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Scottish government makes concession on business rates applicable to listed buildings

The Scottish government has made a concession on the application of business rates to listed buildings in plans aimed at implementing recommendations made in a review of Scottish business rates published earlier this year.21 Dec 2017

Property law expert Alan Cook of Pinsent Masons, the law firm behind Out-Law.com, said the new proposals related to listed buildings would likely receive a mixed response from industry.

Business rates are charged on most non-domestic premises including shops, offices, warehouses and factories. Under the current rules, properties are usually revalued for rates purposes once every five years, based on rental values at a date two years before the date the revaluation takes effect. The current rates came into force on 1 April 2017.

The Scottish government appointed former RBS chair Ken Barclay to lead a review of Scottish business rates in 2016. The review group set out its recommendations for reform in August this year, and the Scottish government has now outlined its plans to implement the recommendations (23-page / 355KB PDF).

In its report, the review group made recommendations to "encourage bringing empty property back into economic use". In response, the Scottish government has said it will push forward with plans which will see business rates relief for listed buildings restricted to a maximum of two years, but that it intends to waive the application of increased rates which normally apply when a building has been vacant for five years in the case of listed buildings.

"We will enable discretion for local authorities in the application of this measure, so that local circumstances can be accounted for," the Scottish government said. "We will further engage stakeholders to inform how best to specify this change, including through the advisory group that we have convened. We intend to bring forward legislation to deliver this measure by 2020. This notice will allow those ratepayers affected to plan ahead."

Cook of Pinsent Masons said: "This will be welcome by those looking to redevelop listed buildings, though charging rates while development plans are being formulated will continue to cause concern, as obtaining the consents and other matters required to redevelop a listed building can be a particularly long drawn out process."

In its paper, the Scottish government also said that it would "consider" the review group's recommendation to reduce the "large business supplement" that applies to their business rates "in the context of future budgets, subject to affordability".

"The Scottish government is committed to Scotland being the best place to do business the UK, and all non-domestic rates decisions are made in light of this and also of the budgetary context, reflecting budget allocations from the UK government," it said. "The large business supplement will continue to be set annually under secondary legislation. The annual rates poundage for 2018-19 will be uplifted in line with CPI inflation, rather than the higher RPI, as has been called for by business."

The Scottish government also confirmed that it accepts the review group's recommendation to introduce a "12 month delay … before rates are increased when an existing property is expanded or improved and also before rates apply to a new build property". This 'business growth accelerator' relief will have effect from 1 April 2018, it said. Further reforms impacting on new build properties were also detailed. They take forward plans that the Scottish government announced in September and will see the application of business rates waived on commercial properties in Scotland until one year after the property is occupied by its first tenant.

"New build properties will only enter the valuation roll once first occupied," the Scottish government said. "As well as being eligible for this measure, new-build properties will benefit from the ‘growth accelerator’ relief when they enter the valuation roll. This further measure will be implemented administratively with effect from 1 April 2018 under current legislation. Thereafter we will keep arrangements under review and consider legislative requirements in due course. We do not anticipate these support measures being restricted by EU State aid rules."