Local government finance circular 4/2024: Green Freeports Non-Domestic Rates relief and income retention

Annex A: Tax Incremental Financing (TIF) and Green Freeport (GF) Retention

Baselines

1. For areas where there is both a GF and a TIF with an overlap, on the day before the tax site for the GF is designated, the council will be required to take two baselines for GF retention purposes: one for areas where there is no overlap with the TIF red line area (Area A) and one for areas where there is an overlap (Area B).
2. Each baseline will include a record of every NDR property in each area on the reporting date, and include detail of any reliefs received on this date, as well as other basic information about these properties.
3. The baseline NDR income for the first year, or remainder of the financial year, will be calculated on the basis of the properties in each baseline, following the end of the financial year. The baseline income will then be updated each year through the Annual GF return to take account of changes to properties in the original baseline(s).

Retention

4. For any additional GF income in Area A, income from property improvements or new builds in the area, etc. above the baseline in Area A, taking into account an agreed displacement factor, will be retained by the council.
5. For Area B, any additional income resulting from property improvements or new builds in the area, etc. above the baseline in Area B will be recorded, but will not be retained by the council as ‘GF retention’ until the end of the TIF period, because this additional income will instead be retained under the TIF program, and monies cannot be retained twice. However, the council will retain as GF retention (not TIF retention since only collected amounts are statutorily retained under the TIF program) the value of GF relief awards and any BGA relief awards where the property was also eligible for GF relief. These should be manually added to the amounts at lines C1a and C1b in the return.
6. Once the TIF program ends, the council will retain additional income from Area B taking into account an agreed displacement factor, in a similar fashion to Area A, until the end of the GF period.
7. To facilitate this, the Council will complete and submit to the Scottish Government three annual returns for TIF and Green Freeports:
   1. A GF return covering area A. Properties pre-dating the setting of the GF baseline will form the baseline part of this return, while properties completed after the setting of the baseline will count either as baseline or as additional income, in line with the guidance above.
   2. A TIF return covering area B. Properties pre-dating the setting of the GF baseline will form the baseline part of this return, while properties completed after the setting of the baseline will count either as baseline or as additional income, in line with the guidance above. Any retained amounts relating to properties pre-dating the setting of the GF baseline should be counted as baseline in this return, and will be retained in return at c. After the end of the TIF period, this will become a GF return.
   3. A TIF return, covering the entire TIF area. This should continue to be completed as normal, but any properties completed in area B after the setting of the GF baseline should count towards baseline income in this return, and towards additional income in the return at b. This will enable properties in the overlap area built after the setting of the GF baseline to form part of the retention under GF once the TIF period ends.
8. Following the end of the TIF period, instead of completing the TIF returns, the Council will complete a separate GF return for Area B, and the baseline from this return will be the GF baseline for Area B, and any additional income will be treated as GF additional income.
9. This will allow the Council to separately track the baseline in Area B, which will become part of the GF retention after the end of the TIF period. Until the end of the TIF period, amounts calculated under b. and c. above will be retained under the TIF scheme, while amounts calculated under a. will be retained under the GF scheme. After the end of the TIF period, amounts calculated under paragraph 7a and b above will be retained under the GF scheme, while amounts under paragraph 7c will not be calculated or retained.