The Barclay Review of non-domestic rates in Scotland published its report in 2017 making a series of recommendations to the Scottish Government on changes that should be made to the business rates system. The Scottish Government accepted most of the recommendations and has now published a consultation on how best to implement the proposed changes.
The deadline for responses to the consultation is 17 September 2018.
While the Scottish Government declined the recommendation to remove charity relief for certain university properties and for ALEOs, it confirmed that it will remove charity relief for most independent schools from April 2020. However, the Scottish Government has committed that schools for children and young people with additional support needs that are in receipt of disabled persons relief or charitable relief will be able to retain that relief. The Scottish Government has also recognised that there may be a small number of independent schools with exceptional circumstances, such as specialist music schools that require further consideration and requests feedback on this point (see Q22).
Another recommendation by the Barclay Review was to limit relief to economically active properties (ie those in active occupation). This change would 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. The consultation document asks how active occupation should be defined (Q23) noting that the definition must not give rise to avoidance. It is suggested that evidence could include a combination of factors including: floor space used, accessibility to the public and/ or council, demonstration of accounts for a business in operation at the property; or for the General Anti Avoidance Rule to be utilised in cases where a property is not in active use, but claims a relief other than empty property relief.
A further recommendation was that in order to encourage empty property back into economic use, from 2020, 100% relief for empty listed buildings should be restricted to a maximum of 2 years, and thereafter reduced to 10% relief in line with other types of empty property. The consultation asks for views on whether Councils should have discretion in the application of this measure for properties, so that local circumstances can be accounted for (Q24)?
Other recommendations that may be of interest to charities include: introduction of three yearly valuations, penalties, appeals, relief for sports clubs, and a new power to enable councils to impose an additional levy on rates in certain circumstances.
To inform the implementation of the Barclay Review recommendations, Derek Mackay MSP, Cabinet Secretary for Finance and the Constitution has convened an Implementation Advisory Group. Several of the Barclay recommendations (including those relating to charity relief for independent schools) require primary legislation and it the Scottish Government’s intention to introduce a Bill during the current term of Parliament, informed by feedback to the consultation.