Scottish Business Rates Revaluation delayed until April 2023

02 September 2020

In their Programme for Government 2020-21, the Scottish government has announced that the next revaluation of Non-Domestic Rates in Scotland will be delayed by one year and take effect from April 2023.

In the document they state that “The next Non-Domestic Rates revaluation in Scotland will take effect in 2023, the same year as in England and Wales, but will be based on rental values as at 1 April 2022, and not 1 April 2020. This will mean that properties' rateable values will better reflect true market conditions, taking into account any COVID-19 effects, and delivers our commitment to move to revaluations with a one‑year tone date two years ahead of schedule.”

This aligns the date of the Scottish revaluation with the equivalents in England and Wales. However, when the UK government announced the postponement of the 2021 revaluation it was to end uncertainty and to allow for a fundamental review of the business rates system.

Scotland has already had its fundamental review of business rates in the form of the Barclay Report, published in 2017 and recommendation two in the report was that there "should be three yearly revaluations from 2022 with valuations based on market conditions on a date one year prior (the 'Tone date').”

The Non-Domestic Rates (Scotland) Act 2020 gained Royal Assent in March this year and as per Barclay’s recommendation provided for three yearly revaluations while setting the date of the next revaluation at 1 April 2022, albeit with a tone date two years prior at 1 April 2020. This would have resulted in a valuation roll that reflected the rental values shortly after the lockdown came into effect and an alternative that preserved the revaluation date could have been to simply move the tone date to 1 April 2021, a year post lockdown. This is, of course, the proposed valuation date in England and Wales in respect of the deferred 2023 revaluations – so there will now be a fundamental difference in valuation dates when the revaluations finally take place between Scotland and England and Wales.

As the main purpose of a revaluation is to redistribute the rates burden fairly across all ratepayers, delaying means that some will have to pay rates based on disproportionately high values for a year longer. Conversely some ratepayers will benefit for lower values for an extended period.

One point to note is that if some of the sectors that have been badly affected by the lockdown restrictions recover during the two year extension to the tone date then any benefit they will have seen from lower rateable values will be diminished or simply not reflected in their valuations at all.

This is compounded by the fact that the 2020 Act also took away certain rights of appeal on the grounds that there had been a material change of circumstances affecting value, by purposely excluding appeals relating to economic factors or falling rents.

By the time the next revaluation takes effect ratepayers will have been billed based on 2015 rental values for over three years post COVID-19. For some businesses the first year of this period was offset entirely or in part by government rates relief schemes and following the announcement postponing the 2022 revaluation, GL Hearn will continue to lobby to ensure that the schemes continue in some form and the shock of returning to 100% liability is avoided.

To speak about your Business Rates requirements in Scotland, contact Derek Kidd - Business Rates Director.