The Department for Education is consulting on a streamlined process for schools’ business rates. The DfE looks at how the new system should help make savings and calls for feedback from councils.
Room151: What is the DfE aiming to do?
Department for Education: The Department for Education (DfE) is proposing to reform the way in which business rates are paid for state funded schools attended by pupils aged 5+. We are proposing to move to a simpler system where the Education and Skills Funding Agency (ESFA) will pay schools’ business rates directly to billing authorities, removing the need for schools to make these payments to billing authorities themselves.
In order to ensure accuracy of payments, we are suggesting that billing authorities will provide one bulk upload of business rates bill data to an ESFA online portal every year, which would cover local authority maintained schools and academies within their area.
The costs of schools’ business rates are currently covered by DfE, and the available funding would stay the same, but in future paid directly by DfE. Subject to consultation, we will be looking to implement these changes from April 2022 onwards.
Room151: What’s driving this effort?
DfE: The changes we have proposed aim to simplify the existing process and remove unnecessary burdens on schools and local authorities. Restructuring the payment process of schools’ business rates will reduce the circular flow of business rates funding and result in a less resource intensive system.
The proposals will also streamline the current process by bringing the payment approaches for local authority maintained schools and academies into closer alignment.
Room151: What is the current process for schools paying their business rates?
DfE: Currently, local authority maintained schools and academies have different processes in place for paying their business rates. These processes can also differ depending on which local authority a school is based in.
Broadly speaking however, most local authority maintained schools receive funding for their business rates within their budget from their local authority. This funding comes from the ESFA and is included within the dedicated schools grant (DSG) received by local authorities, based on actual spend in the previous year.
Once local authorities have distributed this funding to the local authority maintained schools in their area, those schools pay the cost of their rates bills directly to the billing authority.
Academies also pay their business rates directly to billing authorities. After they have paid, academies then submit a claim to the ESFA via the national non-domestic rates (NNDR) rates return portal which allows them to recoup the cost of their rates, which the ESFA refunds within 2 months.
Room151: How will schools and local authorities benefit?
DfE: The main savings here arise from reduced circular information and cash flows between ESFA, local authorities, billing authorities and schools.
As local authorities would receive funding in one upfront payment from the ESFA in June, they would no longer have to chase schools for payment or take recovery action in situations of late payment.
There is also a potential for reduced burdens for local authorities in areas with two-tier councils, which would no longer need to facilitate payments across tiers.
For schools, the burden of making rates payments to billing authorities will be removed. The new process also removes the risk that academies find themselves out of pocket if they fail to claim back the cost of their rates from ESFA.
Room151: What do councils need to do now?
DfE: DfE has launched a public consultation outlining the proposal to centralise the payment of business rates for state-funded 5-16 schools.
DfE is seeking views on the payment of schools’ business rates directly to billing authorities on behalf of schools and a single reconciliation payment to billing authorities to allow for adjustments before the end of the financial year. We welcome views from local authorities, billing authorities and any other stakeholders.
The consultation closes on 5th May 2021 and can be accessed via the link: Changes to the payment process of schools’ business rates – GOV.UK (www.gov.uk). Please do pass this link on to interested parties.
All comments come from a Department for Education Representative.
Image: DfE.
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