Barclay Implementation Advisory Group: Appeals sub-group final report

5. Background

Non-domestic rates are levied on rateable non-domestic properties and based on their rateable value (RV), which in Scotland are derived by fourteen independent Assessors. In order to ensure that RVs reflect changing property rental values over time, these are “revalued” periodically. “Revaluations” occur generally every five years, though the last two were in 2010 and 2017. At each revaluation the Assessor seeks new evidence to ascertain an RV, that is derived from the Net Annual Value,^[8] calculated using different valuation methodologies (Comparative method, Contractor’s method, or Receipts and Expenditure method) according to the type of property. This may involve asking for rent details, or other value-relevant characteristics such as financial accounts, throughputs, extraction rates, etc. In order to ensure consistency, the evidence gathered is benchmarked to a fixed date - this is known as the tone date and is currently two years prior to revaluation. The Assessor informs the proprietor, tenant or occupier (PTO) of their property’s RV through the issuance of a Valuation Notice.  

Assessors issue a Return of Information (ROI) request to PTO for the majority of rateable non-domestic properties – those where rental or cost information is required to revalue them. Despite the fact that the failure to return the information is liable to a criminal penalty, the SAA reports that returns are poor – with little over 50%^[9] of rental and turnover information returned ahead of the 2017 revaluation.^[10]

This point was further raised by the Barclay Review, which stated:^[11] “Considerable evidence was presented to us to indicate that the provision of information by ratepayers to Assessors to enable Assessors to accurately derive RVs was often poor and that this happened for various reasons, including where ratepayers were advised to do so by a professional rates advisor (who stood to gain a portion of any reduction in rates paid following a successful appeal).” The absence of adequate evidence can have a detrimental impact on the derivation of RVs. 

The Barclay Review recommended that Assessors be given greater information-gathering powers.  The Non-Domestic Rates (Scotland) Bill introduces a civil penalty for not complying with an Assessor ROI request, removes the exisiting criminal penalty for this, and provides Assessors with the power to request information from any person where they think this is reasonably required to carry out a valuation.  

All rateable non-domestic properties are entered on the Valuation Roll (“the Roll”) – the statutory list maintained by Assessors. 233,386 properties were entered on the Roll at the 2017 revaluation. Shops were the most prevalent type of property on the Roll, making up nearly a quarter (23%) of the number of properties and RV on the Roll. Industrial subjects and offices are the next two largest categories in terms of numbers and RV. Together, these three categories account for 63% of properties on the Roll, and 54% of the RV (Table 3).

Table 3: Non-Domestic Rates Properties by Classification (as at 1 April 2017)^[12]

	Number of properties	RV (£)	% of Properties on Valuation Roll	% of RV on Valuation Roll
Shops	53,709	1,611,664,302	23.0%	21.9%
Industrial Subjects	49,050	1,256,125,440	21.0%	17.1%
Offices	44,061	1,082,525,979	18.9%	14.7%
Leisure, Entertainment, Caravans, etc.	22,299	281,406,378	9.6%	3.8%
Other	16,156	141,617,533	6.9%	1.9%
Public Service Subjects	10,082	356,549,995	4.3%	4.8%
Religious	6,101	56,293,665	2.6%	0.8%
Hotels	5,469	275,073,193	2.3%	3.7%
Garages and Petrol Stations	4,245	74,937,080	1.8%	1.0%
Public Houses	3,732	132,642,075	1.6%	1.8%
Education and Training	3,705	559,765,675	1.6%	7.6%
Health and Medical	3,233	228,000,365	1.4%	3.1%
Sporting Subjects	3,010	18,120,492	1.3%	0.2%
Care Facilities	2,975	118,542,034	1.3%	1.6%
Advertising	1,924	10,538,430	0.8%	0.1%
Cultural	1,419	53,810,920	0.6%	0.7%
Statutory Undertaking	1,065	935,200,808	0.5%	12.7%
Quarries, Mines, etc.	660	17,990,509	0.3%	0.2%
Communications	349	24,645,995	0.1%	0.3%
Petrochemical	142	122,224,305	0.1%	1.7%
Total	233,386	7,357,675,173	100.0%	100.0%

Based on draft RVs provided to the Scottish Government by Assessors on 4 October 2016, 98% of the properties on the Roll had been given RVs, with less than 3,000 properties having not received a draft RV on that date. 87% of properties receiving a draft RV saw no change between October 2016 Draft RV and April 2017 RV. 

Assessors are also required to keep property RVs up to date by reflecting alterations and extensions, new construction and demolitions and any other Material Change of Circumstances (MCC). In 2018-19 Assessors made 19,149 changes to property RVs.

5.1. Appeals system

The key legislation that covers the appeals system are:

• Lands Valuation (Scotland) Act 1854
• Local Government (Scotland) Act 1975
• The Valuation Appeal Committee (Procedure in Appeals under the Valuation Acts) (Scotland) Regulations 1995
• The Valuation Timetable (Scotland) Order 1995

RVs can be appealed when a new entry is made to the Roll, when the RV is re-assessed at a new revaluation, or when there is an MCC.^[13] PTO have six months to appeal their value at each revaluation. There is also a six-month right of appeal when there is a change of interest in the property (change in PTO). PTO all have the right to lodge an appeal on a given property, and in some cases different parties lodge appeals on the same property.

Anybody may also lodge a complaint against an entry in the Roll to the Assessor.^[14] 

Appeals are made to Valuation Appeal Committees (VACs) but are lodged with the Assessor in the first instance, potentially through a professional advisor who will provide advice and assist the appellant in the appeal-lodging process. They are then notified to the VAC Secretary. 

