1.1 This report presents the findings of an analysis of written responses to a Scottish Government consultation on possible transitional arrangements relating to the 2017 non-domestic rating revaluation. The consultation was published on 16 August 2016 and ran until 12 October. 
1.2 Non-domestic rates (often referred to as business rates) are a property tax paid by occupiers, tenants or proprietors of most non-domestic properties. This tax is fully devolved to the Scottish Government. Local authorities administer the system, issue bills and collect payments, and the funds raised are used to help pay for local services.
1.3 The pence in the pound tax rate, known as the 'poundage', is set annually by legislation laid by Scottish Ministers. The rateable values of properties are determined by the independent Scottish Assessors, and are based on the rent a property would achieve on the open market at a fixed point in time (the 'tone date').
1.4 To ensure that rates bills remain up to date, the rateable values of properties are reassessed at regular intervals as part of a process known as revaluation. In general, revaluations in Scotland take place every five years. The last revaluation was in 2010 with a tone date of 1 April 2008. The revaluation scheduled for 2015 was postponed by two years, and will now take effect from 1 April 2017. This will be based on property values assessed as at 1 April 2015.
1.5 The revaluation of non-domestic rates is not intended to raise extra revenue but redistributes the tax burden by adjusting rateable values to reflect current rental values. Where certain kinds of properties, or properties in certain locations become more in demand, rental values for those properties may rise relative to the national average, while demand may fall in other locations or for other kinds of property. Thus, business rates are linked to the demand for property, and on this basis, revaluation may result in individual businesses seeing either a rise, or a fall, in their business rates.
1.6 The Scottish Government has the option to put in place transitional relief arrangements to help those businesses facing large increases in their rates bills as a result of the 2017 revaluation. Transitional relief caps significant bill increases that would otherwise occur for premises where the rateable value has risen, and enables adjustments to rates bills to be phased in over a number of years. Unlike other reliefs, transitional relief is funded entirely by businesses and is not a government subsidy. This relief can be paid for by those businesses whose property values have decreased over a certain level. These businesses still see a decrease but may not see their full savings until the transitional period is finished. Alternatively, the relief can be funded by a general supplement on all ratepayers. The transitional scheme may run for any number of years during the revaluation cycle. The longer the scheme, the more gradually increases in bills can be phased in. However, a longer scheme also results in other ratepayers having to wait a longer period of time before receiving the full savings they are entitled to.
1.7 Legislation is required to put transitional relief in place, and the current consultation sought views about whether transitional relief is needed for the forthcoming 2017 revaluation, and if so, how a scheme might operate.
1.8 This consultation was undertaken at the same time that a wider review of business rates in Scotland (the Barclay Review) was being carried out. The remit of the Barclay Review is to make recommendations that seek to enhance and reform the business rates system in Scotland to better support business growth and long term investment and reflect changing marketplaces. This Review will report in July 2017.
About the current consultation
1.9 The consultation contained four questions, three closed (tick-box) questions and one open question which invited any other comments. Question 1 asked whether the Scottish Government should introduce a transitional scheme for the 2017 revaluation (yes or no). Question 2 asked how long any transitional relief should be in place (offering four choices: no scheme / 3 years / 4 years / 5 years). Question 3 asked how transitional relief should be funded (offering two choices: through a cap on bill reductions, or through a supplement on other ratepayers). Question 4 invited other comments.
About the analysis
1.10 Both quantitative and qualitative analysis was undertaken in relation to the responses received, with the emphasis on exploring the views of respondents as presented in the comments submitted to the consultation.
1.11 A proportion of the respondents to this consultation submitted 'non-standard' responses. These respondents did not use the consultation questionnaire provided, but rather submitted their views in the form of a letter or short report. Where it was clear from the respondents' comments what their views were in relation to the tick-box questions (Questions 1, 2 and 3), the responses to these questions were imputed during the analysis. Where the respondents' views on any of the first three questions were not clear, the relevant questions were left blank.
1.12 Results of the frequency analysis of responses to the tick-box questions are presented in tables in Chapters 3 and 4 of this report. These tables thus include a small number of imputed responses ( i.e. responses derived from the comments provided by respondents who did not submit a completed consultation questionnaire).
1.13 Responses to the tick-box questions provided the framework for the qualitative analysis of the comments submitted at Question 4. Where respondents' additional comments were not related to any of the first three questions, the analysis of this material has been discussed in Chapter 5 of this report.
1.14 The analysis in this report is based on the responses submitted to the consultation. It is important to note that, given the self-selected nature of the respondents, the views presented here should not be seen as representative of the views of the wider population.