Source · Select Committees · Education Committee
Recommendation 8
8
Accepted
Paragraph: 48
Exempt early years providers from business rates and VAT; DfE must not reduce funding
Recommendation
The Government will soon be funding up to 80% of all childcare places in England, up from 50% before the Spring Budget. In recognition of this, and the public benefit that the whole early years sector is providing, the HM Treasury should grant all early years providers an exemption from business rates. Private, Voluntary and Independent (PVI) settings should also be zero-rated for VAT. We heard that VAT costs and business rates facing ECEC settings are taken into account in the DfE’s process of setting funding rates. Following these proposed changes, DfE should not account for any cost savings gained from VAT and business rate exemptions in their calculation of the funding allocations for local authorities. This would allow savings to be channelled back into the settings in recognition for the need for a more qualified (and therefore expensive) workforce. The benefits to retention and development of staff, affordability for parents and expansion of places for children will substantially outweigh the costs of these changes.
Government Response Summary
The government does not accept the recommendation for new business rate exemptions or VAT zero-rating. Instead, it highlights existing measures like the business rates multiplier freeze, small business rate relief, and charitable rate relief that already provide support to early years providers.
Paragraph Reference:
48
Government Response
Accepted
HM Government
Accepted
34. At Autumn Statement 2022 the Government announced a freeze to the business rates multiplier in 2023–24, a tax cut worth £9.3 billion over the next 5 years, which supports all ratepayers, including early years businesses, and means bills are 6% lower than without the freeze. The package also includes targeted reliefs which mean no small business will have seen their bill increase by more than 5% or £600 at the revaluation 35. Many small businesses like nurseries might pay no, or reduced, business rates bills. The small business rate relief (SBRR) scheme provides up to 100% relief for eligible businesses occupying one property with a rateable value of £12,000 or below, and reduced bills up to £15,000. Further, if a nursery is a charity, Charitable Rate Relief provides 80% off rates bills, which can be topped up to 100% by the local authority. 36. If a setting is not getting small business rate relief and may be eligible for it, they can contact their local authority here: https://www.gov.uk/contact-your-local-council-about- business-rates. Additionally, businesses may qualify for the small business rate relief scheme if their property’s bill went up because of the most recent revaluation on 1 April 2023. Furthe