Non-domestic rates reform: analysis of responses to consultation on Barclay implementation

10. Barclay Review Recommendation 19 – Reform appeals system

10.1 Questions 15 and 16 relate to Recommendation 19, "Reform of the appeals system is needed to modernise the approach, reduce appeal volume and ensure greater transparency and fairness". The Tribunals (Scotland) Act 2014 provides for the transfer of VACs to Scottish Tribunals. The consultation notes this transfer is planned to take place in 2022. Currently, the appeals process can only result in a decrease in rateable value or the rateable value staying the same. The Barclay Review recommended that it should also be possible for the outcome of an appeal to be an increase in rateable value. The Review anticipated that this will help ensure fairness across non-domestic rates. The BIAG highlighted the importance of ensuring the appeals system is reformed to guarantee an effective delivery system within the new three year revaluation timescale (noted in Recommendation Two).

Question 15 - How should this change be communicated to ratepayers?

10.2 There were 64 responses to Question 15. The Independent Education Sector and the Other Sector did not answer this question. A breakdown of respondent categories can be found in the table below.

Table 15: Respondents Categorised

10.3 There was strong indication that the Scottish Government should be responsible in some part for communicating the changes to the appeals system to ratepayers. To a lesser extent, Local Rating Authorities were also identified as a conduit for communicating changes.

10.4 Communication strategies identified from the responses included: via annual non-domestic rate billing, social media or websites, press releases, in writing (email and letters) and via trade or business associations.

10.5 A suggestion was made that the changes to the appeals system could be communicated in conjunction with the changes to debt recovery, as outlined in Question 13.

Question 16 - Do you have any points about the change to allow valuation appeals to increase?

10.6 There were 78 responses to Question 16, the largest respondent categories were Representative Bodies and Local Authorities. A breakdown of respondent categories can be found in the table below.

Table 16: Respondents Categorised

10.7 There was general agreement with the proposed change to allow rateable values to increase on appeal, this was expressed by all respondent groups except Chartered Surveyors.

10.8 Various implementation concerns were raised with the proposed change to valuation appeals. Concerns included:

• Inconsistencies in valuation of properties,
• Unclear methodology with regard to valuation decisions,
• A potential threat of appeal increases disincentivising small businesses from appealing when they are eligible for lower rates.

10.9 Inconsistencies in the valuation of properties across different geographies was highlighted by Local Authorities, Representative Bodies and ratepayers (Education and Other). There was a call for clarity of the impact an appeal increase or decrease could have on neighbouring or similar properties. The Scottish Chamber of Commerce stated "one business can appeal, see their RV (Rateable Value) reduced, and their next-door neighbour, in an identical property, will never receive a revised value themselves [if they have not appealed]". It was suggested that this could continue a system of unequal valuations on neighbouring or like properties.

10.10 A concern, particularly for Representative Bodies, was the potential threat of appeal increases disincentivising small businesses from appealing when they are eligible for lower rates; for example, eligibility for the Small Business Bonus Scheme. The British Independent Retailers Association (BIRA) for instance stated "the stakes are simply too high and we are concerned that small business will be incentivised to accept that they have to pay too much tax rather than risking an even larger bill". Concerns were not confined to small businesses, the Chartered Institute of Taxation commented that there was "a danger that some ratepayers with sound reasons for submitting an appeal may be put off doing so". Therefore, the new appeals system may be prejudiced towards not only smaller businesses, but may also "create a category of businesses who are paying too much but who are frightened into not enforcing their rights by the potential of even higher bills" (BIRA).

10.11 Some respondents suggested that clarification of the methodology the Assessor used to arrive at valuations would be useful in deciding whether a business should launch an appeal. It was felt that if the Assessor was compelled to publish this method, it would increase the transparency and reassure the ratepayer of consistency and fairness within the system. There were also calls for additional clarity as to the timescale of appeals in relation to the new three year valuation cycle.

10.12 A small number of Local Authorities, Businesses and Representative Bodies highlighted that Assessors already have the power, set out in the Local Government (Scotland) Act 1975^[3] to change valuations once they have been entered onto the roll where errors exist (i.e. valuations are incorrect due to factual or fundamental errors). However, some noted that these powers may need amended to enable the proposals to be fully realised.