The Non-Domestic Rating (Designated Areas) Regulations 2025
The Non-Domestic Rating (Designated Areas) Regulations 2025 designate specific areas in England and Wales to retain a portion of their non-domestic rating income.
The regulations detail how to calculate this income and establish a baseline amount to determine the portion retained.
These calculations consider factors such as small and standard business rate multipliers and the aggregate rateable values of properties within designated areas.
The regulations also amend existing legislation to extend the designation of the Heart of the South West–Huntspill Energy Park designated area and specify the designation period (24-25 years) for all designated areas.
Arguments For
Increased Local Control: Allows local authorities more control over their finances by retaining a portion of non-domestic rates generated within designated areas.
Economic Development Incentives: Provides financial incentives to stimulate economic growth and development within targeted areas.
Targeted Investment: Focuses funds specifically on the development of prioritized areas, potentially leading to more efficient and effective investment in infrastructure and public services.
Legal Precedent: Builds on existing legislation (Local Government Finance Act 1988) and regulations relating to designated areas and allows for adaptations and improvements.
Evidence-Based Approach: Calculations within the legislation align with industry standards and established valuation methods.
Arguments Against
Complexity of Calculations: The intricate formulas used in calculating baseline amounts and non-domestic rating income could be challenging for local authorities to implement and audit.
Potential for Inequality: The distribution of this retained non-domestic rate revenue may not equally benefit all areas requiring support, potentially exacerbating existing funding disparities.
Administrative Burden: This legislation creates additional administrative responsibilities for both billing authorities and central government.
Unintended Consequences: Changes in business rates or economic conditions could impact the effectiveness of the designated areas scheme in unforeseen ways.
Lack of Transparency: The complex calculations might lead to a lack of transparency, hindering public understanding and accountability.
The Secretary of State makes these Regulations in exercise of the powers conferred by section 143(1) of, and paragraph 39 of Schedule 7B to, the Local Government Finance Act 19881 (“the 1988 Act”).
These Regulations are made with the consent of the Treasury in accordance with paragraph 39(13) of Schedule 7B to the 1988 Act.
The Secretary of State created these regulations using powers granted by the Local Government Finance Act 1988 (section 143(1) and Schedule 7B, paragraph 39).
The Treasury approved the regulations, fulfilling the requirements of Schedule 7B, paragraph 39(13).
These Regulations may be cited as the Non-Domestic Rating (Designated Areas) Regulations 2025.
These Regulations come into force on 1st April 2025 and extend to England and Wales.
These regulations are officially called the Non-Domestic Rating (Designated Areas) Regulations 2025.
They came into effect on April 1, 2025, and apply to England and Wales.
In these Regulations—
“the 1988 Act” means the Local Government Finance Act 1988;
“billing authority” means a billing authority2 in England, part of whose area falls within a designated area;
“designated area” means an area designated under regulation 3(1);
“local list” means a local non-domestic rating list3;
“non-domestic rating income”, in relation to a billing authority, means the amount calculated under Part 2 of Schedule 2 in respect of a designated area for a specified year;
“non-domestic rating multiplier”, in relation to a chargeable financial year4, means the non-domestic rating multiplier for the year calculated by the Secretary of State under Schedule 7 to the 1988 Act5;
“preceding year” means the chargeable financial year immediately preceding the specified year for which a calculation under Part 3 of Schedule 2 is made;
“revaluation year” means a year in which a local list must be compiled under section 41 of the 1988 Act6;
“Schedule 7B” means Schedule 7B to the 1988 Act;
“small business non-domestic rating multiplier”, in relation to a chargeable financial year, means the small business non-domestic rating multiplier for that year calculated by the Secretary of State under Schedule 7 to the 1988 Act;
“small business rate baseline amount”, in relation to a billing authority, means the amount calculated under paragraph 3 or 4 (as appropriate) of Schedule 2 in respect of a designated area for a specified year;
“specified year” means, in relation to a designated area, a chargeable financial year falling within the period of years specified in relation to that area in regulation 3(2) or (3) (as the case may be);
“standard business rate baseline amount”, in relation to a billing authority, means the amount calculated under paragraph 5 or 6 (as appropriate) of Schedule 2 in respect of a designated area for a specified year;
“total baseline amount”, in relation to a billing authority, means the amount calculated under paragraph 7 of Schedule 2 in respect of a designated area for a specified year.
