Scotland Marches Forward with Non-Domestic Rates Reform

The Non-Domestic Rates (Scotland) Bill introduced by Cabinet Secretary Derek Mackay last week aims for  policy objectives to support business growth and long-term investment that reflects changing marketplaces.

Whilst we “talk” south of the border and undertake continuing consultations, Scotland is getting on with much needed policy reform. These reforms include reforming rate reliefs and tackling known avoidance measures, matters that Councils in England and Wales are keen to address; so take note!

The Bill follows many of the recommendations set out in the “Barclay review”. But there are three Barclay Review recommendations, included in the Scottish Government Implementation Plan which do not form part of the draft Bill. The first is the recommendation to charge businesses based predominantly online or out-of-town, a business rates supplement. The Cabinet Secretary for Finance, Economy and Fair Work, confirmed in the Scottish Budget that the Scottish Government would not be taking forward this recommendation at this time. But the recommendation to increase the current 42 days reset period (to six months) for empty property relief will be progressed.

The Non-Domestic Rates (Scotland) Bill sets out the legislative framework to enable a number of the Barclay Review recommendations to be implemented including the following.

Three Yearly Revaluations

The Scottish Government plans to implement the move to a three yearly revaluation cycle after the 2022 revaluation. The valuation date will be brought forward from two years to one year before the revaluation. The 2025 revaluation will therefore take effect from 1 April 2025 with a valuation “tone date” of 1 April 2024. It is hoped that this will help ensure that the rating system in Scotland is more responsive to changing economic circumstances.

Business Growth Accelerator

A relief of 100% for 12 months will be available on rateable value increases due to property improvements. New property will be entered on the roll when it comes into existence but 100% relief will be available on those properties for 12 months after they are first occupied. A statutory instrument called “The Non-Domestic Rates (New and Improved Properties) (Scotland) Regulations 2019” has been laid before the Scottish Parliament and will be effective from 1 April 2019.

Non-Domestic Rates Avoidance

Vacant property; the Bill provides that a local authority can serve a notice on a ratepayer who is in receipt of a relief other than unoccupied property relief in two circumstances (a) where a local authority considers that the property is not being used, thus suggesting that unoccupied property relief ought to apply instead of whatever relief is being received; and (b)where the local authority is of the opinion that the property is significantly underused, thus suggesting the amount of relief being received is greater than would be received if unoccupied property relief applied. It is likely that great care will be required when ratepayers complete such statements.

Local Authority information; the Bill provides that a local authority can issue an information notice to a person seeking, for example, information to ensure the non-domestic rates liability has been correctly calculated. If the person fails to comply with the notice within the period specified a fine will be due.

Tax avoidance; the Bill empowers the Scottish Ministers to make regulations, which include such provision as they consider appropriate to counteract the tax advantages that, should these regulations not be in place, would arise from tax avoidance arrangements that are artificial.

Reform of the Appeal System

1.       A requirement that a ratepayer lodges a proposal with supporting information to the assessor before an appeal can be made; and

2.       A period must elapse before that appeal can be made, to allow the assessor to consider and respond to the proposal; and

3.       A regulation enabling a fee to be paid for taking an appeal forward; and

4.       A provision for a Valuation Appeal Committee to be able to increase the rateable value where evidence has emerged to support this.

You can find more details and follow the Bill’s progress here: