A consultation paper Rate Relief for Horse enterprises on Farms was issued on 25 August 2000 but was not well received by the farming community who perceived the proposals as not providing sufficient help to farmers. A further consultation paper Rate Relief for Farm Diversification enterprises was issued on 28 November 2000 proposing to extend the relief to all new small non-agricultural enterprises on farms for a 5 year period. This bill implements the proposed relief.

Extension of mandatory 50% rate relief to village food shops

9.     The village shop rate relief scheme was introduced by the Local Government and Rating Act 1997 which effected the new relief scheme by amendments to the Local Government Finance Act 1988. The provisions came into force on 1 April 1998 and are designed to help rural communities by sustaining rural shops and post offices, which supply essential goods and services and provide a focal point for village life.

10.     Under the scheme, the sole general store and/or post office in a rural settlement of no more than 3,000 is entitled to 50% mandatory relief. Local authorities have the power to top this up to 100%. They also have discretionary powers to grant up to 100% rate relief to any other business in a qualifying rural settlement where they are satisfied that the business is of benefit to the rural community and the cost to the council taxpayer is justified (local authorities have to meet 25% of the costs of discretionary relief from their own funds). Mandatory relief is subject to a rateable value limit of £6,000. Discretionary relief is subject to a rateable value limit of £12,000.

11.     It is for local authorities to decide which of their communities located in a designated rural area meet the qualifying criteria and to place them on a rural settlement list. The rural areas themselves are designated by centrally by Government. The scheme was originally based on those areas designated by the Housing Right to Acquire or Enfranchise Orders. Since then the current Government has designated a further 115 areas as being rural for the purposes of the rate relief scheme.

THE BILL

12.     The relevant legislation is in sections 43 and 47 of the Local Government Finance Act 1988 as amended by the Local Government and Housing Act 1989, the Local Government Finance Act 1992, the Local Government and Rating Act 1997, the Greater London Authority Act 1999 and the Postal Services Act 2000.

13.     Clause 1 amends section 43 to provide the mandatory 50% relief for former agricultural premises.

14.     Subsection (3) inserts a new subsection (6F) into section 43 of the Local Government Act 1988 setting out the conditions a hereditament must meet if it is to qualify for the 50% mandatory rate relief. These are:

  • its rateable value shown in the rating list at the beginning of the financial year is not more than the amount prescribed by the Secretary of State;

  • that land and buildings contained within the hereditament must have been wholly or mainly agricultural (disregarding domestic property) for at least 183 days in the year preceding the commencement of the Bill;

  • on the relevant day for which rates are chargeable some land or buildings which were agricultural on 183 days during that period are not agricultural; and

  • the hereditament does not qualify for stud farm relief on the relevant day.

15.     This clause also :

  • places a 5 year limit on the relief from the date the provisions of the Bill come into effect;

  • gives the Secretary of State the power to extend the life of the relief for a further period or periods; and

  • if the period is extended, limits mandatory relief for hereditaments that include land and buildings already qualifying for relief as part of an earlier hereditament, to a 5 year period commencing on the day that earlier hereditament first qualified for rate relief.

16.     Subsection (4) provides that if a hereditament qualifies for relief under both subsection (5) (use for charitable purposes) and subsection (6A) (certain premises in rural settlements, including qualifying food stores) of section 43, it receives the greater relief under subsection (5).

17.     Clause 2 enables the local authority to determine the daily rate liability of a hereditament that qualifies for the 50% mandatory relief for former agricultural premises instead of the formula set out in section 43 of the 1988 Act. This enables local authorities to top-up the mandatory relief with discretionary relief.

18.     Clause 3 adds village food stores to the list of other hereditaments that can qualify for mandatory 50% village shop rate relief.

19.     Subsection (3) defines a village food store as one that is wholly or mainly selling food on a retail basis for human consumption. The supply of confectionery and of food in the course of catering is excluded. Catering is defined as the supply of food for consumption on the premises or of hot food that is eaten off the premises. This excludes such establishments as restaurants, cafes, tea-rooms and fast food shops.

20.     Clause 4 enables the National Assembly for Wales to make separate orders for hereditaments in Wales.

21.     Clause 6(2) contains the commencement provision. The Act is to be brought into force on such a day or days as the Secretary of State or (in Wales) the National Assembly for Wales by order appoints.

EFFECTS OF THE BILL ON PUBLIC SECTOR FINANCES

22.     Both the new relief for farm enterprises and the extension of mandatory relief to village food shops should have no direct impact on public expenditure but they will reduce tax receipts to the Exchequer.

23.     The cost of providing the relief will depend on the number and rateable values of the properties that qualify. Therefore it is difficult to predict precise costs. However, from the information available, farm diversification relief is likely to cost the Exchequer something between £16 million and £65 million per annum over the five year period. This represents a range of take up by farmers of between 5% and 20%. A further £2 million to £9 million may be met by local authorities in respect to their contribution towards discretionary relief, depending on the extent to which they exercise that discretion. However, as the relief will encourage new enterprises to be established this cost will be offset by the additional rate income generated by the new enterprises.

24.     We also expect the extension of rate relief to village food shops to cost the Exchequer in the region of £9 million per annum with up to a further £3 million from the local authorities, depending on the extent to which they choose to give discretionary relief. But again the precise costs will depend on the number and rateable value of qualifying properties.

EFFECTS OF THE BILL ON PUBLIC SERVICE MANPOWER

25.     The Bill should not increase public service manpower. Both the Valuation Office Agency and local authority staff are already charged with ensuring non-agricultural enterprises on farms are correctly entered on the rating list. The new relief will not add to this work. Similarly local authorities already administer other rate reliefs. The additional workload for administering the new reliefs should, therefore, be minimal and not greatly impact on current staffing levels.

SUMMARY OF THE REGULATORY APPRAISAL

26.     Neither the farm diversification relief nor the extension of mandatory rate relief to village food shops will have cost implications for businesses. Although business will incur some costs in relation to time and effort in making an application for relief, this is more than outweighed by the benefits they will receive. The farm diversification relief may adversely affect those small off-farm businesses engaging in enterprises similar to those established on-farm as a result of having higher overheads than those on-farm enterprises receiving the relief. There may be similar effects with respect to existing on-farm enterprises, which will not receive the relief. However, the proposed relief will be time limited so this effect will be limited. It is felt that the advantages to the rural economy of encouraging new enterprises on farms outweigh the disadvantages. No serious consequences are foreseen for food shops.

EUROPEAN CONVENTION ON HUMAN RIGHTS

27.     Section 19 of the Human Rights Act 1998 requires a statement to be made in each House of Parliament, before the second reading, about the compatibility of the provisions of the Bill with the Convention rights (as defined by section 1 of that Act). The Secretary of State for the Environment, Transport and the Regions has made the following statement:

In my view, the provisions of the Rating (Former Agricultural Premises and Rural Shops) Bill are compatible with the Convention rights.

COMMENCMENT

28.     It is proposed that the Bill be brought come into force as soon as is practicable but no later than 1 April 2002 in England. Separate commencement powers are provided for Wales, exercisable by the National Assembly for Wales.

 
 
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Prepared: 20 March 2001