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.

4. Barclay Review Recommendation 1 – Business Growth Accelerator

4.1. Question One relates to Barclay's first recommendation, "A Business Growth Accelerator (BGA) – to boost business growth, a 12-month delay should be introduced before rates are increased when an existing property is expanded or improved and also before rates apply to a new build property." Secondary legislation to implement the Growth Accelerator was brought into effect from 1 April 2018. The Scottish Government went further in its Implementation Plan and introduced full rates relief until a new build property is occupied, delivering no rates liability until 12 months after a new build is first occupied.

Question 1 – What are your views on how the growth accelerator and new unoccupied build should be treated in legislation?

4.2. There were 94 responses to Question 1, the largest respondent categories were Representative Bodies and Local Authorities. No respondents from the Other Sector category answered this question. The breakdown by each of the seven classifications of respondent is detailed in the Table 1.

Table 1: Respondents Categorised

Respondent Category Number of Responses
Businesses 10
Chartered Surveyors (Private Sector) 5
Independent Education Sector 8
Individual 6
Local Authority / Local Authority Association / Local Community 27
Other Public Sector and Third Sector 0
Professional / Representative / Trade Body 33
Valuation Boards / Assessors / Related Representative Organisation 5
Total 94

4.3 A substantial proportion of respondents supported the provision of this policy in primary legislation, on the basis that primary legislation would better encourage investment by offering certainty over the long-term existence of the relief and may allow for the relief to be automatic rather than application-based. Comments reflected a view that primary legislation would streamline the process and "reduce administrative burdens on Councils and those seeking relief" (Law Society of Scotland). Primary legislation is seen as preferable by Local Authorities, as they view this as a way to ensure consistent policy across Scotland and simplify the non-domestic rates system. Businesses and Representative Bodies also support the move to primary legislation as they too believe it would ensure a consistent policy across Scotland, as well as, providing clear guidance to Assessors and resulting in certainty with regard to taxation. Whilst Assessors agree with the above point, they raised issues over clarity within legislation; clear guidance and taxation certainty would only be achieved if legislation is "clear and unambiguous" (Ayrshire Valuation Joint Board).

4.4 The general consensus among Businesses, Representative Bodies, Local Authorities and Chartered Surveyors was that the Business Growth Accelerator (BGA) would be beneficial, it was perceived that the BGA would continue to support investment in Scotland and benefit the economy. The Scotch Whisky Association commented that it had already seen member businesses benefit from the Accelerator. Furthermore, COSLA noted that Councils had "given some indication that these measures [BGA and new unoccupied build] are already having a positive impact". There was no suggestion, however, that this was conditional on the Accelerator being embedded within primary legislation.

4.5 A small number of concerns were raised by Representative Bodies and Businesses as to whether or not the proposed 12-month delay in non-domestic rates would be available for a substantial period of time. Scottish Engineering voiced concerns over future investment planning, stating: "Business investment planning can be a lengthy process and it is best encouraged through consistent and stable business tax policy. The Scottish Government should therefore provide certainty through legislation by committing to making the growth accelerator consistently available." This view was supported by the Confederation of British Industry Scotland.

4.6 In respect of new-build properties specifically, a number of concerns were raised over properties not being subject to valuation until they are first occupied. It was the view, mainly of Assessors and Representative Bodies, that excluding new-build properties from valuation upon existence would mean the Valuation Roll "would not always reflect the existence, nature or extent of non-domestic properties in existence in Scotland" (Scottish Assessors Association). The potential consequences connected to this were illustrated through the example of third parties who use the Valuation Roll to conduct business, such as the non-domestic water industry, who use the Roll when setting water charges.

4.7 Local Authorities and Assessors raised concerns about the practical application of the BGA, with both parties apprehensive about the possible increase in workload and necessity for extra resources. Specific concerns were raised over the potential need for constant monitoring of all new-build properties to ensure they were subject to valuation upon occupation in order to avoid systematic abuse. Clarification was called for by Local Authorities and Assessors on which body would be responsible for implementing the BGA.

4.8 In relation to the above point, Assessors suggested that the provisions of Section 2 of the 1975 Local Government (Scotland) Act remain in force. They believed this would ensure that all relevant properties would be entered on the Roll upon coming into existence. A suggestion was made to alter current policy slightly by implementing a system of markers on properties indicating their status. Thus, only properties with markers would be required to be monitored. This would potentially diminish the workload to admit or readmit a property onto the Roll and help prevent systematic abuse.

4.9 Some respondents indicated concern over the definition of what constitutes a new build or an improvement to a property and asked for greater clarity. In particular, this was considered necessary in order to reduce potential disputes between ratepayers and Councils. In this context, there was a suggestion by Assessors for an appeal system to be used in the event of disagreement as to whether or not properties were eligible for the Growth Accelerator.

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