Measures to Improve Administration
Barclay recommendations 8 - 12 are administrative and are outwith the scope of this consultation
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.
Barclay recommendation 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.
26.At each revaluation, the Assessors have to determine the rateable value of each property at a fixed point in time, known as the Tone date. Generally this involves information such as rent paid and details of rental agreements, but in certain cases may involve additional information such as construction costs or turnover.
27.Currently for certain areas or types of property the level and quality ofinformation provided is low, meaning valuations may not be as accurate as they would otherwise be. This can result in the appeals system being used as the mechanism to correct valuations, putting undue burden on the appeal system and means the appeal process takes longer than it would otherwise.
28.The Scottish Government have committed to change primary legislation to remove the current criminal penalty for non-provision of information, which is rarely, if ever, used and replace this with a civil penalty, which will be simply to apply and enforce. This should incentivise higher information return rates and ensure more accurate valuations. If valuations are more accurate, then fewer ratepayers should appeal resulting in less burden on the appeals system.
29.Any new penalty created will have to have adesignated body that is responsible for administration and suitable provision for appeals against the penalty notice.
30. The penalty is not intended as a revenue raising measure, but rather an incentive to ensure better information from the outset and remove the need to rely on the appeal system to set valuations at the correct level.
31.The range of organisations/ individuals that the Assessors can request information from to inform valuations will also be considered for expansion.
Question5 - What level(s) should this civil penalty be set at?
Question 6 - How should the penalty be set? Should it be a fixed penalty or proportionate to/ banded by rateable value?
Question 7 - Do you have any views on who is responsible for administering the penalty and the process for appeals against the penalty notice?
Question 8 - Which organisations/ individuals should be required to supply necessary information to the Assessors, where applicable?
Barclay recommendations 14 and 15 are administrative and will be taken forward without primary legislation and are outwith the scope of this consultation.
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.
Barclay recommendation 16
A new civil penalty for non-provision of information to Councils by ratepayers should be created.
32.Barclay noted that is important that Councils have up to date information on occupiers of non-domestic property to ensure that bills are accurate and relief is correctly applied.
33.This is required to prevent fraud, but also ensures the correct ratepayer is billed for the correct amount. The Scottish Government have committed to change primary legislation to create this penalty. This should ensure better information and more accurate bills issued to the correct ratepayers.
34.It is not intended to be a revenue raising exercise but penalties are intended to deter fraud and ensure information is kept up to date.
35.This runs in tandem with separate recommendations to ensure that Councils improve their services to ratepayers e.g. through faster repayment of any overpayments and better provision of information.
36.The Implementation Advisory Group believe there should be a duty for a ratepayer to inform the local council within 28 days of when they move in and move out of a non-domestic property and to provide any information on request by the Council within the same timeframe. This could include, but is not limited to, evidence of relief entitlement. The penalty could be an automatic fixed amount applied to bills or one which the Council has discretion over e.g. if there are extenuating circumstances the Council can waive the penalty.
37.Any new penalty created will have to have adesignated body that is responsible for administration and suitable provision for appeals against the penalty notice.
38.The penalty is not intended as a revenue raising measure, but rather an incentive to ensure better information.
Question 9 - What level(s) should this penalty be set at?
Question10 - How should the penalty be set? Should it be a fixed penalty or proportionate to / banded by rateable value?
Question 11 - Do you have any views on who is responsible for administering the penalty and the process for appeals against any penalty notice?
Question 12 - Should this be a mandatory penalty or one that the Council has discretion over (please indicate your preference and add any comments)?
Barclay recommendation 17 does not require primary legislation and is outwith the scope of this consultation.
17- Councils should refund overpayments to ratepayers more quickly.
Barclay recommendation 18
Councils should be able to initiate debt recovery at an earlier stage.
39. Currently debt recovery Council tax takes place earlier in the financial year than it does for rates. From 2020 the Scottish Government will bring debt recovery for both kinds of local taxation (non-domestic rates and Council tax) into line. This means a council will be able to initiate enforcement action for non-payment of rates earlier in the year to ensure fairness among all tax payers (both citizens and businesses). This may also reduce avoidance. It would also be an option to allow Councils some discretion over exceptional circumstances.
