The Scottish Government is looking to reform rate relief for empty non-domestic properties through the Local Government Finance (Unoccupied Properties etc.) (Scotland) Bill. The current proposals involve reducing the amount of rate relief that empty non-domestic buildings currently attract. The bill is set for in-depth analysis at the Committee Stage of debate. Law Now will continue to track the progress of the bill.

The current rate of relief is 100% for the first three months that a non-domestic property is empty, followed by 50% relief thereafter. If the bill is successful, it will retain the three month initial 100% relief; then drop down to 10% relief thereafter.

The current list of exceptions would still apply, namely listed buildings, industrial properties, properties with a rateable value below £1,700 per annum and unoccupied parts of otherwise occupied premises.

The Scottish Government believe that the contents of the bill will reduce the number of empty commercial properties in town centres by reducing the appeal of not using a commercial property. Additionally it would seek to reduce the tax spend on empty commercial properties (and unoccupied residential premises) by cutting the rate relief awarded to the owners of such buildings.

The bill has passed Stage 1 of debate, with the Lead Committee (the Local Government and Regeneration Committee) issuing their report on 28 June 2012, which can be read here. The Committee stage of debate (Stage 2) consideration starts today, and this will involve a more detailed reading of the contents. Non-domestic rates have been in the news recently for another reason, with two court cases going against building owners in their attempts to appeal the setting of commercial rateable values. The outcome of the cases and their impact is the subject of another recent Law Now article, which you can read here.

The bill has received broad support from a number of groups, including the Federation of Small Businesses and Shelter. It has also attracted criticism from CIB Scotland, the Finance Committee and members of the Scottish Conservative Party.

The Scottish Property Federation has criticised the bill, maintaining that the English equivalent of this bill has failed in its intended target to reduce the number of empty town centre commercial properties. The SPF claim that the number of vacant commercial properties in England stood at 3% before the introduction of their Act, rising to 14% as at 27 March 2012.

Stage 2 consideration is much more in-depth than the Stage 1 reading, and the bill is not guaranteed to pass this stage. The bill has divided opinion and the in-depth consideration is likely to garner further media attention. Ironically local councils may be hit hardest by these reforms, according to figures obtained by way of a freedom of information request by the Scottish Conservative party and made public by them: the number of publicly owned empty commercial buildings rose from 294 in 2009/2010, to 681 in 2011/2012, which would mean a higher tax bill to be paid by local authorities under the provisions of the bill.

Even as Scotland entertains the possibility of moving to less reliefs, England & Wales may be about to return to a greater relief system. The last revision to English business rates took place in 2008. The old model had been like the current Scottish system in that most commercial properties received 100% relief for the first three months, and 50% relief thereafter. Since April 2008, only industrial properties (including warehouses) have been able to receive exemption at 100% for six months, other commercial properties receive 100% exemption for the first three months, with rates payable at 100% thereafter. The Chancellor, George Osbourne, recently agreed to review this policy after pressure from inside the Conservative Party, and it is likely that any revisions to the policy would move back towards the pre-2008 system.