Local government finance circular 5/2024: non-domestic rates relief guidance

Annex A – Non-domestic rates relief: information for scottish local authorities

INTRODUCTION

1. Non-domestic rates (NDR), often referred to as business rates, are levied on non-domestic properties, subject to statutory exemptions and reliefs. The NDR framework for Scotland is devolved to the Scottish Parliament and Scottish Government, and although broadly similar, is different in detail from arrangements in the rest of the United Kingdom (UK).
2. Valuation of non-domestic properties is undertaken independently by the Scottish Assessors, subject to statutory appeal processes, with all valuations freely accessible on the Scottish Assessors Association’s webiste.[1] Scottish Ministers annually set a national poundage, plus any supplements, which are applied to a property’s rateable value (RV). The administration of NDR, including billing, collection, enforcement and determination of rates relief, is undertaken by local authorities. A ratepayer may appeal their bill to the council on the grounds that they are being improperly charged.[2]
3. Certain types of properties are statutorily exempt from NDR, either through exclusion from the valuation roll (e.g. agricultural land and buildings) or exemption from NDR (e.g. churches, lighthouses and fishings), the effect of these being that the property is not liable for rates.
4. A number of reliefs are available for certain types of property nationally under Scottish law. These are subject to the UK’s international commitments on subsidy control arising from, amongst others, the Subsidy Control Act 2022, the EU-UK Trade and Cooperation Agreement (TCA), World Trade Organisation Membership and commitments arising from international treaties and agreements to which the UK is a party. 
5. Some reliefs are mandatory (i.e. they must be applied) and some are discretionary (i.e. local authorities have discretion as to their application).
6. Under Part 11 of the Community Empowerment (Scotland) Act 2015, local authorities may also reduce or remit NDR. In doing so, they must have regard to the authority’s expenditure and income and the interests of persons liable to pay council tax set by the authority. The revenue impact of local reliefs must be borne by the local authority unless otherwise specified. 

This Document

7. Information in this document is provided by the Scottish Government, in conjunction with COSLA, to Scottish local authorities.
8. This document has no statutory basis, is offered without prejudice to relevant legislation and legal decisions, and does not constitute legal advice. 
9. This document aims to inform a mutual understanding amongst local authority practitioners. It includes general information relating across the different reliefs, and specific information relating to each relief.
10. Given their responsibilities for managing public funds, it is up to local authorities to ensure that procedures for administering relief, including reviewing and re-application processes, are suitably robust, including for audit purposes.
11. This document refers to amended legislation rather than amending legislation. For example, the Non-Domestic Rates (Telecommunication Installations) (Scotland) Regulations 2016 have to date been subject to a number of amendments – and reference is made to the 2016 Regulations.

SUBSIDY CONTROL

Background

12. The Subsidy Control Act 2022 is applicable from 4 January 2023.
13. All public authorities must have regard for the Subsidy Control Act 2022 as well as commitments in the EU-UK TCA, Withdrawal Agreement, Northern Ireland Protocol, World Trade Organisation rules (including the Agreement on Subsidies and Countervailing Measures), and Trade Agreements between the UK and non-EU countries. Non-domestic rates reliefs, like other subsidy or support measures, may be subject to the conditions set out in these international agreements. 
14. Relevant links are provided below:
    1. Subsidy Control Act 2022
    2. UK Subsidy Control Statutory Guidance
    3. Scottish Government Subsidy Control Guidance

Defining a Subsidy

15. The Subsidy Control Act 2022 (“the Act”) defines a subsidy as financial assistance awarded to an enterprise involved in the provision of goods or services which:
    1. is given, directly or indirectly, from public resources by a public authority,
    2. confers an economic advantage on one or more enterprises,
    3. is specific, that is, such that it benefits one or more enterprises over one or more other enterprises with respect to the production of goods or the provision of services, and
    4. has, or is capable of having, an effect on:
       1. competition or investment within the UK
       2. trade between the UK and a country or territory outside the UK, or investment as between the UK and a counry or territory outside the UK
16. The Act prohibits some categories of subsidy outright because of the greater risk they pose of significantly distorting competition or investment in the UK, or international trade or investment. The UK also has obligations under international agreements to prohibit many of these kinds of subsidies. These categories are:
    1. Any subsidy that would guarantee an unlimited quantity of liabilities or debts, or which would guarantee a finite amount of liabilities or debts but over an indefinite period.
    2. A subsidy that is contingent in law or in fact, whether solely or as one of several other conditions, upon export performance relating to goods or services.
    3. Subsidies that are contingent on the use of domestically produced goods or services, often known as ‘local content’ subsidies.
    4. Relocation subsidies where the subsidy contains a condition requiring the relocation and the relocation would not occur without the subsidy, except for the purposes of addressing social or economic disadvantage.
    5. Rescuing and restructuring subsidies to ailing or insolvent enterprises unless certain requirements are met.
17. Other specific prohibitions and requirements are set out in Chapter 5 of the UK Subsidy Control Statutory Guidance.

