Non-domestic tax rates review: Barclay report

Report of the external Barclay review into tax rates for non-domestic properties, with recommendations for rates system reform.

Section 1: Executive Summary.

Remit of Review and timescales.

1.1 We were appointed by Scottish Ministers in mid-2016 with the following remit:

"To make recommendations that seek to enhance and reform the non-domestic rates (also sometimes referred to as business rates) system in Scotland to better support business growth and long term investment and reflect changing marketplaces, whilst still retaining the same level of income to deliver local services upon which businesses rely."

1.2 We were given around a year to conduct the review and to make recommendations.

1.3 We were not asked to influence the 2017 revaluation, nor to look at wider taxation or business policies. We also had to consider whether measures we recommended would fall within devolved competence.

Membership and biographies.

1.4 We were appointed to undertake the non-political review acting independent of Government. The Review Group was comprised as follows:-

Kenneth Barclay (Chair)
Prof. Russel Griggs OBE
David Henderson
Isobel d'Inverno
Nora Senior CBE

Kenneth Barclay was Chair of RBS Scotland until February 2016. His current portfolio includes Chairman of a Scottish Charitable Incorporated Organisation, The Lens. He sits on the Advisory Board of IPPR Scotland, is the Compliance Trustee of The Scottish Children's Lottery and is a Director of Poppy Scotland. He has previously served as Director, Scottish Financial Enterprise and Scottish North American Business Council and has been a Council member of both CBI Scotland and the British Chamber of Commerce in Hong Kong.

Isobel d'Inverno is Director of Corporate Tax at Brodies LLP and is Convenor of the Tax Law Committee of the Law Society of Scotland and a Council member of the Stamp Taxes Practitioners Group. She also served on the Scottish Government / COSLA Joint Commission on Local Tax Reform.

Nora Senior CBE is a previous Scottish Businesswoman of the Year. Her influential position in the UK business community led to her appointment as President of British Chambers of Commerce, Chair of Scottish Chambers of Commerce and a non-exec Board member of the SCDI. She is Chair UK Regions of communications consultancy Weber Shandwick. She was awarded the CBE in 2017 for services to the Scottish and UK Business Community.

David Henderson is a retired senior civil servant. His final post in the Scottish Government before retirement was as Deputy Director for local government finance, which included responsibility for non-domestic (business) rates.

Professor Russel Griggs OBE has had a number of non-executive positions in the private, public and third sector as well as running his own consultancy business which does a variety of strategic work for public bodies and private companies. Currently, he chairs the Scottish Government's independent Regulatory Review Group who advise and work on better regulation in Scotland. He also has worked closely with the SME banking sector in recent years, overseeing and reviewing practices in the financial sector, including SME Appeals, Bank Branch Closures, and Statutory SME referrals. He also chairs the Scottish Mines Restoration Trust which is a third sector charity set up to restore opencast sites left derelict by the collapse of the two main opencast mining companies in Scotland.

1.5 Secretariat support was provided by the Scottish Government.

1.6 We agreed to work under terms of reference which can be viewed here. Neither the Chair nor the members received any remuneration, although some of the costs of travel to meetings was met by the Scottish Government.

1.7 The expected approximate time commitment indicated to the Group by the Scottish Government at the start of the process was one day per month for members and two for the Chair. In the event, the actual time spent was considerably greater.

Process, consultation and engagement.

1.8 We undertook extensive consultation. Our first step was to issue a broad invitation for written submissions to be provided by October 2016. By the cut-off date, we had received over 150 submissions, some of which were very detailed. A small number of written submissions were received after the cut-off date. All were considered by the Group. Where consent was given to publish, these written submissions are available online.

1.9 We tried to meet as many people as possible within the time we had available and, during the first half of 2017, members of the Group held a series of oral evidence sessions and consultation meetings with a broad range of organisations. These meetings were held mainly in Edinburgh and Glasgow but, in order to ensure as wide a cross-section of views as possible, meetings and events were also attended and hosted in other locations around Scotland including in Aberdeen, Crieff, Dumfries, Galashiels, Inverness, Kirkcaldy and Perth.