This section defines key terms used throughout the regulations. '1988 Act' refers to the Local Government Finance Act 1988. 'Billing authority' is defined as the local government body responsible for collecting business rates, and 'designated area' is an area specifically chosen for specific financial treatment.
The definitions cover various multipliers used to compute business rates, baseline amounts, and the relevant financial year for calculation.
The definition of 'specified year' indicates the duration of designated area status.
The areas listed in Schedule 1 are designated for the purposes of these Regulations.
Subject to paragraph (3), the designations take effect on 1st April 2025 for the period of 24 years beginning with that date.
The designation of the Riverside Sunderland—Crown Works Studios Designated Area takes effect on 1st April 2025 for the period of 25 years beginning with that date.
The document specifies the areas designated under the regulations, found in Schedule 1.
The designation starts on April 1, 2025, and lasts for 24 years for most areas, while the Riverside Sunderland—Crown Works Studios Designated Area has a 25-year designation period.
Part 1 of Schedule 2 provides rules for calculating the proportion of a billing authority’s non-domestic rating income in respect of a designated area for a specified year.
The proportion is to be disregarded for the purpose of calculations under— (a)any of the following provisions of Schedule 7B— (i)paragraph 6 (payments to the Secretary of State in respect of the central share); (ii)paragraph 13 (calculations following local government finance report); (iii)paragraph 16 (calculations following amending report); (iv)paragraph 23 (calculations of levy payments)7; (v)paragraph 26 (calculations of safety net payments)8; (vi)paragraph 30 (distribution of remaining balance)9; (b)regulations made under any of the following provisions of Schedule 7B— (i)paragraph 7 (administrative arrangements for payments in respect of the central share); (ii)paragraph 9 (payments by billing authorities to major precepting authorities); (iii)paragraph 10 (administrative arrangements for payments by billing authorities to major precepting authorities); (iv)paragraph 28 (regulations about payments on account).
Schedule 2, Part 1, explains how to calculate the portion of non-domestic rating income disregarded in other calculations.
This disregarded portion is not considered for numerous calculations within Schedule 7B of the 1988 Act, including payments to the Secretary of State and adjustments following local government finance reports.
This also applies to regulations made under certain paragraphs of Schedule 7B.
The Non-Domestic Rating (Designated Areas etc) Regulations 201710 are amended as follows.
In regulation 3 (interpretation), in paragraph (a) of the definition of “period of designation”, after “York Central Enterprise Zone—York Central Site Designated Area” insert “and the Heart of the South West—Huntspill Energy Park Designated Area”.
In regulation 4 (designation of areas)— (a)in paragraph (3), for “the York Central Enterprise Zone—York Central Site Designated Area”, substitute “an area listed in paragraph (4)”; (b)after paragraph (3) insert— “(4)The areas are— (a)the Heart of the South West—Huntspill Energy Park Designated Area, (b)the York Central Enterprise Zone—York Central Site Designated Area.”.
This regulation amends the 2017 Non-Domestic Rating (Designated Areas etc) Regulations.
Specifically, it adds the 'Heart of the South West—Huntspill Energy Park Designated Area' to the list of designated areas and restructures regulation 4 to accommodate this addition.
The amendment clarifies the definition of the designation period.
We consent to the making of these Regulations
Nicholas Dakin Jeff Smith Two of the Lords Commissioners of His Majesty’s Treasury
Signed by authority of the Secretary of State for Housing, Communities and Local Government
Khan Parliamentary Under Secretary of State Ministry of Housing, Communities and Local Government 18th February 2025
This section shows the Treasury's consent and the signature of the Parliamentary Under Secretary of State, signifying the official approval and enactment of these regulations.
Each of the areas listed in column 2 of the table in this Schedule is designated by reference to the area or areas bounded externally by the outer edge of the red line shown on the map specified in column 1 on the table.
A reference in this Schedule to a map is to one of the maps numbered 1 to 6 and entitled “Maps referred to in Schedule 1 to the Non-Domestic Rating (Designated Areas) Regulations 2025” of which prints, signed by a member of the Senior Civil Service in the Ministry for Housing, Communities and Local Government, are deposited and available for inspection at the offices of the Secretary of State for Housing, Communities and Local Government, and in relation to each map, at the offices of the billing authority to which the map relates as specified in column 3 of the table in this Schedule.
For the purposes of determining a designated area, where part only of a hereditament is situated within an area shown on a map, the whole of the hereditament is to be included within that designated area.
[Table showing designated areas, billing authorities, values J and N]
Schedule 1 lists the designated areas and identifies them using maps available for inspection in government and participating local authority offices.
The boundaries are defined by red lines on these maps.
If only part of a property falls within the designated area, the entire property is included in the designation for calculation purposes.
The table details each designated area, its associated billing authority, and two numerical values, J and N, critical for subsequent calculations.
Proportion of non-domestic rating income to be disregarded
Unless sub-paragraph (2) applies, the proportion of a billing authority’s non domestic rating income in respect of a designated area for a specified year is the difference between the authority’s— (a)non-domestic rating income in respect of the designated area for that year, and (b)total baseline amount in respect of the designated area for that year.
If the total baseline amount is greater than or equal to the non-domestic rating income, the proportion is zero.
Calculation of non-domestic rating income
A billing authority’s non-domestic rating income in respect of a designated area for a specified year is the amount calculated in accordance with the formula— [(Formula with variables A-H)] [Definitions of variables A-H]
This sub-paragraph applies to a hereditament which— (a)is to be treated as one hereditament by virtue of regulations made under section 64(3)(b) of the 1988 Act, and (b)would have constituted three of more separate hereditaments had regulations under section 64(3)(b) not been made.
In this paragraph, references to an authority’s collection fund income and expenditure account are references to a revenue account to which, in accordance with proper practices, amounts are credited or charged in respect of the authority’s income or expenditure relating to sums paid into or payments met or to be met from the authority’s collection fund.
Calculation of the baseline amounts
Small business rate baseline: non revaluation year
If a specified year is not a revaluation year, a billing authority’s small business rate baseline amount in respect of a designated are for the specified year is the amount calculated under sub-paragraph (2) or (3).
For the specified year beginning with 1st April 2025, a billing authority’s small business rate baseline amount is calculated in accordance with the formula— [Formula with variables J, K1, K2]
For a subsequent specified year that is not a revaluation year, the small business rates baseline amount is calculated in accordance with the formula— [Formula with variables L, K1, K2]
Small business rate baseline: revaluation year
If a specified year is a revaluation year, a billing authority’s small business rate baseline amount in respect of a designated area for the specified year is the amount calculated in accordance with the formula— [Formula with variables L, M1, M2, K1, K2]
Standard business rate baseline: non-revaluation year
If a specified year is not a revaluation year, a billing authority’s standard business rate baseline amount in respect of a designated area for the specified year is the amount calculated under sub-paragraph (2) or (3).
For the specified year beginning with 1st April 2025, a billing authority’s standard business rates baseline amount is calculated in accordance with the formula— [Formula with variables N, P1, P2]
For a subsequent specified year that is not a revaluation year, the standard business rate baseline amount is calculated in accordance with the formula— [Formula with variables Q, P1, P2]
Standard business rate baseline revaluation year
If a specified year is a revaluation year, a billing authority’s standard business rate baseline amount in respect of a designated area for the specified year is the amount calculated in accordance with the formula— [Formula with variables Q, R1, R2, P1, P2]
Total baseline
A billing authority’s total baseline amount in respect of a designated area for the specified year is the sum of the small business rate baseline amount for the specified year and the standard business rate baseline amount for the specified year.
