November 2020 – Re-vamping of Business Rates

Author: Mitchells Roberton
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  • This month owners and tenants of non-domestic properties should have received a letter from the Scottish Government about changes to the system for non-domestic rates – otherwise known as business rates.
  • This follows on from the passing of the Non-Domestic Rates (Scotland) Act 2020 which was passed by the Scottish Parliament on 5th February 2020.
  • In outline the Act:
    • amends the law about the administration and enforcement of non-domestic rates;
    • makes provision about information-gathering powers for assessors and local authorities; and
    • provides for Scottish Ministers making regulations to tackle avoidance of non-domestic rates.

This note outlines the key changes and makes particular comments about two of the other changes.

  1. Administration
  • Non-domestic rates are assessed by (unimaginatively) “assessors”: see https://www.saa.gov.uk/
  • They are calculated using the rateable value of a property included in the valuation roll. For most properties the rateable value is generally based upon its estimated open market value on the “tone date” (i.e. revaluation date) were it to be vacant and available to let.
  • The rateable value requires to be reviewed and revalued from time to time to reflect changes in the property market.
  • Under the Act there will be a revaluation every three years – rather than every five years.
  • The next year of revaluation is to be the year 2022-23; and so the next will be three years later i.e. 2025-26; and so on.
  1. Enforcement
  • Assessors may give written notices to an owner, tenant or occupier or any other relevant person to provide information which the assessor may need for the purpose of valuing a property.
  • A person who receives such a notice has 28 days to comply.
  • There are civil penalties for failing to comply with a notice and someone who knowingly provides false or misleading information in reply to an assessor information notice commits an offence.
  • “Legal professional privilege” does apply however where, for example, a person to whom such a notice is sent is a lawyer.
  1. Avoidance of non-domestic rates
  • Many tax regimes include their own specific anti-avoidance provisions. It seems that business rates too are to get their own in that the Act provides that Scottish Ministers may make regulations designed to prevent or minimise “advantages” arising from non-domestic rates avoidance arrangements that are artificial.
  • The Act gives a cascade of definitions about what counts as “advantages” etc but no Regulations have been made – so far.
  • The Act says expressly that Scottish Ministers may not make anti-avoidance regulations “unless they consider that it is appropriate to do so”. One would however have thought that saying so was superfluous: After all, Ministers could not properly make regulations under any of their powers if they considered it inappropriate to do so.

Particular comments

“Material change of circumstances”

  • Before the Act an owner, tenant or occupier of property could appeal against the entry in the valuation roll if there were a “material change of circumstances”.
  • A “material change of circumstances’ for these purposes was, broadly speaking, a change of circumstances affecting the value of the property including general economic factors (e.g. a general increase or decrease in rents). So, such factors could have formed the basis of an appeal against an entry in the valuation roll.
  • The Act however amends the definition of “material change of circumstances” to exclude changes in general economic circumstances: specifically, changes in the rent of particular property, or in the level of valuations generally or in the value of property generally.
  • So, from now on, “material change of circumstances” will generally be limited to any alteration to the property concerned and any relevant decision of a court or tribunal altering the rateable value of any comparable properties.

Independent schools

  • Before the Act independent schools that were charities got 80% relief from non-domesti rates by virtue of being charities. And there was scope for an additional 20% relief if the relevant local authority so chose.
  • But the Act is to abolish that relief for “mainstream”  independent schools. As to which, at the Stage 1 Debate on the Bill,  the Minister said: “It is fair to say that not all the provisions in the bill have been universally welcomed; I refer specifically to the removal of charitable rate relief from mainstream independent schools.”

Note: This material is for information purposes only and does not constitute any form of advice or recommendation by us. You should not rely upon it in making any decisions or taking or refraining from taking any action. If you would like us to advise you on any of the matters covered in this material, please contact Joyce Moss: email jmm@mitchells-roberton.co.uk

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