Minimal Financial Assistance (MFA) Threshold

18. The Act sets out common principles that must be met for subsidies. The designing and granting of subsidies must consider these principles on a case-by-case basis – including those under the Community Empowerment (Scotland) Act 2015. Failure to do so could leave a public authority open to judicial review in the UK.
19. The principles are (Schedule 1 of the Act):
    1. Subsidies pursue a specific public policy objective to remedy an identified market failure or to address an equity rationale (such as local or regional disadvantage, social difficulties or distributional concerns).
    2. Subsidies should be proportionate to their specific policy objective and limited to what is necessary to achieve it.
    3. Subsidies should be designed to bring about a change of economic behaviour of the beneficiary. That change, in relation to a subsidy, should be conducive to achieving its specific policy objective, and something that would not happen without the subsidy.
    4. Subsidies should not normally compensate for the costs the beneficiary would have funded in the absence of any subsidy.
    5. Subsidies should be an appropriate policy instrument to achieve their specific policy objective and that objective cannot be achieved through other, less distortive, means.
    6. Subsidies should be designed to achieve their specific policy objective while minimising any negative effects on competition and investment within the UK.
    7. Subsidies’ beneficial effects (in terms of achieving their specific policy objective) should outweigh any negative effects, including in particular negative effects on competition and investment within the UK, and international trade and investment.
20. Minimal Financial Assistance (MFA) allows public authorities to award low value subsidies without needing to comply with the majority of the subsidy control requirements and provides an exemption from the above principles. MFA has a financial threshold which allows recipients to receive up to £315,000 over three financial years (the current and preceeding two financial years).
21. The MFA level of £315,000 replaces the TCA minimum financial assistance of 325 Special Drawing Rights (which replaced the EU de minimis regulation under the Treaty of the Functioning of the European Union which limited support to a beneficiary to €200,000 over three years).
22. Although subsidies given as MFA are exempt from the main substantive subsidy control requirements, there are two prohibitions that apply to all subsidies including MFA - the prohibition on giving subsidies relating to goods for export performance and the prohibition on domestic content.

Awarding a subsidy under MFA

23. Public authorities awarding subsidies as MFA must comply with certain procedural requirements.
24. Before awarding an MFA subsidy, the public authority should provide the intended recipient enterprise with an ‘MFA notification’ which is a written statement:
    1. explaining that the public authority is proposing to give to the enterprise a subsidy by way of MFA,
    2. specifying the gross value amount of the assistance, and
    3. requesting written confirmation from the enterprise that the MFA threshold specified in section 36(1) of the Subsidy Control Act 2022 will not be exceeded by the enterprise receiving the proposed assistance.
25. The public authority can only award the subsidy when it has received this confirmation. If the enterprise confirms it will exceed the threshold on receipt of the subsidy, it can still elect to receive part of the subsidy up to the threshold as MFA. Any remaining balance will be subject to the full subsidy control requirements associated with providing a subsidy.
26. When awarding an MFA subsidy, the public authority must give the intended beneficiary an ‘MFA confirmation’ which is a written statement that confirms:
    1. that the subsidy is given as MFA,
    2. the date on which it is given, and
    3. the gross value amount of the assistance.

MFA Thresholds Calculation

27. Any previous subsidies given under the TCA should be cumulated with any subsidies given as MFA. Therefore, it is necessary to account for any previous payments made over the three year period (the elapsed part of the current financial year and the two financial years immediately preceding the current financial year). 

Transparency Requirements

28. The transparency rules set out in the Act require public authorities to upload details of both subsidy schemes and awards to the UK Government’s Subsidy Database. Transparency obligations apply regardless of any information that a beneficiary believes is commercially sensitive.
29. Details of every subsidy payment must be uploaded to the transparency database within three months of the date of award (unless an exemption applies). All subsidy awards which exceed £100,000 are required to be uploaded to the database. For information on how to upload details to the transparency database please refer to the Scottish Government’s webpage on transparency requirements.

Relief Restriction Regulations

30. The Non-Domestic Rates (Restriction of Relief) (Scotland) Regulations 2023 came into force on 1 April 2023 and require that the granting of prescribed mandatory non-domestic rates reliefs must be compatible with the Subsidy Control Act 2022, in particular the subsidy control requirements set out in the Act.
31. Under the Regulations, from 1 April 2023 reliefs awarded as MFA must meet the following requirements:
    1. The total amount of minimal financial assistance must not exceed the amount set out in section 36(1) of the Subsidy Control Act 2022 (currently £315,000 over the current and preceeding two financial years);
    2. The procedural requirements in section 37 of the Act must be followed; and
    3. Where the relief exceeds the amount specified in section 36(4) of the Act (currently £100,000), certain requirements as to transparency must be followed.
32. These regulations also amend the Non-Domestic Rates (Restriction of Relief) (Scotland) Regulations 2021 to specify that those regulations only apply in the financial years 2021-22 and 2022-23.

GENERAL INFORMATION

33. Determination of each relief by the council is generally based on an application from the rateable occupier (for some reliefs an application is statutorily required). Recurrent annual applications are not necessarily required, but in some cases statutorily are; for example, councils may choose to align a reapplication cycle with the revaluation cycle.
34. To determine the amount of relief to be awarded, local authorities should take steps as they see fit to ensure they have complete, accurate and up-to-date information on all properties occupied by the applicant in Scotland i.e. across all local authority areas. Application is made to each local authority in whose area the property for which relief is sought is located, and a separate application is made for each relief. Applicants should provide details of all non-domestic properties in Scotland which they own, lease or are entitled to occupy, regardless of whether they are occupied or vacant.
35. The applicant must be listed as the property’s rateable occupier in the council’s assessment roll, or authorised to apply on behalf of the rateable occupier.
36. An application for a relief to which subsidy control rules apply must include a declaration of all other public assistance received (see Subsidy Control section above). The local authority should consider undertaking due diligence. Any application not providing correct information may be considered fraudulent, in which case appropriate action may be taken against the applicant.
37. For some reliefs, such as Charity Relief, the council may require the applicant to supply additional documentary evidence in support of their application. Examples of documentary evidence required in support of applications for certain reliefs are at Annex B. A council may decide that a single letter e.g. from a surveyor, agent, regulator or law-enforcement organisation, on its own is not sufficient evidence.
38. A completed application form signed and dated by the rateable occupier is necessary for the local authority to begin its consideration. Local authorities may accept applications by email, and this is to be encouraged.
39. Rates bills to ratepayers should include a list of the reliefs the property is in receipt of.
40. Relief applications relating to utilities valued under the designated Assessors’ regime[3] should be passed to the relevant billing authority as follows:
    1. electricity – South Lanarkshire Council
    2. water – Fife Council
    3. gas – West Dunbartonshire Council
    4. docks and harbours – Falkirk Council
    5. railways – Highland Council
    6. canals – Highland Council
    7. fixed-line telecommunications – Renfrewshire Council
41. Some reliefs are mandatory i.e. if the applicant is deemed eligible then the relief must be awarded.
42. Some reliefs are discretionary i.e. if the applicant is deemed eligible then the relief may be awarded but this is the local authority’s choice.
43. If backdated relief is applied for, local authorities will need to establish whether the applicant has been liable for the property’s rates for the period in question (they may request supporting evidence from the applicant), and also the applicable relief legislatively provided for relating to different time periods.
44. Funding arrangements for reliefs between local authorities and the Scottish Government are set out in The Non-Domestic Rating Contributions (Scotland) Regulations 1996. The cost of discretionary reliefs is generally 75% funded by the Scottish Government and 25% by the awarding council, except for discretionary sports clubs relief awarded under 4(5)(c) of the Local Government (Financial Provisions etc.) (Scotland) Act 1962, Green Freeports relief and Investment Zone Relief, which are fully funded by the Scottish Government. The discretionary reliefs are:
    1. Charity Relief ‘top-up’ of up to 20% for OSCR-registered charities;[4]
    2. Charity Relief of up to 100% for certain other not-for-profit organisations;[5]
    3. Sports Club Relief ‘top-up’ of up to 20% for HMRC-registered Community Amateur Sports Clubs (CASCs);[6] 
    4. Sports Club Relief of up to 100% for certain other not-for-profit organisations;[7] 
    5. elements of Rural Relief;
    6. Hardship Relief; and
    7. Stud Farms Relief.
45. Local reliefs[8] are fully funded by the Council, with the exception of Green Freeports relief and Investment Zones Relief.

BUSINESS GROWTH ACCELERATOR (BGA) RELIEF

46. The key legislation is The Non-Domestic Rates (Relief for New and Improved Properties) (Scotland) Regulations 2022, as amended. Councils may be assisted in the idenitification of properties eligible for this relief by a mark on the valuation roll required under section 2A of the Local Government (Scotland) Act 1975 flagging entries that relate to newly buit or improved property.
47. The regulations for this relief are not time-limited, i.e. they do not have an expiry date. Relief in respect of 2018-19 can be applied for at any time. Relief for 2019-20 and 2020-21 had to be applied for in the year in which it was sought. Relief in respect of 2021-22 can be applied for at any time and from 1 April 2023 the relief can be applied for in respect of the financial year preceding the financial year in which the application is being made.
48. Properties that contain new buildings are eligible for 100% mandatory new-build relief until twelve months after they are first occupied. Improved properties that contain buildings are eligible to see no rates increases for 12 months until after the RV has been amended as a result of the improvement.
49. The 2022 regulations set out four regulations under which relief can be granted:
    1. New-build (1): Regulation 4 provides for 100% relief to the entire RV of the property for twelve months until after first occupation. Where a new build has been entered in the valuation roll within the last 12 months, 100% relief will be available until 12 months after the property becomes occupied, or four years after the date on which the entry in the valuation roll took effect, whichever is sooner. Where the new build has been entered into the valuation roll more than 12 months previously, 100% relief is available until 12 months after the property becomes occupied or the latter of the following dates: 31 March 2025 or four years after the date that the entry in the valuation roll took effect. This applies to new entries on the Roll made under section 2(1)(b) of the Local Government (Scotland) 1975 Act containing one or more buildings or parts of a building, none of which were shown in any entry in the roll for the day prior to the day that entry takes effect.
    2. New-build (2): Regulation 6 provides for 100% relief to the entire RV of the property, for twelve months until after first occupation. Where a new build has been entered in the valuation roll within the last 12 months, 100% relief will be available until 12 months after the property becomes occupied, or four years after the date on which the entry in the valuation roll took effect, whichever is sooner. Where the new build has been entered into the valuation roll more than 12 months previously, 100% relief is available until 12 months after the property becomes occupied or the latter of the following dates: 31 March 2025 or four years after the date that the entry in the valuation roll took effect. This applies to entries that contained no buildings (e.g. ground entries in the Roll). This applies to entries on the Roll made under section 2(1)(d) of the Local Government (Scotland) 1975 Act containing one or more buildings or parts of a building, none of which were shown in any entry in the roll for the day prior to the day that entry takes effect.
    3. New-build (1 or 2) + improvements: Regulation 8 sets out how properties in receipt of one of the above two types of new-build relief are treated when they are further improved.
    4. Regulation 10 provides for delayed increase in rates bills for 12 months on existing entries in the Roll which comprise a building where there has been a property improvement. 100% relief is available only on the increase in RV, which is equal to the final RV minus the RV prior to the commencement of the works. Examples would typically include an extension to the rear of a shop; the erection of a new building in an entry that already has buildings; the installation of a sprinkler system, airconditioning, underfloor heating, or solar panels.
50. Property improvements comprise the installation of plant and machinery that falls within class 4 in the schedule of the Valuation for Rating (Plant and Machinery) (Scotland) Regulations 2000.
51. If the property was an existing dwelling or other building that was previously exempt from the valuation roll immediately prior to being entered on the roll, then it is not eligible for BGA Relief. 
52. Where an unoccupied property in receipt of new-build relief is divided, each new entry continues to be eligible for relief until twelve months after it is first occupied. Where an occupied entry in the Roll in receipt of new-build relief is split, relief continues to be available on each unit until the end of this twelve-month occupation period but no more.
53. Where an increase in RV is due to a split, merger or reorganisation, a property is not eligible for relief, even if the process involves for instance the creation of a new building.
54. BGA for property improvements is available even where there is an increase in RV due in whole or in part to a change in the way the lands and heritages are being used.[9] A property that was converted from one type of use to another (e.g. office to hotel) may thus qualify for relief, subject to the other eligibility criteria.
55. The local authority determines whether a property is eligible for relief, and may wish to consult the Assessor’s office to discuss eligibility. The Non-Domestic Rates (Scotland) Act 2020 provides that Assessors will identify new builds and improved properties with a marker in the Valuation Roll in order to facilitate identification from 1 April 2021. From 1 April 2022, the Non-Domestic Rates (Valuation Roll) (Modification) (Scotland) Regulations 2022 provides that the installation of specified plant and machinery or increases in rateable value of lands and heritages where there has in part been a change in the way they have been used will also be identified on the roll by Assessors.
56. Local authorities are encouraged to liaise with the assessor if a property in the above circumstances applies for BGA Relief, in order to confirm eligibility for the relief.
57. This relief is mandatory and 100% funded by the Scottish Government.
58. This relief requires an application form.
59. BGA Relief applies generally for properties of a certain type (buildings) and in certain circumstances (new and improved) and is therefore unlikely to be considered a subsidy. 

CHARITY RELIEF

60. The key legislation is Section 4 of the Local Government (Financial Provisions etc.) (Scotland) Act 1962.
61. Properties that are either (i) occupied by a charity in the Scottish Charity Register, held by the Scottish Charity Regulator (OSCR),[10] or by trustees thereof, and that are used wholly or mainly for charitable purposes; or (ii) held on trust for use as an almshouse, are entitled to 80% mandatory Charity Relief.[11]
62. The legislation for this relief is not time-limited, i.e. there is no expiry date.
63. This mandatory element of the relief is 100% funded by the Scottish Government.
64. The local authority also has discretion to ‘top up’ this relief to 100%.[12] This element of the relief is 75% funded by the Scottish Government. This means that for a property receiving 80% mandatory relief and a 20% discretionary top up, this relief would be 95% funded by the Scottish Government (80*100 + 20*75).
65. The local authority determines whether occupation is wholly or mainly for charitable purposes. A trading arm of a charity, which is itself a separate entity that is not a charity, may not be eligible for mandatory relief. For charity shops to be eligible, their use must be wholly or mainly for the sale of goods donated to the charity and the proceeds of sale (after expenses) must be applied for the purposes of the charity. To inform this consideration, the relative proportion of new and donated goods sold on the premises may be requested from the occupier.
66. Properties occupied by certain other not-for-profit organisations are eligible to receive up to 100% relief at the discretion of the local authority.[13] To qualify, the purpose of occupation must mainly be charitable or otherwise philanthropic or religious or concerned with education, social welfare, science, literature or the fine arts.
67. The Non-Domestic Rates (Scotland) Act 2020 removes eligibility for Charity Relief from mainstream independent schools[14], leaving it in place for special schools[15] and schools for musical excellence within that category. It does not affect these schools’ charitable status. This provision was commenced on 1 April 2022.[16] 
68. Local authorities may have their own policies for awarding discretionary relief. Some current examples of eligibility criteria are:
    1. premises does not hold a liquor or gaming licence;
    2. premises is not used to carry out commercial operations;
    3. the organisation benefits the community.
69. A separate application will normally be required for each rateable property. Joint occupation or use of the premises with another party that does not meet the criteria may affect eligibility. Full details must be provided or the application could be deemed fraudulent and action taken against the applicant. For organisations not registered with OSCR, the local authority may ask for details of their constitution. Where there is any dubiety, local authorities may visit the premises.
70. The 80% mandatory relief appears to be available across the UK and could be regarded as a general measure and therefore unlikely to be considered a subsidy. Any discretionary relief applying to activity not economic in nature is also unlikely to be a subsidy. For charity shops and other commercial activity, local authorities will have to consider whether this must be awarded as MFA, or whether the relief award is subject to other subsidy control requirements.

DAY NURSERY RELIEF

71. The key legislation is The Non-Domestic Rates (Day Nursery Relief) (Scotland) Regulations 2018.
72. 100% relief is available where the premises are used wholly or mainly as a day nursery. This relief is available for properties in all sectors - private, public and charitable.
73. The legislation for this relief is not time-limited i.e. there is no expiry date.
74. An application must be made for this relief.
75. This relief is likely to be considered a subsidy under the Act. Public authorities should consider whether this relief is awarded as MFA, or whether it meets the other subsidy control requirements of the Act. This relief is listed in the Non-Domestic Rates (Restriction of Relief) (Scotland) Regulations 2023.

