Business rates in Scotland is about to change. This follows the 30 recommendations set out by the Scottish Government initiated Barclay Review in 2017. Although some changes have already been implemented (e.g. more frequent revaluations and rates relief for new and extended properties) many of the harder hitting recommendations are being addressed largely through the Non-Domestic Rates (Scotland) Bill which will come into force on 1 April 2020.
So what does this mean for the Scottish ratepayer? The following will hopefully explain matters:-
3 Yearly Revaluations
One of the main criticisms of the existing system is the disconnect of rating assessments (which are based on rental and cost values that applied 2 years prior to the revaluation introduction date) where values are too remote from current market conditions. This was made all the more obvious during the economic downturn over 10 years ago when the 2010 revaluation was unable to reflect a drop in values which were then fixed until the next revaluation taking place in 2017.
To combat this, 3 yearly revaluations will now take place beginning 2022 based on a valuation date 1 April 2020. Thereafter, a valuation date 1 year prior to the revaluation date will apply.
With a shorter time frame to allow assessors in Scotland to prepare, value and handle appeal procedures for 3 yearly revaluations, a new appeal format will apply.
Previously, notices advising ratepayers of their new assessments were issued a few weeks prior the revaluation date whereupon an appeal had to be lodged by 30 September of the revaluation year. The assessor then had just over 3 years to dispose of all revaluation appeals.
For 2020, notices will be issued as normal but any challenge against the new assessment now requires a “proposal” being submitted to the assessor highlighting any issues against the assessment being applied. The assessor then has to determine whether the proposal is fair and can change the value accordingly if merited. If the appellant continues to disagree, an appeal can then be lodged. Timing is key: proposals must be submitted before 30 June of the revaluation year which is likely to be a challenge when considering larger portfolios.
Request for Information Forms and Penalties
This is perhaps the most important change being introduced and ratepayers will require to be fully aware of the implications if information is requested by the assessor. Generally this will involve disclosure of any rental agreements and/or costs incurred for construction where necessary. What is important is that the new Bill allows the assessor to impose severe penalties should non-provision of any such request apply.
Once a request is made, the ratepayer has to provide the information sought within 28 days. Failure in doing so will incur civil penalties, which are extreme:
- Not actioned within 28 days - £200 or 1% of the Rateable Value of the property, whichever is the higher.
- Not actioned within 70 days - £1,000 or 20% of RV, whichever is the higher.
- Not actioned within 84 days - £1,000 or 50% of RV, whichever is the higher.
These penalties are cumulative.
It is, therefore, imperative that ratepayers act or seek advice as soon as any request of information is received otherwise a sizeable penalty is likely to apply.
Stronger Anti-Avoidance Powers to Councils
Introduced to prevent and limit rates avoidance schemes that currently exist which includes the period of occupation required between 2 claims for empty property relief being increased from 6 weeks to 6 months.
3 yearly reviews are welcome and will allow the rates system to be more in tune with market conditions but the appeal process will become more restrictive with the time limit of appealing revaluation assessments being reduced. It is anticipated draft valuations will be available 3 months prior to the introduction of the 2022 revaluation which will allow ratepayers and their agents to consider the proposed assessments and consider any action necessary.
The new civil penalties for non-provision of information requested is severe. It is anticipated that additional information will allow the assessor to be more accurate in arriving at their assessments but there is concern about the level of detail that may be sought.
Additional measures that will also apply include:
- The rates multiplier for 2020/21 will be include an intermediate rate for properties having an assessment between RV £51,000 and £95,000.
|Rating Year||RV up to £51k||RV from £51k-£95k||RV over £95k|
- From 1 September 2020, independent schools will no longer be eligible for charitable rates relief.
- From 1 April 2021, councils will have the ability to decide who receives discretionary sports relief.
- From 1 April 2022, empty property relief will be at discretion of councils.
It is clear the landscape of Scottish Business rates is soon to witness much change and it is imperative ratepayers are fully aware of these new reforms and their significance.
Anyone seeking additional information or advice should contact either Steven Dalton or Ken McCormack.