Interpretation of Part 3
In this Part— [Definitions of variables J, K1, K2, L, M1, M2, N, P1, P2, Q, R1, R2]
For the purposes of paragraphs 4 and 6 of this Schedule, the rateable value of a hereditament shown in the billing authority’s local list for 31st March in the preceding year is taken to be the rateable value that would have been shown in that list for that day had the circumstances relating to that hereditament been as they were on 1st April in the specified year.
Schedule 2 details the calculation methods for determining the portion of non-domestic rating income to be retained and the overall baseline amount for designated areas.
It separates calculations for small businesses and standard businesses, accounting for revaluation years and non-revaluation years.
This includes extensive formulas and definitions of variables crucial for accurate rates calculation.
The schedule also clarifies how rateable values are determined and adjusted for calculations.
These Regulations designate areas in England (“designated areas”) for the purpose of paragraph 39(1) of Schedule 7B to the Local Government Finance Act 1988 (“the 1988 Act”) (local retention of non-domestic rates). They provide rules for calculating in respect of a billing authority in England all or part of whose area falls within a designated area— (a)the billing authority’s non-domestic rating income in respect of the designated area for a specified year; and (b)the proportion of that non-domestic rating income that is to be disregarded for the purpose of specified calculations under Schedule 7B to the 1988 Act.
The calculations are to be made separately for each designated area within a billing authority’s area.
Regulation 3(1) and Schedule 1 designate the areas. Copies of the maps referred to may be inspected free of charge by prior appointment with the Ministry of Housing, Communities and Local Government, Business Rates Retention Team at 2 Marsham Street, London, SW1P 4DF and the principal office of the billing authority.
Regulation 3(2) and (3) provide that the designation of the areas takes effect on 1st April 2025 and, depending on the area, will have effect for the period of 25 or 24 years beginning with that date. The effect of specifying the period of designation is to trigger paragraph 39(9) of Schedule 7B to the 1988 Act which prevents the revocation of the Regulations and certain kinds of amendments to the Regulations until after the end of that period.
Regulation 4 and Schedule 2 provide the rules for the calculations. Part 1 of Schedule 2 provides rules for calculating the proportion of non-domestic rating income in respect of a designated area for a specified year that is to be disregarded for specified calculations under Schedule 7B to the 1988 Act. The proportion is calculated by subtracting the baseline amount in respect of the designated area for the specified year (calculated under Part 3 of Schedule 2) from the non-domestic rating income in respect of that area for that year (calculated under Part 2 of Schedule 2). Non-domestic rating income in respect of a designated area for a specified year is essentially the amounts payable to a billing authority under sections 43 and 45 of the 1988 Act for that year in respect of hereditaments situated in the designated area, subject to several adjustments.
The total baseline amount in respect of a designated area for the specified year beginning with 1st April 2025 is the sum of the amounts specified in columns 4 and 5 of the table in Schedule 1 as uprated in accordance with the formulae in paragraphs 3(2) and 5(2) of Schedule 2. The amounts in columns 4 and 5 of the table represent the existing non-domestic rating income for the designated area, split by hereditaments subject to the small business non-domestic rating multiplier and those subject to the non-domestic rating multiplier. For each subsequent specified year, the baseline amount is an uprated amount representing growth in the billing authority’s income in the designated area.
Regulation 5 amends the Non-Domestic Rating (Designated Areas etc) Regulations 2017 (S.I. 2017/318) to extend the period of designation for the Heart of the South West – Huntspill Energy Park designated area.
An impact assessment has not been produced for this instrument because it amends an existing local tax regime. Publication of a full impact assessment is not necessary for such legislation, but the impact assessment prepared for the Local Government Finance Act 2012 (c. 17) is relevant, and the assessment can be viewed at https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/8470/2054063.pdf
This explanatory note summarizes the regulations' purpose and key features.
It clarifies the designation of areas for local retention of non-domestic rates, explicitly detailing the calculation processes.
The note emphasizes the separate calculations for each designated area and provides information on accessing the relevant maps.
The note highlights the amendment to the 2017 regulations, explaining the reason for omitting a new impact assessment.
A link to a relevant impact assessment is provided.