1.10 Agendas, minutes of meetings and other papers are published online here.

1.11 We are extremely grateful to all those who made time to write to us and to meet us. Their contributions were invaluable to our work and have contributed to our final recommendations. While we acknowledge that we have not acted upon some of the points put to us (where, for example, these were at odds with other points made or would have incurred costs to the Scottish Government which we consider it could not have reasonably met within an overall constraint of revenue neutrality), we would wish to stress that we have taken account of all of them in reaching our conclusions.

State aid.

1.12 The result of the EU Referendum in June 2016 introduced an element of uncertainty as regards the future of the current EU state aid rules. Currently, all subsidies provided by the Scottish Government, including subsidies through reliefs or exemptions under the rating system, must conform to these rules. We have assumed, for the purposes of this report, that the current state aid rules will continue in the short term, but we recommend that the Scottish Government should consider the implications of any future changes to state aid or any replacement measure(s) for the wider implementation of the recommendations in this report.

Revaluation 2017.

1.13 Our remit was to consider future changes to the current rates system, however, the timeframe of our review spanned the implementation of the 2017 rates revaluation in Scotland. Perhaps understandably, therefore, many ratepayers and organisations wished to discuss the revaluation with us. While the terms of our review preclude us from making any recommendations about the 2017 revaluation, we have reflected fully the views expressed with regard to future revaluations.


1.14 We are grateful to the many organisations, trade bodies, businesses and individuals who sent us written submissions and other information, who provided oral evidence to us or who met us. Their insight and evidence was invaluable in highlighting areas where the non-domestic rates system could be improved.

1.15 We are also grateful to various officials in the Scottish Government, particularly Marianne Barker, Steve Ing and Tony Romain, for their extensive support and helpful advice throughout the period of the review.

1.16 All the recommendations we have included in this report are solely those of the Group.


1.17 Before reaching our conclusions, we debated extensively the many options that were put to us as ways of reforming the rates system.

1.18 Some may be disappointed that our recommendations are not designed to reduce the overall burden of the tax, but key within the remit given to us was the need to be revenue neutral in whatever we recommended.

1.19 An over-arching conclusion that we reached is that some form of property tax is still an appropriate way to fund the local services provided by councils, as the whole of society benefits from the services they provide (such as education, social care and road maintenance). However, we also acknowledge that a property tax does not adequately cover all aspects of the fast‑growing digital economy and we have observed the challenges of this later in this report.

1.20 We recognise that the Scottish Government will need time first to consider our recommendations and then to implement those it accepts, although we hope that it will do so quickly to seize the opportunity that our reforms present. In particular, some recommendations will require the Scottish Parliament first to pass primary legislation. Other recommendations carry a cost and so, given that the terms of our remit stipulated that our recommendations should, in total, be revenue neutral, are reliant on the Scottish Government introducing other measures within our package first, to ensure the necessary funding can be in place.

1.21 Our 30 recommendations are as follows. More detail on each appears later in the main body of this report. Our recommendations have been broadly grouped into similar categories, although many are interlinked, not least those which require funding that, under our revenue neutral remit, need to be financed by savings made elsewhere within our recommendations.

Measures to support economic growth.

1.22 This was core to our remit: to identify any ways in which we believe the rates system could improve and stimulate economic performance. These are our recommendations:

1. A Business Growth Accelerator - 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.

2. There should be three yearly revaluations from 2022 with valuations based on market conditions on a date one year prior (the 'Tone date').

3. The large business supplement should be reduced.

4. A new relief for day nurseries should be introduced to support childcare provision.

5. Town Centres should be supported by expanding Fresh Start relief.

6. There should be a separate review of Plant and Machinery valuations with particular focus on renewable energy sector valuations and statutory improvements to property including sprinkler systems.

