The government is proposing to change the way “complex” school business rates are collected to cut out “substantial bureaucracy”.
Currently, individual schools receive business rates bills from their local councils every year and it is their responsibility to pay them. They also receive money to pay the rates either by claiming it back from the government if they are academies or as part of their funding from their council if they are maintained.
But in a consultation published today, the government warned of a “complex flow of business rates funding, much of which is circular, involving
substantial bureaucracy and which serves no benefit to front line services”.
The Education and Skills Funding Agency is proposing that instead of giving schools money to pay their business rates, it will pay schools’ business rates “directly to billing authorities”.
If approved, the change to the system would come into force from the 2022-23 financial year, and should “simplify the process and remove unnecessary burdens on schools”, the government said.
Technically, the change will mean local authority maintained schools receiving less money in their funding allocations, because the cash they currently receive to pay business rates will be kept by the government.
The ESFA said the funding available to cover the cost of schools’ business rates “will remain unchanged”.
Liability for business rates would also remain unchanged. Local authority maintained schools and academies would “retain liability for business rates, but ESFA would act as a paying agent on their behalf”.
The ESFA plans to repurpose its online portal currently used to collect academies’ rates data to accept data from councils once a year for all the schools in their areas.
However, the government has said it will also stop accepting historic claims for previous years’ rates from academies next April.
Transitional arrangements “would include bringing academies’ ability to make historic claims to an end by the launch of the new business rates payment system,” the ESFA said.
Academies “would have until April 2022 to submit any historic claims from the 2014-15 financial year to the 2020-21 financial year”. After that, the ESFA “would no longer accept, process or reimburse academies for historic claims relating to unclaimed years”.
However, the ESFA “will continue to accept revised claims arising from historic adjustments”.
By law, councils are allowed to provide business rate relief to certain charitable and non-profit organisations.
The ESFA said its proposed change “would not preclude local authorities offering discretionary business rates relief”.
“Those local authorities which already offer relief for the schools within their local areas can continue to do so and any local authority may start offering discretionary relief, if they choose to do so.”
The proposals would also have “no bearing on the 80 per cent mandatory rates relief received by academies, which would remain unchanged”.