Green Freeport: What is Full Non-Domestic Rates Relief?

In the fourth article in our Green Freeport tax series, Keturah Adam, Trainee Solicitor in our Inverness Office, analyses the benefits and pitfalls the of Full Non-Domestic Rates Relief.

Businesses situated in Green Freeport tax areas can qualify for full, 100 per cent relief from non-domestic rates on qualifying new properties and partial relief on expanded properties. This relief applies for five years from the point at which the business becomes eligible for it.

Non-domestic rates are determined by three factors:
• The value of the property (rateable value)
• The national poundage – a “pence per £1” proportion of rateable value to be paid
• Any rates relief that the property is entitled to claim

For businesses to qualify for full relief they must have either:
• Started the business in the Green Freeport or moved into a Green Freeport area after the Green Freeport was set up; or
• Expanded the business into a property in the Green Freeport after the Green Freeport was set up.

Businesses can also qualify for a discount on their Non-Domestic Rates bill if the business was in the property before the Green Freeport was set up and:
• The business extended the property after the Green Freeport was set up - for example, building an extension or taking on additional rooms within a property; or
• Improved an area within the property so that the business could make use of it for the first time after the Green Freeport was set up - for example, if you improved access to a new area of an office or made fire safety improvements.

The relevant local authority works out how the relief is applied and applies the rules to determine the discount given to expanding businesses, often apportioned based on how much the rateable value of the property has changed because of the extension or improvements.

Potential pitfalls of FNDRR
Business should be wary of some of the pitfalls when considering taking advantage of this relief. The relief will only be available for five years from the point that the business becomes eligible for the relief. If another rates relief such as ‘Improvement Relief’ is granted for part of this 5-year period, the time period for which the FNDRR is awarded will be shortened. For example, if the Improvement Relief is granted for one year, FNDRR will be granted for four years – giving a total of five years’ relief.

There are other specific things to consider = for example, FNDRR cannot generally be claimed on part-occupied properties or property improvements if the expansion is into a part of the property already in use; the expansion predated the Green Freeport designation; or if the improvement of an area was for a space that was already in use by the business.

As local authorities have ultimate discretion in the application of the award, it is also worth highlighting that the relevant local authority may request additional information from businesses. Local authorities also have the ability to apply additional tests to disincentivise businesses already operating nearby from moving into the Green Freeport area solely to claim additional relief.

Businesses should also be aware of the obligation to report changes to ensure they do not get a backdated increase in their bill or overpay it. Therefore, businesses should contact the local authority if:
• The property becomes empty
• The business acquires another property
• Changes are made the property that increase its value
• The nature of the business changes
• The business moves to different premises

FNDRR is an attractive relief and can provide businesses with significant savings during a growth period. Businesses who plan carefully and get the right advice can take full advantage of FNDRR and other tax initiatives provided by the Green Freeport areas to reduce costs and help accelerate their growth.

For further advice and assistance, call the experts on our corporate team on 01463 234445 or email corporate@wjm.co.uk