7. The effectiveness of the Small Business Bonus Scheme should be evaluated.

Measures to improve ratepayer experience and administration of the system.

1.23 It is also important to recognise that - alongside headline measures to incentivise investment - more incremental administrative improvements in the rates system can have a positive effect. Therefore we also make the following recommendations:

8. The Scottish Government should provide a 'road map' to explain changes to the rating system and should consult whenever possible on those changes, prior to implementation.

9. There should be better information on rates made available to ratepayers - co-ordinated by Scottish Government.

10. A full list of recipients of rates relief should be published to improve transparency.

11. A "rateable value finder" product should be used - to identify properties that are not currently on the valuation roll, so as to share the burden of rates more fairly.

12. Assessors should provide more transparency and consistency of approach. If this is not achieved voluntarily, a new Scotland wide Statutory Body should be created which would be accountable to Ministers.

13. The current criminal penalty for non‑provision of information to Assessors should become a civil penalty and Assessors should be able to collect information from a wider range of bodies.

14. Standardised rates bills should be introduced across Scotland.

15. Ratepayers should be incentivised to sign up for online billing where available except in exceptional circumstances.

16. A new civil penalty for non-provision of information to councils by ratepayers should be created.

17. Councils should refund overpayments to ratepayers more quickly.

18. Councils should be able to initiate debt recovery at an earlier stage.

19. Reform of the appeals system is needed to modernise the approach, reduce appeal volume and ensure greater transparency and fairness .

Measures to increase fairness and ensure a level playing field.

1.24 Finally, any well-functioning tax needs to rely on principles of fairness to remain credible for tax payers and to ensure revenues are not undermined by avoidance tactics. We therefore make the following recommendations:

20. A General Anti-Avoidance Rule should be created to reduce avoidance and make it harder for loopholes to be exploited in future.

21. To counter a known avoidance tactic, the current 42 days reset period for empty property should be increased to 6 months in any financial year.

22. To counter a known avoidance tactic for second homes, owners or occupiers of self-catering properties must prove an intention let for

140 days in the year and evidence of actual letting for 70 days.

23. The Scottish Government should be responsible for checking rates relief awarded, to ensure compliance with legislation.

24. Charity relief should be reformed/restricted for a small number of recipients.

25. To focus relief on economically active properties, only properties in active occupation should be entitled.

26. To encourage bringing empty property back into economic use, relief should be reformed to restrict relief for listed buildings to a maximum of 2 years and the rates liability for property that has been empty for significant periods should be increased.

27. Sports club relief should be reviewed to ensure it supports affordable community-based facilities, rather than members clubs with significant assets which do not require relief.

28. All property should be entered on the valuation roll (except public infrastructure such as roads, bridges, sewers or domestic use) and current exemptions should be replaced by a 100% relief to improve transparency.

29. Large scale commercial processing on agricultural land should pay the same level of rates as similar activity elsewhere so as to ensure fairness.

30. Commercial activity on current exempt parks and Local Authority (council) land vested in recreation should pay the same level of rates as similar activity elsewhere so as to ensure fairness.

1.25 The infographic below sets out the main themes of both our remit and our recommendations.

infographic sets out the main themes of both our remit and our recommendations

1.26 There is one recommendation which we would have made, had the costs of doing so not breached the terms of the remit we were given to ensure overall cost neutrality. This recommendation would have been to link annual increases in the Scottish poundage to CPI (Consumer Prices Index) rather than September RPI (Retail Prices Index). Section 5 provides full details and explains why we have not felt able to include this recommendation at this time.


1.27 We include an outline roadmap, including timescales, showing when we believe it might be reasonable to expect the Scottish Government to be able to implement the recommendations which we have made. The relevant recommendation number(s) appear in brackets after each entry.

Road map.

