Non-domestic rates reform: analysis of responses to consultation on Barclay implementation

Analysis of responses to our consultation on accepted recommendations requiring legislation that came out of the Barclay Review of non-domestic rates. The consultation ran from 25 June until 17 September 2018.

15. Barclay Review Recommendation 25 – Restrict relief to properties in active occupation

15.1 Question 23 relates to Recommendation 25, "To focus relief on economically active properties, only properties in active occupation should be entitled". This recommendation will primarily impact on empty properties either previously occupied by charities which receive charity relief (not empty property relief), or empty properties that claim the more generous SBBS instead of empty property relief. Active occupation has yet to be defined but suggestions in the Barclay Implementation Consultation Paper included "floor space used, accessibility to the public and / or council, demonstration of accounts for a business in operation at the property". The consultation also suggested an alternative could be to use the GAAR as an alternative in cases where a property is not in active use, but claims a relief other than empty property relief.

Question 23 - How should active occupation be defined?

15.2 There were 54 responses to Question 24. The largest respondent category was Local Authorities. A breakdown of responses by respondent categories can be found in the table below.

15.3 The Barclay Implementation Consultation Paper (paragraph 61) identified "floor space used, accessibility to the public and/ or council, demonstration of accounts for a business in operation at the property" as possible criteria to form the definition of active occupation. These three criteria, as well as potential use of the GAAR, were supported by Local Authorities and Representative Bodies.

Table 23: Respondents Categorised

Respondent Category Number of Responses
Businesses 6
Chartered Surveyor (Private Sector) 4
Independent Education Sector 1
Individuals 3
Local Authority / Local Authority Association / Local Community 25
Other Public Sector and Third Sector 1
Private Sector Professional / Representative / Trade Body 13
Valuation Boards / Assessors / Related Representative Organisation 1
Total 54

15.4 The GAAR was supported, in part because of the perceived difficulty in arriving at a practical and effective definition of active occupation. For example, "subjects take the form of telecommunications cables, radio masts, rights over land or other entities where physical / human occupation never occur" (Dunbartonshire and Argyll & Bute Valuation Board). Furthermore, GL Hearn was concerned that defining 'active occupation' was not "a viable strategy for deciding whether business rates relief should be granted". Therefore, "due to the complexities of arriving at a practical and effective definition of active occupation", West Lothian Council, among others, suggested using the GAAR.

15.5 Additional criteria suggested included:

  • Physical evidence of a business being run from the property, however there was no consensus on the evidence preferred to determine a physical business.
  • North Lanarkshire Council suggested that "providing a service or being used in support of active use of another property" could be used to define active occupation.

15.6 The proposal to remove charity relief from properties which were no longer occupied by a charity was met with agreement by a number of respondents. GL Hearn Ltd stated "if a unit is no longer occupied by a qualifying charity then charitable relief should be removed". Furthermore, Argyll and Bute Council noted "that charitable relief should only be given to properties which are occupied by the charity. Currently there are situations where charities own properties and have limited incentives to ensure they are well utilised". Therefore, there was agreement from Local Authorities and Chartered Surveyors that the charity relief should only apply on buildings where charities were in occupation.

15.7 However, the Royal Blind School highlighted potential scenarios in which charity relief should still be applicable even when the charity is not actively using the building. These included "changes to school rolls, the physical needs of their service users, and moving services out of buildings which are no longer fit for purpose". In these instances, charity relief should still apply on the property. Therefore, the Royal Blind argue that "a definition of "active property" which did not give any consideration to such scenarios and processes could also have a detrimental impact on charities providing vital educational benefit to disabled children and young people".

15.8 Similarly, the Scottish Business Ratepayers Group stated that "not all properties that are vacant are economically active". Therefore, if the property is not capable of being let for reasons outwith the ratepayers' control then it is not fair to further penalise them with the removal of rates relief. This view was supported by a number of Businesses, Representative Bodies and Chartered Surveyors.

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