VACs hear both non-domestic rates appeals, and appeals related to Council Tax (see Annex A). They comprise members drawn from a Valuation Appeal Panel for each Valuation Area who are appointed by the Sheriff Principal.

Appeals are heard by VACs, but complex cases can be requested for referral to the Lands Tribunal for Scotland (LTS).^[15] Their decisions can be appealed on points of law only to the Lands Valuation Appeal Court (LVAC). VACs have to dispose of all appeals by a statutory deadline which varies according to when an appeal is lodged. There is no such deadline for the LTS or LVAC to determine appeals, or for a VAC to determine an appeal that is referred back to them by the LVAC. 

The VAC must give the parties to an appeal at least 105 days notice of the hearing date. The statutory disposal date for revaluation appeals is 31 December in the third year after revaluation (31 December 2020 for the 2017 revaluation^[16]).  Appellants also have the right to request an expedited hearing from the VAC, to which the VAC must respond with a written explanation if it is unable to comply with the request.  

In practice appeals are cited for a hearing date by the VAC, although a VAC Secretary may consult with the Assessor and possibly the appellant or their representative.

At least 35 days prior to a hearing date, the appellant must set out in writing to the Assessor the grounds for their appeal, and the proposed alternative RV and grounds on which that value was arrived at. Within 28 days of receiving this, and no later than 21 days before the hearing, the Assessor must provide in writing to the appellant the grounds on which the entry in the Roll was arrived at.

The issuance of the 105-day citation notice for the hearing in many cases marks the starting-point for the appellant and the Assessor to exchange information in an attempt to negotiate an agreement in advance of the hearing.  The Appeals sub-Group heard that limited information is usually exchanged ahead of this citation notice.

The vast majority of appeals are resolved during this 105-day period and hearings often do not take place. By means of illustration, of the 16,398 appeals (revaluation and running roll appeals) lodged between 2010 and 2015 with the Grampian Assessor, 97% were resolved prior to VAC hearing. Of the 599 remaining cases, three-quarters were not resolved prior to the VAC hearing dates and the remainder was referred to the LTS. Of those appeals that were due to be heard by the VAC, only six cases were actually heard and determined by VAC, whereas 243 appeals were dismissed for non-attendance on the appellant’s part.^[17] However, the Appeals sub-Group cautioned that these figures are purely illustrative and cannot be used to extrapolate figures across different cycles, or across different parts of Scotland. 

The Scottish Government collects and publishes data on revaluation appeals on a quarterly basis.^[18] Of the 233,386 rateable non-domestic properties in Scotland, 73,882, or 32%, were subject to appeals following the 2017 revaluation (Table 4 and Figure 1). 60% of those appeals had been resolved by 30 June 2019, although this only represents a third of the RV that was appealed; large complex cases tend to be dealt with towards the end of the appeal disposal period. Around three-quarters of appeals resolved at that point had not resulted in any change in RV. 

Table 4 compares the appeal disposals at the 2010 and 2017 revaluation at the same point in the cycle. It shows that there has been slower resolution of appeals in the 2017 revaluation cycle (60%) compared to the 2010 revaluation cycle (69%). The Appeals sub-Group suggested that this may be related to a number of factors, including:

• the order in which different property classes are being cited in the 2017 cycle differs from the 2010 cycle

• the seven-year period between the 2010 and 2017 cycle compared to five years at the 2010 revaluation
• the particular economic circumstances prevailing at the tone date for these two revaluations (1 April 2008 and 1 April 2015)
• the increase in the number of entries on the Roll between the two cycles, which is close to 20%. As at 1 April 2010 there were 213,311 properties on the Roll.^[19]  As at 1 April 2017 there were 233,386^[20], rising to 252,153 as at 1 June 2018 – following in addition to the ‘standard’ increase in property numbers over time, the inclusion of 11,914 shootings and deer forests to the Roll – these having been exempt from rating prior to the Land Reform (Scotland) Act 2016
• the resources available to both Assessors and rating advisors.  

Table 4: Percentage of appealed properties for which appeals were disposed of following the 2010 and 2017 revaluations, Scotland^[21]

27 months after revaluation	2010 Cycle	2017 Cycle
Share of Roll appealed	31%	32%
Share of RV appealed	75%	73%
Share of appeals resolved	69%	60%
Share of appealed RV resolved	41%	34%

Figure 1: Percentage of appealed properties for which appeals were disposed of following 2010 and 2017 revaluations, Scotland^[22]

Note: Since Quarter 1 (Q1) of Year 1 ended before the September 2010 & 2017 appeals deadlines, figures for Q1 have been excluded. 

Aside from revaluation appeals, there are also “running roll” appeals. These are due to changes occurring after the revaluation and include MCC appeals, new PTO, or new entries in the Roll. The proportion of revaluation appeals to running roll appeals can vary markedly in different areas and across different revaluation cycles. Assessors report that 5,774 running roll appeals were lodged across Scotland in 2018-19, while 5,105 running roll appeals were also resolved that year. There was a total of 9,985 running roll appeals at the start of 2018-19, rising to 10,654 at the end of the year. While these figures can provide some indication of the potential magnitude of the number of running roll appeals relative to the number of revaluation appeals in the system at any point in time, these ratios vary not only within a given cycle, but may also vary considerably from one cycle to another. For instance, the number of running roll appeals may increase if a potential relevant appeal decision is anticipated. This was the case for instance in 2010, 2011 and 2012 due to the outstanding case Assessor for Fife v. Mercat Kirkcaldy Limited and Others.