Non-Domestic Rates (Coronavirus) (Scotland) Bill: ministerial statement - 28 April 2022

Statement given to Parliament by the Minister for Public Finance, Planning and Community Wealth Tom Arthur.

I am pleased to open the Stage 1 debate on the Non-Domestic Rates (Coronavirus) (Scotland) Bill which was introduced to the Scottish Parliament on 14 December 2021.

Non-domestic rates play a key role in balancing the need to deliver a competitive and sustainable tax environment, while ensuring that we have sufficient resources to fund public services.

The aim of this Bill is to deliver fairness to all ratepayers by ensuring that any effects of COVID-19 are considered for all properties at revaluation - rather than through the use of Material Change of Circumstances provisions.

Outside of a revaluation, the Rateable Value or Net Annual Value of a property can be amended for instance to reflect “Material Changes of Circumstances”.

A Material Change of Circumstances is typically a physical change to a property such as an extension or demolition, or it could be a major change in a specific area where the property is located, such as the tram works in Edinburgh.

Under the Non-Domestic Rates (Scotland) Act 2020, the definition of “Material Change of Circumstances” was amended with effect from 2 April 2020 to exclude changes in general economic circumstances.

This reflected the fact that we are moving to three-yearly revaluation cycles and a one-year tone date, which will allow valuations in future to be more closely aligned to current market values, removing the need for appeals on the basis of a change to general economic circumstances.

Since the start of the coronavirus pandemic, over 40,000 appeals have been lodged on non-domestic properties. This abnormal spike at this point in the revaluation cycle indicates most were lodged because of the pandemic.

We do not believe that the “Material Change of Circumstances” provisions are appropriate in relation to COVID-19.

 Any impact on rental values arising from COVID-19 or COVID-19 restrictions forms part of general market conditions and therefore should be considered at revaluation – when all relevant impacts on values across all properties will be taken into account. 

This is a view shared by the UK Government, the Welsh Government and the Northern Ireland Assembly.

We announced on 23 June 2021 that we intended to take measures to rule out COVID-19 appeals.

The Cabinet Secretary for Finance and Economy, the Minister for Business, Trade, Tourism and Enterprise and myself carried out an extensive consultation and engagement exercise with all major business representative bodies over summer 2021.

These meetings provided an opportunity to discuss our approach to supporting business during the pandemic, and its priorities in the recovery period.

The matter of these appeals was not raised as a substantial concern. 

This Bill builds on The Valuation and Rating (Coronavirus) (Scotland) Order 2021 that came into force on 1 December 2021. 

The Order specifies that, in calculating the rateable value of properties in the 2017 valuation roll, no account can be taken of any matter arising on or after 1 April 2021 that is directly or indirectly attributable to COVID-19.

Primary legislation is however required to go back further, and to extend the rule to Net Annual Value - from which Rateable Values are derived.

The Bill under discussion today provides that in calculating the net annual value or rateable value in relation to any property in the 2017 valuation roll, no account can be taken of any matter arising on or after 2 April 2020, that is directly or indirectly attributable to coronavirus.

This date aligns with the date from which the definition of “Material Change of Circumstances” was clarified by the Non-Domestic Rates (Scotland) Act 2020. 

The Bill does not apply to changes to the physical state of a property or whether a property should or should not be included in the valuation roll, for instance if someone started working from home as a result of the pandemic.

Nor does it remove the right of appeal. Rather, it will provide clarity, consistency, and fairness to all ratepayers by ensuring that any effects of COVID-19 are considered for all properties at the next revaluation in 2023.

In fact, we are intending to delay the disposal deadline for appeals by one year to 31 December 2023 so that appellants who made a COVID appeal can make an informed decision once Parliament has finished considering this Bill as to whether they wish to pursue or withdraw the appeal.

 While appeals have been submitted for over 40,000 properties, this is less than one fifth of all non-domestic properties in Scotland, and as the Federation of Small Businesses have pointed out previously, not many small businesses are amongst them.

This may reflect our generous support package for small businesses, but it likely also reflects that well-resourced, professionally-advised property owners and occupiers are more likely to know about the ‘Material Change of Circumstances’ provisions and therefore to have appealed.

Meanwhile, a number of large and multi-national firms that have been largely unaffected or potentially even successful during the pandemic have made appeals against their properties.

 This is a hugely complex issue and the outcome of any appeal is uncertain – it cannot be assumed they would be successful.

 We believe that the right time for market-wide economic changes to be reflected is at revaluation.

We are strengthening revaluations following the independent Barclay Review of Non-Domestic Rates, to ensure that they more closely reflect market circumstances.

Firstly, we are increasing the frequency of revaluations from five to three years and reducing the time between the ‘tone date’ and revaluation.

Secondly, we delayed the next revaluation by one year to 2023 and brought forward that commitment to a one-year tone date – which will be 1 April 2022. 

Both measures that have been welcomed by the business community in Scotland.

 As we all know, COVID-19 has had a major impact on the economy.  We responded swiftly and on an unprecedented scale to support business through the pandemic.

Business have benefitted from more than £4.6 billion of support, since the start of the pandemic. 

This includes around £1.6 billion of COVID-related rates reliefs. 

For the past two years, we provided 100% Retail, Hospitality, Leisure and Aviation relief without no financial cap, and we were the only government in the UK to do this.  

And we are preventing a cliff edge return to full liability for businesses in the retail, leisure and hospitality sectors, by continuing relief at 50% for the first three months of 2022-23, capped at £27,500 per ratepayer.

I am grateful to the convener and members of the Local Government, Housing and Planning Committee for their scrutiny of the Bill.

I welcome the Committee’s support for the general principles of the Bill and have responded to the various issues that were raised in its report.

As the Committee recognised the realities of dealing with Covid-19 were challenging and we had to act, both to mitigate the impact of large volumes of appeals on assessors and to protect the public finances more generally. 

We acted quickly to support the business community when it needed it most, and continued to supported businesses through the pandemic. 

Presiding Officer, in closing, I would return to my opening comments, that this Bill seeks to ensure fairness for all Scottish ratepayers whilst maintaining the integrity of the non-domestic rates system as well as the stability of public finances.

I move,

That the Parliament agrees to the general principles of the Non-Domestic Rates (Coronavirus) (Scotland) Bill. 


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