40.This runs in tandem with separate recommendations to ensure that Councils improve their services to ratepayers e.g. through faster repayment of any overpayments and better provision of information to ratepayers.
41.Ratepayers will also need to be aware that payments still need to be made regardless of whether a bill is in dispute, for example whilst an appeal is progressing. This could be achieved by including this information prominently on bills if it is not already included.
Question 13 - How should the debt recovery changes be communicated to ratepayers?
Question 14 - What are your views on whether Councils should retain a discretion over debt recovery to allow for any extenuating circumstances?
Barclay recommendation 19
Reform of the appeals system is needed to modernise the approach, reduce appeal volume and ensure greater transparency and fairness.
42.In the longer term, the functions of the current Valuation Appeal Committees ( VACs) are expected to transfer to the Scottish Tribunals in 2022, noting that the functions of the VAC extend beyond those related to non-domestic valuation.Those reforms will be made under separate legislation, however one recommendation made by Barclay was that the outcome of an appeal should be to increase as well as decrease the rateable value of a property.
43.Currently the valuation appeals system is risk free for ratepayers in that the valuation may only decrease or remain the same. Whilst the majority of appeals result in no change for the ratepayer, and an appeal cannot increase the valuation even if there is new evidence to support such an outcome.
44.As noted in Recommendation 2, it is considered critical by the Implementation Advisory Group that the appeals system is reformed in order to deliver a more effective system and to support the move to three yearly revaluations.
45.It is not anticipated that this will impact on significant numbers of ratepayers, nor that it will raise significant amounts of revenue, but if during the course of an appeal it becomes apparent that a valuation is too low, this could be corrected to ensure fairness with other ratepayers.
Question 15 - How should this change be communicated to ratepayers?
Question 16 - Do you have any points about the change to allow valuation appeals to increase?
Barclay recommendation 20
A General Anti-Avoidance Rule ( GAAR) should be created to reduce avoidance and make it harder.
46.There will always be those who try to avoid paying taxes to create a competitive advantage for themselves to the detriment of others.
47.Where possible, known loopholes will be closed (see recommendations 21 and 22). However, even as loopholes are closed, there will be those who look to new ways to exploit the system to create an unfair advantage.
48.The Implementation Advisory Group agrees that action should be taken to tackle those who deliberately avoid payment of taxation.A General Anti Avoidance Rule ( GAAR), as used in other taxes, will also go some way to future proofing the system and allow Councils to act swiftly to tackle new avoidance tactics as they arise.
Question 17 -When the General Anti Avoidance Rule is introduced, do you have any recommendations or principles that this should encompass?
Barclay recommendation 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.
49.Currently, after a 42-day period of occupation a property can be eligible for empty property relief ( e.g. 100% relief for six months for industrial property).This is open to abuse through patterns of occupation aimed at obtaining successive periods of empty relief.
50.The Scottish Government will change the rules around the eligibility for empty property relief to reduce this known avoidance tactic from 2020. This will increase the period a property must be occupied before a new period of empty property relief may be claimed from 42 days to 6 months. Barclay advised that the 6 month period should be discontinuous so as not to inhibit pop-up uses of empty premises.
51.Additional reforms to empty property relief are addressed under Recommendation 26.
Question 18 – How do we raise awareness of this change among ratepayers?
Question 19 – Do you have any further comments around the 6 month reset period for empty property relief?
Barclay recommendation 22
To counter a known avoidance tactic for second homes, owners or occupiers of self-catering properties must prove an intention to let for 140 days in the year and evidence of actual letting for 70 days.
52.Currently, for self-catering holiday accommodation to be entered in the valuation roll (and thereby be liable to non-domestic rates, rather than council tax), it must be made available for letting for a total of at least 140 days in the year in question.However, it need not actually be let for any period.
