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Council arms-length leisure facilities to retain business rates relief, says Scottish government

Arms-length external organisations (ALEOs) providing leisure and cultural facilities on behalf of local authorities in Scotland will continue to benefit from business rates relief, the Scottish government has announced.01 Dec 2017

A review of business rates in Scotland, commissioned by the government and chaired by former RBS chair Ken Barclay, had recommended that these bodies no longer benefit from the reduced rates available to charities if these facilities, where operated directly by local authorities, would be liable for business rates.

Finance secretary Derek Mackay said that the government would not take forward this recommendation following "stakeholder engagement". However, he said that the government intended to "offset" the costs of the relief to local authorities, to discourage them from setting up any additional ALEOs in order to benefit from reduced rates.

"In my response to the Barclay review I made clear that this was a recommendation that I wished to engage on before coming to a conclusion," said Mackay. "In these discussions I have heard a strong and consistent message about the importance of this benefit to sports and leisure facilities, and to keeping the costs of these services affordable especially in disadvantaged and vulnerable communities."

Ending rates relief for ALEOs was one of several review recommendations that the government said would require "further consideration and engagement" before it came to a decision about whether to implement them. Barclay similarly recommended introducing business rates for listed buildings, and ending rates relief for independent schools that currently benefit from rates relief where council-run schools do not because of their charitable status.

"I suspect this announcement by the Scottish government is the result of lobbying by local councillors concerned about the impact ending rates relief for ALEOs would have on local leisure services," said property law expert Alan Cook of Pinsent Masons, the law firm behind "It remains to be seen what the government will decide to do in regards to listed buildings and private schools, which are both areas in which there has also been extensive lobbying."

The government announced in September that it would implement the "vast majority" of the recommendations of the Barclay review. These include moving to three-yearly revaluations, which will be based on the property's rateable value one year before the revaluation takes effect; introducing a new 100% rates relief for day nurseries; and expanding the 'fresh start' relief scheme, to create a greater incentive to bring empty properties back into economic use.

It has also committed to introducing the so-called 'business growth accelerator', which was one of the central recommendations of the review. Under this scheme, which the government intends to introduce on 1 April 2018, business rates will not be charged on Scottish commercial properties until one year after the property is occupied by its first tenant.