The Non-Domestic Rates (Liability for Unoccupied Properties) (Scotland) Bill - Business and Regulatory Impact Assessment

Executive summary

Issue and why it needs to be addressed

The Non-Domestic Rates (Scotland) Act 2020 (“the 2020 Act”) made changes to the law relating to non-domestic rates (NDR), including to devolve Empty Property Relief (EPR) to local authorities from 1 April 2023. Amendments made by the 2020 Act were intended to create a situation whereby owners of unoccupied properties would be liable to pay NDR on such property, and local authorities could then reduce their bills (known as ‘relief’) as they considered appropriate.

It has recently become apparent that the amendments made by the 2020 Act to devolve EPR have not had the intended legal effect, and there has been no legal basis for imposing NDR liability upon the owners of unoccupied properties since 1 April 2023. Local authorities are responsible for the administration and collection of NDR, and in the absence of rectifying legislation, they will require to consider ceasing levying rates on owners of empty properties and refund rates paid on unoccupied properties since 1 April 2023. This presents a significant, and growing financial risk, meaning urgent resolution of the issue is essential. It is also considered essential to rectify this issue with retroactive effect, in order to give effect to the original policy intention, and maintain public finances.

Intended outcomes

The intended outcome for the Bill is to give effect to the original policy intention when the 2020 Act was enacted and the position as it is understood by local authorities and ratepayers, and which has been applied by local authorities, since 1 April 2023, by providing a statutory basis to levy rates on the owners of unoccupied non-domestic properties with retroactive effect from 1 April 2023.

Options

The Scottish Government gave consideration to the following options:

1. Do nothing.

2. Introduce a Bill which provides for local authorities to levy rates on the owners of unoccupied properties once the Bill comes into force.

3. Introduce a Bill which provides a legal basis for local authorities to levy rates on the owners of unoccupied properties retroactively from 1 April 2023.

Sectors affected

The Bill will affect all owners of unoccupied non-domestic properties who have paid rates in respect of those properties since 1 April 2023. However, the Bill will bring the legislative position into line with that which councils and ratepayers have understood it to be since 1 April 2023 and how the system has operated in practice since then, so compared to the status quo, there would be no change, and no affected groups or sectors directly affected by the Bill, if it is passed.

Engagement completed, ongoing and planned

No engagement was undertaken before the Bill was introduced to the Scottish Parliament given the need to bring forward remedial legislation as quickly as possible following identification of the error in the 2020 Act, and given the Bill is intended to bring the law into alignment with the position as intended, as understood by local authorities and ratepayers, and as operated in practice by local authorities since 1 April 2023. Given the urgency and market sensitivity it was not feasible to engage on this occasion.

The Bill will create a valid legal basis for the original policy intent of section 19 of the 2020 Act, namely for rates to be levied on the owners of unoccupied properties, subject to local authorities offering local EPR should they choose to do so.

Major business organisations representing ratepayers, COSLA and local authorities will be engaged closely upon the Bill’s introduction.

Anticipated impacts (intended and unintended, positive and negative) and mitigating actions

Under Option 3 (the preferred option), businesses would neither receive a refund of their Bill (though this is subject to any action regarding refunds that councils may choose to take before the Bill comes into force) nor see future bills change compared to current expectations. It would be a continuation of the situation as it has been understood by ratepayers and councils since April 2023.

Enforcement/compliance

Local authorities administer and collect NDR. It will be for local authorities to enforce and comply with the Bill, and there are no concerns over this given they have since 1 April 2023 already been operating in practice as if there were a legal basis to levy rates on unoccupied properties.

Recommendations/ implementation plans

The preferred option is Option 3, to establish a proper and permanent fix, with retroactive effect from 1 April 2023, whereby rates can be levied on the owners of unoccupied properties, subject to any reliefs that local authorities may choose to put in place under existing discretionary powers.

Implementing the Bill will not require any change from current local authority practice.

Evaluation and monitoring of implementation/ review of BRIA

All non-domestic rates policies are kept under review.