There has been widespread coverage of the Government's plans to abolish Empty Property Rates Relief in England and Wales. In terms of the Rating (Empty Properties) Act 2007, from 1 April 2008, commercial properties which have lain unoccupied for longer than three months will no longer be entitled to 50% relief from business rates. The changes have been heavily criticised by many in the property industry to whom the relief is essential. For landlords who struggle to lease properties in unpopular areas or who require time to refurbish a property between tenants, or for developers who buy commercial property on a speculative basis, the new provisions could be particularly detrimental.

Empty relief in Scotland

However, the 2007 Act does not apply to Scotland and the Scottish Government has yet to announce any plans to follow suit. At present, empty commercial premises in Scotland receive 100% relief on mandatory empty property rates for the first three months during which the property is unoccupied under the Non-Domestic Rating (Unoccupied Property) (Scotland) Regulations 1994 (as amended from time to time*). Thereafter, the business is entitled to 50% relief unless it falls into one of a number of exceptions in which case 100% relief applies throughout the total period of non-occupation.

The exceptions under the 1994 Regulations include buildings which are the subject of a building preservation notice; property which is held by a trustee, an executor, a trustee in sequestration or a liquidator; and industrial property. All of these properties are entitled to 100% relief. In addition, small businesses are currently entitled to relief under the Small Business Rates Relief Scheme (SBRRS). This provides an automatic relief of 5% for all individual properties with a rateable value of £11,500 or less, whatever the combined rateable value of all the business's properties.

The Small Business Bonus Scheme

The Scottish Government has identified that small businesses currently face a disproportionate rates burden compared to larger businesses. From 1 April 2008, the SBRRS will be replaced by the Small Business Bonus Scheme (SBBS) in a bid to reduce the percentage of turnover that small businesses spend on property rates, and to give small Scottish businesses a competitive advantage. The new scheme is being brought in to increase rates relief for the smallest businesses which hold properties that have a combined rateable value of £15,000 or less. The Scottish Government is targeting small businesses as they are a source of entrepreneurship and play a vital role in job creation and in strengthening rural communities.

Unlike the SBRRS, the amount of relief available under the new scheme is determined by the combined rateable value of all of a business's occupied and unoccupied properties. This is to ensure that only the smallest businesses benefit. Under the SBBS, the range of cumulative rateable values which qualifies for relief has been widened, and higher rates of relief are available. Businesses which hold property having a combined rateable value of up to £8,000 will qualify for 80% relief, while 40% relief will be available where the combined rateable value of a business's properties is between £8,000 and £10,000. Thereafter, 20% relief will be available for properties with a combined rateable value of up to £15,000. The Scottish Government will increase the rate of the reliefs available between 1 April 2008 and 1 April 2010. The scheme is being brought in more quickly than originally intended and on current projections, the rates of relief will be increased in 2009 to provide 100% relief for properties with a combined rateable value of less than £8,000.

The combined rateable value takes into account all of a business's properties in Scotland, whether they are occupied or non-occupied. The availability of relief may be affected by the eligibility of each property for one of the existing rates relief schemes, including empty property relief, rural rate relief, charitable rate relief and disabled persons rate relief. The level of other public sector assistance received by the business will also be taken into account.

Reducing the administrative and financial burden

The Scottish Government has sought to reduce the administrative burden and bring further economic benefit for small businesses by reducing the application for the relief to once every five years. The information currently held for the purposes of the SBRRS will not be sufficient to establish eligibility for the SBBS, so an initial application will have to be made to the local authority area in which the business has a property. Relief can be awarded for a maximum of five years before a review of the information held about the business must be undertaken.

Overall, the scheme should benefit small businesses which hold unoccupied property and it has been broadly welcomed by industry leaders. Reports suggest that up to 150,000 businesses will make savings as relief will now be available for businesses which hold property that has a cumulative rateable value of between £11,500 and £15,000, which previously did not qualify under the SBRRS. However, the removal of the automatic entitlement to 5% relief for individual properties with a rateable value of less than £11,500 could result in increased rates bills for businesses currently in receipt of this relief, unless the cumulative value of the business's occupied and unoccupied properties does not exceed £15,000.

For more information on the SBBS, please click here.

To view the Non-Domestic Rating (Unoccupied Property) (Scotland) Regulations 1994 as originally enacted pleaseclick here.