53.This is open to abuse, such as by owners of second homes who wish to avoid council tax, who claim a property is available to let with no actual intention of letting it.Such properties can then be eligible for 100% rates relief under the Small Business Bonus Scheme, with the outcome that no local tax is paid by the property (either non-domestic rates or council tax).
54.The requirement will be changed so that actual let for 70 days and intended let for 140 days must be evidenced by the ratepayer to allow the property to be able to be classed as a non-domestic property.
55.This could be either a mandatory requirement or one with local discretion to allow flexibility e.g. for small numbers of genuine self-catering properties where the individual property is incapable of being let for 70 days due to circumstances outwith the owners control. An example of this could be due to poor access to the property following a landslide or in the event of periods of prolonged adverse weather.
Question 20 - Should there be any local discretion in the application of this policy?
Question 21 - If your answer to question 18 is yes, under what circumstances should this discretion apply?
Barclay recommendation 23 is for the Scottish Government to check relief awarded and does not require primary legislation and is outwith the scope of this consultation.
Barclay recommendation 24
Charity relief should be reformed/restricted for a small number of recipients.
56.The Scottish Government will remove charity relief for most independent schools from April 2020 to bring independent schools into line with Council schools. 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.
57.There may be a small number of independent schools with exceptional circumstances, such as specialist music schools that require further consideration.
58.Additional separate engagement will be undertaken with the sector.
The separate strand of this recommendation for ALEO (Arms Length External Organisations) properties is being taken forward administratively.
59. Question 22 - How should independent schools with exceptional circumstances such as specialist music schools be treated?
Barclay recommendation 25
To focus relief on economically active properties, only properties in active occupation should be entitled.
60.This change will primarily impact on empty properties either previously occupied by charities which recieve charity relief (not empty property relief) or empty properties that claim the more generous SBBS instead of empty property relief.
61.Active occupation must be defined in a way which does not give rise to avoidance so for example could include floor space used, accessibility to the public and/ or council, demonstration of accounts for a business in operation at the property. A combination of these or any other criteria could form the basis of a definition. An alternative could be 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.
Question 23 - How should active occupation be defined?
Barclay recommendation 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.
62.From 2020 empty listed property will receive 2 years 100% relief and thereafter receive 10% relief in line with other types of empty property. Additionally, any type of property that is empty for over 5 years, with the exception of listed property, will pay a 10% bill surcharge after 5 years. This will create incentives to bring all types of empty non-domestic property back into economic use.
63.It has been suggested by the Implementation Advisory Group that property in the planning process could be excluded from reforms, but this could have consequences if the planning system were abused with properties "parked" in the system to avoid payment of local taxation. An alternative may be to allow local discretion.
64.Additional separate engagement will be undertaken with the sector and the impact of this policy on the public sector will be considered.
Question 24 - What are your views on whether Councils should have discretion in the application of this measure for properties, so that local circumstances can be accounted for?
Barclay recommendation 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.
65.This relief is currently offered to affordable, community sports clubs and it is anticipated that 95% of current recipients of this relief will be unaffected.
66.However, a small number of clubs with very high fees and/ or membership policies which specifically exclude certain parts of the local community may lose relief as a result of reforms.
67.Options for reform could include incorporating a requirement for all beneficiaries to have inclusive and transparent membership policies, membership fees below a certain threshold, availability of the facilities to the local community or other criteria.
68.Additional separate engagement will be undertaken with the sector.
Question 25 - How should affordable/ community sports facilities be defined?
Barclay recommendations 28 and 29 will not be progressed by The Scottish Government and are outwith the scope of this consultation.
Barclay recommendation 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.
69.Currently public parks and land vested by the local authority in recreational purposes are exempt from entry in the valuation roll and hence commercial activity taking place on these pay no rates. From 2020 the Scottish Government will remove those exemptions and rates will become payable on the property or land within the park undertaking that activity.
70.Additional separate engagement will be undertaken with the sector.
Question 26 – How should commercial activity on parks be defined?