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2005 Transitional Scheme

Further information concerning the transitional arrangements may be found on the Government website www.mybusinessrates.gov.uk Opens in a new window

The 2005 revaluation is accompanied by a new transitional scheme to soften the impact of dramatic increases in rate bills by phasing in the changes over a period of time. The scheme is funded by also placing limitations on reductions in rate liability.

The scheme will limit the amount that individual rate bills may increase or decrease year on year (after allowing for inflation) and will operate over a period of four years. To determine whether the transitional arrangements should apply to a particular property, a comparison is made between the rate bill from 2004/2005 (known as the base bill) and the new rate bill in 2005/2006. If the new rate bill is higher or lower than the base bill by more than the prescribed percentage then the increase or decrease is limited. The limited amount is calculated by applying the prescribed percentage to the base bill and then applying an inflation factor. The limited amount then becomes the base bill for determining whether the transitional arrangements will continue to apply the following year.

The inflation factor is calculated as a ratio of the Retail Prices Indices (RPI) for September for the two years preceding the year for which the bill is being determined. The inflation factor for 2005/2006 is shown below:

2005/2006 Inflation Factor
RPI for September 2004 = 188.1 divided by RPI for September 2005 = 182.5 
Equals 1.031 (rounded)

For subsequent years, the inflation factor is found by applying the formula:

Small Business Rating Multiplier for financial year concerned divided by Small Business Rating Multiplier for the financial year which precedes the year concerned

Therefore, the inflation factor for 2006/2007 is calculated in the following manner:

2006/2007 Inflation Factor
Small Business Rating Multiplier for 2006/2007 divided by Small Business Rating Multiplier for 2005/2006 = 42.6 divided by 41.5 Equals 1.026

The prescribed percentage limits on increases and decreases are shown below. For the purposes of the 2005-2010 transitional arrangements, small properties are defined as properties with a Rateable Value of less than £15,000 (less than £21,500 in London).

Prescribed Percentage Increase Limits

Prescribed Percentage Decrease Limits