DIPLOMATIC MISSIONS AND CONSULATES EXEMPTION FROM RATES

76. The key legislation is article 23 of the Vienna Convention on Diplomatic Relations and article 32 of the Vienna Convention on Consular Relations.
77. Buildings occupied by embassies, consulates or other diplomatic missions are exempt from rates where the sending state is party to the Vienna Convention on Diplomatic Relations or the Vienna Convention on Consular Relations.
78. The legislation for this exemption is not time-limited i.e. there is no expiry date.

DISABLED RATES RELIEF

79. The key legislation is the Rating (Disabled Persons) Act 1978. Up to 100% relief may be available where:
    1. residential accommodation is provided for the care or aftercare of people who are disabled;
    2. facilities are provided for the training of people who are disabled; or
    3. welfare services or workshops for disabled persons are provided.
80. The legislation for this relief is not time-limited i.e. there is no expiry date.
81. The applicant will generally be asked to confirm the percentage of floor space used for the qualifying purposes. Floor plans relating to the qualifying area, or area for which relief is to be applied, may also be requested.
82. To determine the eligibility for care homes, the council may request confirmation of registration with Social Care and Social Work Improvement Scotland (otherwise known as the Care Inspectorate).
83. If the property is deemed eligible and the qualifying area has been confirmed at 100%, then the council will generally award 100% rates relief.
84. If the property is deemed eligible and the qualifying area has been confirmed at less than 100%, the council will generally request the Assessor to apportion qualifying parts of the property. The percentage of qualifying area will be used to calculate the percentage of relief to be awarded, provided the qualifying area is greater than 50%.[17]
85. The 100% mandatory element appears to be available across the UK and could be regarded as a general measure and therefore unlikely to be considered a subsidy.

DISTRICT HEATING RELIEF

86. The key legislation is The Non-Domestic Rates (District Heating Relief) (Scotland) Regulations 2017.
87. Properties used wholly or mainly for the purposes of a district heating network may receive 50% relief. This relief is available until 31 March 2032.[18]
88. From 1 April 2024, a property used wholly or mainly for the purposes of a district heating network may receive 90% relief where it is powered by renewable energy sources, and at least 80% of the thermal energy generated by the network in the year derives from renewable sources, as defined in the legislation (see para 134). This relief is available until 31 March 2027[19].
89. An application is required for this relief. Where actual output is not yet available, estimates may be provided with the applicant required to confirm that at least 80% of the thermal energy generated will derive from renewable sources in that particular year.
90. This relief is likely to be considered a subsidy under the Act and is listed in the Non-Domestic Rates (Restriction of Relief) (Scotland) Regulations 2023. Public authorities should consider whether this relief is awarded as MFA, or whether it meets the other subsidy control requirements of the Act.

EMPTY PROPERTY RELIEF

91. Empty Property Relief (EPR) was devolved to individual local authorities from 1 April 2023[20]. All elements of EPR were devolved including rates exemptions for prescribed vacant property (e.g. unoccupied listed buildings), enabling councils to offer any local relief for unoccupied properties in a way that is tailored to local needs. The Scottish Government, in line with the independent Barclay Review of Non-Domestic Rates, supports measures that help bring empty property back into economic use.
92. Local authorities have been provided with a financial allocation to give effect to the devolution of EPR, and it is for individual local authorities to decide whether to use the powers they have to administer a local relief on empty (unoccupied) properties from 1 April 2023. Powers to award discretionary local reliefs are contained in section 3A of the Local Government (Financial Provisions etc.) (Scotland) Act 1962. More details on this can be found within the ‘Local Reliefs and Reductions’ section.
93. Prior to 1 April 2023, EPR provided a level of rates relief, or an exemption, on unoccupied non-domestic properties. See LG Finance Circular 04/2022 for more detail.
94. Part-occupation[21]: if it appears to the council that part of a property is unoccupied but will remain so for a short time only, it may ask the Assessor to apportion the RV between the occupied and unoccupied parts. In that case, the Assessor must apportion accordingly and the following applies from 1 April 2023: the RV for the whole property is taken for rating purposes to be the apportioned value of the occupied portion only. The Valuation Roll itself is not altered, the apportioned figures being supplied to the council by the Assessor on request.
95. Part-occupation is generally considered when a ratepayer can clearly evidence that part of the property is empty. The start date for relief is the later of the date part-occupation commenced or the start of the financial year in which the council’s request was made to the Assessor. The end date is the earliest of: the end of the part occupation; the end of the financial year in which the council’s request was made to the Assessor; a further apportionment being made; or the property become fully unoccupied. The council may extend the duration into the following financial year.
96. As with statutory reliefs, councils must consider and comply with the Act. A local relief scheme could potentially not be a subsidy if it were regarded as a general measure. EPR was previously regarded as a general measure and unlikely to require to be awarded within MFA limits.
97. A local relief for empty property, following a similar approach to mandatory EPR, may potentially be deemed not to be ‘specific’ and not qualify as a subsidy. Councils should however seek their own legal and subsidy advice. 

