Responding to a petition calling for business rates to be changed for childcare providers and make them zero VAT rated, which received more than 10,000 signatures, the Treasury acknowledges that business rates can represent a ‘high-fixed cost’ for small businesses, such as ‘nursery schools’, and says it has delivered a package of rate relief worth £10bn by 2023.
- Petition to axe business rates hits 10,000 signatures
- Welsh nurseries win exemption from business rates
- Budget: Small nurseries taken out of business rates
Once a petition on the GOV.UK website receives 10,000 signatures, the Government must provide a response.
The National Day Nurseries Association, which has been campaigning for a change in business rates, expressed its disappointment and hit out at officials for not understanding the sector as maintained nursery schools, which the Treasury mentioned, are not affected by the ‘tax’.
In its response to the petition, the Treasury states, ‘Regarding business rates, the Government appreciates that these can represent a high fixed cost for small businesses, such as nursery schools. To reduce the burden of rates, the Government has introduced reforms and reductions worth over £10 billion by 2023. This includes – switching the annual indexation of business rates from RPI to CPI from 2018, increasing the frequency of property revaluations, making 100 per cent small business rate relief permanent and increasing the threshold of the relief and for the higher rate.’
Last month (27 September) nurseries in Wales were granted exemption from business rates from April 2019 as part of plans to help the childcare sector to expand.
While local authorities in England have the flexibiity to offer discounts on business rates, Nursery World understands that Harrogate Borough Council is the only local authority to have implemented this for childcare providers.
On the petition's call to make childcare providers zero VAT rated, the Treasury says it is currently unable to change the VAT treatment of providers under EU law.
It states, ‘Under UK VAT rules, the Government allows nurseries regulated by Ofsted to exempt their fees from VAT. This ensures that VAT is not charged on nursery fees paid by individuals and families, but nurseries cannot recover VAT incurred while providing nursery services.
‘These rules cannot be amended under current EU law. Although there may be opportunities to make changes to the UK VAT system in the future, at present, the UK remains a member of the EU with all of the rights and obligations that EU membership entails. That includes the application of EU VAT rules.’
Comments
Commenting on the Government’s response, Purnima Tanuku, chief executive of the NDNA, said, ‘Naturally this is a really disappointing response from the Government who are failing to recognise the pressures their own policies are placing on nurseries across England. They have a chance in the Budget to provide some much needed respite for childcare providers who are facing rising costs and inadequate funding.
‘The fact that they referred to nursery schools which are mainly council run so are not covered by this tax shows that officials simply don’t understand the sector.
‘This response is not where the story ends. NDNA and our members have worked hard to make the case for Business Rate relief for nurseries in Scotland and now Wales where the respective governments have recognised the importance of the sector in delivering high quality, accessible childcare. We will continue pushing for this unfair and outdated tax to be removed from nurseries in England.’
Beatrice Merrick, chief executive of Early Education, said, 'It’s frustrating that the Government not only isn’t listening to the arguments about business rates and early years settings, but is also confusingly referring to ‘nursery schools’ in this context, when this was a petition mainly from PVIs. However, maintained nursery schools do have to pay business rates, and although other schools get these reimbursed, there is no consistency of practice for maintained nursery schools. In the most extreme case, we know of a maintained nursery school which is charged £90,000 a year in business rates despite the fact that maintained nursery schools are not profit making businesses, but community institutions.
'Government needs to review the position for the whole sector and consider whether it makes sense for early years funding to be getting paid out in business rates by some, and not by others.'
Victoria Whitty of Hocus Pocus Day Nursery, who started the petition, said, 'I started this petition to help nurseries like mine deal with some of the growing costs of delivering childcare, especially with the way the 30-hour policy is being funded. It feels like the Government is making it harder to run a nursery.
'It’s really disappointing that with all the people who have signed this petition the response seems to say there isn’t a problem, when we know that there is. If nurseries in Scotland and Wales can get support, why can’t they do this in England too?'
