Removal of charitable rate relief will cost independent schools £140 million

22 October 2024

One of the first announcements made by the new Government is the removal of Charitable Rate Relief, that many Independent Schools currently receive. 

This change, which was recently debated in Parliament, will impact Independent Schools in England, with many facing a substantial increase in their business rate liability next year. The Institute for Fiscal Studies estimated in a research report that the change in eligibility for the relief would raise an additional £140 million in tax.

Currently most Independent Schools receive at least 80% charitable relief but from 1 April 2025 their entitlement to this relief will be removed, and these schools are set to face a five-fold increase in rate liability.

There are over 2,600 Independent Schools with an average rateable value of £200,000 and the average independent school currently receiving 80% relief will see their business rate liability increase by £80,0000 per annum from 2025/2026. Many schools however, have much larger assessments, and some of schools are facing potential increases in rate liability of over £500,000 per annum from next year.

2026 Rating Revaluation
We are also predicting that the Valuation Office Agency (VOA), will significantly increase the rateable values of Independent Schools following the next rating revaluation which will be effective from 1 April 2026.

Most Independent Schools are assessed for business rates by reference to the cost of construction, adjusted for age and obsolescence, rather than rental evidence. The BCIS General Building Cost Index suggests that build costs have increased by over 18% since the last revaluation and it is likely that all properties valued by reference to the contractor’s basis of valuation, including Independent Schools, will see large increases in rateable value and rate liability, because of the 2026 rating revaluation.

Duty to notify
The Non-Domestic Rating Act 2023 introduced new responsibilities and duties which will fundamentally change the way ratepayers need to manage and update the Valuation Office Agency regarding factual information about their portfolio.

Although the new duty takes immediate effect, there is not yet a mechanism that enable ratepayers to comply, but the Valuation Office have indicated that the on-line platform for the submission of data is likely to go live for the 2026 revaluation.

When it does go live, ratepayers will need to notify the Valuation Office of any change, within 60 days and in addition provide an annual confirmation of the current information held by the VOA each year.

There will be financial penalties for failure to comply within the time limit and if false data is provided the Valuation Office Agency could backdate any resultant increase in rateable value. In addition, ratepayers will not be able to Challenge their rateable values or request any valuation information from the VOA, if they have not complied with the requirements of the duty to notify.

We are aware that Independent Schools may have undertaken changes to their properties e.g. extensions, that not always reflected in the current rating assessment and the new duty will require full disclosure, which could lead to additional increase in rate liability for some schools.

How can we help?
Avison Young is one of the largest rating consultants in the UK with experience, dedicated rating professionals in each of our regional locations. We have a proven record in advising the Education Sector and currently advise many independent schools.

We can assist schools, by undertaking an audit of their business rate assessments and provide a comprehensive health check which would include the following:

  • A detailed review of the current rateable value(s) to determine if the survey details held by the Valuation Office Agency are accurate.
  • Advice on challenging the assessment.
  • Budgetary advice, including advice on making accruals for any VOA omissions.
  • On-going provision of budgetary advice.
  • Advice on the application of reliefs and exemptions.
  • Advice on the new Improvement Relief.
  • Updates on changes in legislation and VOA procedures which could impact your future liability.

In addition, after reviewing assessments and in advance of the 2026 Rating List we can make early representation to the Valuation Office Agency to influence the level of the new rateable value prior to the new Rating List coming into force.

For further information, please contact:


Andreas Fatta
[email protected]

 


Andrew Wellens
[email protected]