ENTERPRISE AREAS RELIEF

98. The key legislation is The Non-Domestic Rates (Enterprise Areas) (Scotland) Regulations 2016.[22]
99. Properties concerned with specific sectors in four defined Enterprise Areas, each of which comprises a number of defined geographic locations (see Table 1), may be eligible. Boundaries for each location are set out in a published series of maps.[23]
100. Reliefs and thresholds are set out in Table 2. Dundee Port, Nigg and part of Irvine are within the wider Enterprise Area strategic locations, but are not eligible for rates relief.[24]

Table 1: Enterprise Areas subject to rates relief (including local authority area)

Life Sciences	Low Carbon / Renewables North
Irvine – part of site (North Ayrshire) Forres (Moray) Inverness Campus (Highland) BioQuarter (Edinburgh) BioCampus (Midlothian) BioCity (North Lanarkshire)	Hatston (Orkney) Arnish (Western Isles Scrabster (Highland) Lyness (Orkney)
General Manufacturing & Growth Sectors	Low Carbon / Renewables East
Creative Clyde (Glasgow City) Prestwick International – Aerospace (South Ayrshire) West Lothian – Food and drink manufacturing (West Lothian)	· Leith (Edinburgh)

Table 2: Enterprise Areas Reliefs and thresholds

Value	Rates relief 2024-25	Rates relief 2025-26
£120,000 or less	66.7%	33.3%
Over £120,000 and up to £240,000	33.3%	16.7%
Over £240,000 and up to £480,000	16.7%	8.3%
Over £480,000 and up to £1,200,000	6.7%	3.3%
Over £1,200,000 and up to £2,400,000	3.3%	1.7%
Over £2,400,000	1.7%	0.8%

101. Only businesses undertaking certain activity in each area, as defined at Annex C, are eligible. Only new-build properties (entered in the valuation roll after 1 April 2012) or properties which were vacant for at least a three-month period are eligible.
102. This relief is mandatory and 100% funded by the Scottish Government.
103. This relief is likely to be considered a subsidy under the Act and is listed in the Non-Domestic Rates (Restriction of Relief) (Scotland) Regulations 2023. Public authorities should consider whether this relief is awarded as MFA, or whether it meets the other subsidy control requirements of the Act.

FRESH START RELIEF

104. The key legislation is the Non-Domestic Rates (Levying and Miscellaneous Amendment) (Scotland) Regulations 2024. This legislation relates to 2024-25 only.
105. Mandatory relief of 100% is available for a period of up to 12 months, for certain occupied premises. The following two criteria must be met:
     1. the property has been unoccupied for a continuous period of at least six months immediately prior to the applicant’s occupation;
     2. the property has a RV of up to £100,000.
106. Where there is a change of occupier during the qualifying period for this relief, the new occupier may still receive the remaining balance of this relief as long as the property was not considered unoccupied during this period.
107. This relief is mandatory and 100% funded by the Scottish Government.
108. Local authorities will have to consider whether this must be awarded as MFA or whether the subsidy control requirements are met. As no sectoral restrictions apply and this relief is available for a particular circumstance (newly reoccupied long-term empty property), it is unlikely to confer a selective advantage however.

HARDSHIP RELIEF

109. The key legislation is section 25A of the Local Government (Scotland) Act 1966.
110. A local authority may award up to 100% relief if the applicant would otherwise sustain hardship, and if doing so was reasonable in light of the interests of council taxpayers.
111. The legislation for this relief is not time-limited i.e. there is no expiry date.
112. This relief is discretionary and generally 75% funded by the Scottish Government.
113. If the applicant’s activity is commercial in nature, then the relief may be considered a subsidy. Public authorities should consider whether this relief is awarded as MFA, or whether it meets the other subsidy control requirements of the Act.

