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We commented recently in these news pages on the publication of the report of the Barclay review of business rates in Scotland. The review group, chaired by Ken Barclay, published its report in August, setting out 30 recommendations for changes to the business rates system in Scotland. Scottish Government has now set out its response to the report in a statement made to the Scottish Parliament by Derek Mackay, The Cabinet Secretary for Finance and the Constitution.
The Cabinet Secretary confirmed implementation of four of the report’s recommendations. Rating revaluations in Scotland will take place every three years from 2022 onwards, with those revaluations being based on a date one year prior to the revaluation coming into force. This is a change from the present arrangement of five-yearly revaluations, each based on a date two years before the revaluation. The hope is that this change will ensure that rateable values are kept more accurate and up to date.
From 1 April 2018 day nurseries in Scotland will benefit from 100% relief from business rates. This is designed to reduce he cost of childcare for working parents. Also from 1 April 2018, the “fresh start” relief, available for vacant properties that come back into use, will be expanded. The relief will increase from 50% to 100% for the first year, and will be available for properties that have been vacant for six months or more, rather than those that have been vacant for a year or more, as at present. The Cabinet Secretary also announced that this relief will be available for all types of property, including industrial properties. The aim of this change will be to encourage use of properties that are vacant. Finally, the Cabinet Secretary confirmed a review of the rating of plant and machinery, focussing particularly on the renewables sector and on plant and machinery required for regulatory compliance.
The Cabinet Secretary then announced his intention to implement the “vast majority” of the report’s other recommendations, subject to “any legal or regulatory considerations, the budget process and, of course, the will of Parliament”. The implementation of these other recommendations will be subject to consultation, in advance of any final decision, to be made before the end of this year. The most significant of these other changes is the proposal to exempt new build properties, and improvements to existing properties, from business rates for one year from the date of completion; the so-called “business accelerator”. The Cabinet Secretary has announced that he intends to go further than the Barclay report recommendations in this respect and to exempt all new-build properties from rates until they are occupied for the first time, with the one-year “business accelerator” exemption then applying for the first year of occupation. This is a significant reform of the empty rate regime in Scotland and may put pressure on the government in England to consider amendments to empty rates in England. The proposal is to introduce these changes from 1 April 2018 in Scotland.
Scottish Government intends to reduce the business rates supplement paid by large properties from 2.6 pence to 1.3 pence, to align with the supplement in England, but this will only happen “should it become affordable” and is expressed only as an aspiration for future years’ budgets, not as a commitment. We do not anticipate this “becoming affordable” soon. There will be changes to the provision of information to ratepayers, and a standardised billing process. Assessors will be required to improve the way in which they operate and are to produce an action plan for this by the end of this month.
As well as these changes, that will be welcome to many ratepayers, there will be other changes that may impose new burdens on them. Civil penalties will be introduced for ratepayers who fail to supply information or supply inaccurate information. Tribunals will be empowered to increase assessments on appeal, as well as to reduce them. Perhaps most significantly for ratepayers, a “general anti-avoidance rule”, of the type that exists in other tax regimes, will be introduced for business rates in Scotland.
Two of the report’s recommendations have been specifically rejected. Farms will not be placed on the Valuation Roll; they will continue to be exempt from rates, and large scale food processing plants on agricultural land will not become subject to business rates as the report had recommended.
The measures announced by the Cabinet Secretary largely relate to rate reliefs, but the Barclay review itself had a remit to be “revenue neutral”. It will be interesting to see if other proposals, to follow later, go some way to claw back the costs of what has been announced so far. In any event, the Barclay review group and Scottish Government are to be congratulated on at least attempting to grapple with proper reform of the business rates system – something that has been promised in England since 2013 but that we have yet to see sign of.
