We are testing a new beta website for gov.scot go to new site

Tax Incremental Financing

Tax Incremental Financing

Tax Incremental Financing (TIF) is a means of funding public sector investment infrastructure judged to be necessary to unlock regeneration in an area, and which may otherwise be unaffordable to local authorities. The overarching goal of TIF is to support and guide the increasingly limited public finances available for assisting regeneration and helping to lever in additional private sector capital.

How it works

TIF uses future additional revenue gains from taxes to finance the borrowing required to fund public infrastructure improvements that will in turn create those gains. When a public project such as a new road system is constructed within a specific area, increases in the value of the land as well as new property and business investment can occur. Resultant increased site value and investment generates increased tax revenues. These increased tax revenues (whether domestic or business property) are the 'tax increment'. In Scotland, extra public revenues would come from Non Domestic Rates (NDR) raised.

Scottish Government position on TIF

Ministers have stated that they are supportive of a maximum of six pilot projects to test applicability of TIF to Scottish circumstances. TIF should be used in parallel with existing public and private sector funding streams.

Any proposal for a TIF project must demonstrate to Scottish Ministers that:

  • the enabling infrastructure will unlock regeneration and sustainable economic growth;
  • it will generate additional (or incremental) public sector revenues (net of a displacement effect); and
  • it is capable of repaying, over an agreed timescale, the financing requirements of the enabling infrastructure from the incremental revenues.
TIF progress in Scotland - TIF pilot scheme

Local authorities are encouraged to propose their own TIF schemes, but these will need to be supported through the development of a Business Case which should detail the justification for utilising TIF to deliver investment within the proposed area, the basis for the selection of the chosen enabling infrastructure and why it is believed this infrastructure will deliver the growth and additionality envisaged. Decisions on which projects can progress to pilot status will be made once business cases have been assessed to ensure that these deliver value for money. If a proposal does not clearly meet these conditions then it will not receive approval to form part of the TIF Pilot Scheme.

Guidance on the pilot scheme and how it will operate is available via the following link

The Tax Incremental Financing Administration Pilot Scheme

The Scottish Government has brought forward secondary legislation, The Non-Domestic Rating Contributions (Scotland) Amendment Regulations 2010 under existing provisions in the Local Government Finance Act 1992 to enable the TIF pilot schemes to take place. These regulations can be found via the following link:

The Non-Domestic Rating Contributions (Scotland) Amendment Regulations 2010

Executive Note - The Non-Domestic Rating Contributions (Scotland) Amendment Regulations 2010 - SSI 2010/391

Scottish Futures Trust's role

The Scottish Government tasked the Scottish Futures Trust (SFT) with developing appropriate criteria for the potential application of TIF in Scotland and to work with local authorities in developing their proposals. SFT will need to be convinced, on behalf of Ministers, that the economic case for a particular TIF is clear. Further information on the role of SFT can be found at the following link:


NOTE: The Scottish Government is not responsible for the content of or views expressed in external internet sites.