August 2017

  • Barclay report published
  • List of 30 recommendations

From 2017

  • Administrative changes start ( 8, 9, 10, 11, 12, 14, 15, 17, 23)
  • Initiate review of Plant and Machinery valuations ( 6)

1 April 2018

  • SG funding for councils cut by cost of ALEOs relief ( 24)
  • New relief for day nurseries introduced ( 4)
  • Business investment accelerator created ( 1)
  • Small Business Bonus Scheme relief limited to recipients of property in active use ( 25)
  • Fresh Start relief expanded ( 5)

1 April 2020

  • Large Business Supplement cut to 1.3p ( 3)
  • Review of Small Business Bonus commences ( 7)
  • Anti-avoidance provisions come into force ( 20, 21, 22)
  • New powers and penalties for data collection come into force ( 13, 16)
  • Tone date for 2022 Revaluation (1 April 2020) ( 2)
  • Enable quicker debt recovery from ratepayers ( 18)
  • Penalty for non-provision of information to councils ( 16)
  • Improved info gathering for Assessors ( 13)
  • Charity relief for independent schools removed ( 24)
  • Relief for commercial activities of universities removed ( 24)
  • Sports club relief reformed ( 27)
  • Empty property relief reformed - for listed and long term empty premises ( 26)
  • Non Small Business Bonus Scheme Reliefs limited to active use of property ( 25)
  • Exemptions removed for certain commercial activities ( 29, 30)


  • Next revaluation - first revaluation under full Barclay powers
  • Appeals system moves to Tribunal Scotland ( 19)
  • Review of Small Business Bonus Scheme ( 7) concluded, and recommendations addressed
  • Review of Plant and Machinery valuation ( 6) concluded, and recommendations addressed


  • Tone date for 2025 revaluation (1 year ahead of revaluation) ( 2)


  • First 3 yearly revaluation ( 3)
  • Exempt land and property added onto valuation roll and 100% relief applied ( 28)

1.28 Table 1 (below) summarises the estimated financial impact of each of our recommendations. Where a number does not appear, these relevant recommendations carry no cost, are administrative or the cost rounds up to less than £0.1 million. While these reforms provide a small surplus in 2018-19 and 2019-20 and a small deficit in 2020-21 and 2021-22 we believe these modest sums are within the margins of rounding error on a total tax take of £2.8 billion.

Table 1: Our recommendations - with projected financial implications.

Recommendation Financial Impact (£ million)
No Description 2018-19 2019-20 2020-21 2021-22
1 Business growth accelerator -45 -45 -45 -45
2 Three yearly revaluations
3 Reduction in large business supplement -62.5 -62.5
4 New relief for day nurseries -7 -7 -7 -7
5 Expanding fresh start relief to benefit town centres -2 -2
6 Review of plant and machinery valuation
7 Review of Small Business Bonus Scheme
8 'Road map' for future rates changes
9 Provision of better information
10 Relief recipients to be published
11 Employ rateable value finder product 1 1 1 1
12 More transparency & consistency from Assessors
13 Greater information gathering power for Assessors
14 Standardised rates bills across Scotland
15 Incentivise online billing
16 Penalty for non-provision of information to councils
17 Councils to make refund payments faster
18 Enable quicker debt recovery from ratepayers
19 Reform of the appeals system
20 General anti avoidance rule ( GAAR) 21 21
21 Close empty property relief loophole Covered under GAAR
22 Close SBBS second homes loophole
23 All relief awards to be checked for errors 3 3 3 3
24 Reform charity relief 45 45 50 50
25 Relief restricted to properties in active occupation 7 7 12 12
26 Reform empty property relief 15 15
27 Sports relief for affordable community facilities 3 3
28 All property should be on valuation roll
29 Commercial agricultural processing 2 2
30 Commercial activity on parks etc. 1.5 1.5
Net Financial Impact 2 2 -6 -6


Email: Marianne Barker,

Phone: 0300 244 4000 – Central Enquiry Unit

The Scottish Government
St Andrew's House
Regent Road

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