Unlike England & Wales at the 2017 Revaluation, the Scottish rates system witnessed little change: there was no Check Challenge Appeal introduced and it was pretty much business as usual. That, however, is due to change at the 2023 Revaluation.
Many ratepayers continue to be unaware of the fundamental changes being introduced, but why now?
Why are changes taking place?
Following an in-depth review of the Scottish rates system by the Barclay Review, several key and fundamental recommendations were made to the Scottish Government in 2017, most of which they agreed to implement. One of the main issues raised by Barclay was the frequency of revaluations and the failure of the current system to keep values in line with market conditions. The recommendation was to introduce three-yearly revaluations from 1st April 2023, which the Scottish Government has agreed to. The valuation date, which was previously two years before a Revaluation came into force, will now be based on rental and cost levels one year prior to the start of a revaluation (April 2022). Again, this reinforces the link between the market and the valuation rolls. The Scottish Government will publish the new legislation to implement these changes later this year.
A similar conclusion was reached and adopted by the Valuation Agency Office in England & Wales, where three-yearly revaluations will commence from 1st April 2023. One key difference, however, is that the valuation date, commonly referred to as the antecedent valuation date or AVD, will remain established two years prior to the implementation of the new rating lists.
When will new rating assessments be issued?
The Scottish assessors will publish their draft assessments on 30th November 2022, with proposed Rateable Values being issued at the end of March 2023. Once the Scottish Government announce the new Rate Poundage in the Scottish Budget on 15th December 2022, ratepayers will be able to calculate their new rates bills for the forthcoming three years from 1st April 2023.
Will ratepayers be able to challenge their new assessment?
Yes, but the format differs from what has been applied over recent revaluations. At previous revaluations, appeals could be lodged by 30th September in the year of Revaluation and was a relatively simple exercise of submitting a short note to the assessor. Appeals were then categorised, listed for hearing and had to be disposed of within three years. Detailed discussions with the assessor only took place once the appeal was recorded, and if no agreement was reached, the presentation of the case before the local Valuation Appeal Committee was required.
The new appeal system appears to be much more demanding on the ratepayer:
- It will be a 2-tier sequential approach
- 1st stage (called a proposal) - can only be lodged after the Revaluation comes into force and must be submitted to the assessor by summer 2023 (the final date yet to be confirmed by the Scottish Government but likely to be within four months of the Revaluation coming into force, i.e., 31st July 2023). The proposal must include the following:
- Full comprehensive grounds of appeal outlining why you believe the assessor's proposed Rateable Value is incorrect
- All evidence and statements detailing how the evidence supports the grounds of appeal and your proposed Rateable Value
- An indication of how the entry should be altered, including an alternative value and the effective date of the alteration
- A Letter of authority from the ratepayer for each proposal to be lodged if employing an agent
- The draft Regulations suggest no further evidence will be allowed after the initial evidence is submitted.
- Upon receipt of a proposal, the assessor has the option to amend value in agreement with the proposal or in line with any subsequent agreement reached or state no amendment is merited.
- 2nd stage (appeal) – if no agreement is reached at the proposal stage, an appeal can be lodged against the assessor's decision, at which time the proposal then converts to an appeal. Although this has yet to be confirmed through legislation, it is planned that no further discussions or evidence will be allowed by either party prior to the appeal being heard before the new Scottish Tribunal system is being set up and brought into force from 1st April 2023.
It is no surprise that by introducing three yearly revaluations, a change to the existing system was necessary both legislatively and to limit the number of appeals potentially being submitted. But has the new system gone too far? On the one hand, the Scottish Government have inaugurated a rates system like England & Wales by introducing a tiered sequential approach, but in doing so, they have continued to adopt strict timescales in the process.
For ratepayers and agents, the timeframe of receiving the finalised assessment during late March 2023 and then having to submit all evidence for each property's proposal within 3-4 months will be challenging
That said, draft assessments will be made available in late 2022, allowing ratepayers and their agents to compare and investigate matters in advance. But any benefit will depend on the information provided by the assessor. Although legislation has been laid instructing assessors to provide evidence in support of their draft valuation, the level of detail to be delivered is not yet known. Furthermore, the legal requirement relates to "certain categories" of property, likely to be restricted to assessments based on the comparative method of valuation, such as retail, office and some industrial properties. Valuation details for properties based on turnover or a cost basis are unlikely to be available until final notices are issued in March 2023.
What is clear is that the new Scottish rates system will require a high degree of upfront investigative work to be conducted for each property well before the summer 2023 proposal deadline.
It will undoubtedly alter the current working practices for both the Scottish assessors and private practice agents to ensure due diligence is comprehensively carried out. Equally, it will set the tone for the future structure of the rating system for many years to come.