ISLANDS AND REMOTE AREAS HOSPITALITY RELIEF

114. The key legislation is The Non-Domestic Rates (Islands and Remote Areas Hospitality Relief (Scotland) Regulations 2024. Eligible properties may receive relief between 1 April 2024 and 31 March 2025.
115. 100% relief is available for properties in the hospitality sector located on islands, or in specified remote areas (Cape Wrath, Knoydart and Scoraig), capped at £110,000 per ratepayer.
116. Eligibility is based on the property being wholly or mainly used for purposes set out in the Schedule of the regulations.
117. It is for local authorities to interpret the meaning of the uses in the Schedule where these are not specifically legally defined.
118. This relief is likely to be considered a subsidy under the Act and is listed in the Non-Domestic Rates (Restriction of Relief) (Scotland) Regulations 2023. Public authorities should consider whether this relief is awarded as MFA, or whether it meets the other subsidy control requirements of the Act.
119. This relief is mandatory and 100% funded by the Scottish Government.
120. This relief requires an application.

LIGHTHOUSE EXEMPTION FROM RATES

121. The key legislation is section 221 of the Merchant Shipping Act 1995. The legislation for this exemption is not time-limited i.e. there is no expiry date.
122. All lighthouses occupied by or belonging to the general lighthouse authorities for the purposes of carrying out their services are exempt from rates.

MOBILE MASTS RELIEF

123. The key legislation is The Non-Domestic Rates (Telecommunication Installations) (Scotland) Regulations 2016.[25] 
124. Relief is awarded to mobile masts or towers in (i) three ‘Mobile Masts Pilot Areas’ (two in Arran and one in Cairngorm) entered in the valuation roll on or after 1 April 2016; or (ii) located in a number of specific different grid references.[26]
125. Relief can be awarded between 1 April 2016 and 31 March 2031. An application to the council is required.
126. This relief is mandatory and 100% funded by the Scottish Government.
127. This relief is likely to be considered a subsidy under the Act. Public authorities should consider whether this relief is awarded as MFA, or whether it meets the other subsidy control requirements of the Act. This relief is listed in the Non-Domestic Rates (Restriction of Relief) (Scotland) Regulations 2023.

NEW FIBRE RELIEF

128. The key legislation is The Non-Domestic Rates (Telecommunications New Fibre Infrastructure Relief) (Scotland) Regulations 2019.
129. Telecommunications new fibre infrastructure[27] is eligible for 100% relief between 1 April 2019 and 31 March 2034[28]. An application to the council is required.
130. This relief is mandatory and 100% funded by the Scottish Government.
131. Local authorities will have to consider whether this must be awarded as a subsidy, particularly with regard to confluence with the rest of the UK. Public authorities should consider whether this relief is awarded as MFA, or whether it meets the other subsidy control requirements of the Act.

RELIGIOUS EXEMPTION FROM RATES

132. The key legislation is section 22 of the Valuation and Rating (Scotland) Act 1956.
133. Buildings occupied by a religious body for the purpose of religious worship or related administration, and halls used in connection with such buildings and their occupiers’ purpose, are exempt from rates.
134. The council decides whether premises are used as a place of worship or related administration. Church halls may be ineligible if they are used mainly for non-religious purposes.
135. Although not a statutory requirement, some councils request applications for monitoring purposes.
136. Councils may also offer relief to properties occupied by an institution or organisation which was not established or conducted for profit and whose main object is religious.[29]
137. As the activity is non-economic in nature, organisations would generally not be regarded as undertakings and the relief would likely not be considered a subsidy.

RENEWABLE ENERGY RELIEF

138. The key legislation is the Non-Domestic Rates (Renewable Energy Generation Relief) (Scotland) Regulations 2010.
139. Eligibility for the Renewable Energy Relief relating to community benefit requires arrangements which give at least 15% of the annual profit to a community organisation, in return for investment (or, failing that, so much of the annual profit as is attributable to 0.5 megawatt of the total installed capacity)[30]. Table 3 shows the sliding scale of applicable relief against the RV of the qualifying properties in Scotland that the applicant occupies or (if vacant) is entitled to occupy.

Table 3: Renewable Energy Relief thresholds[31]

RV in Scotland	Relief (%)
up to £145,000	100
over £145,000 and up to £430,000	50
over £430,000 and up to £860,000	25
over £860,000 and up to £4 million	10
over £4 million	2.5

140. Relief is available for subjects solely concerned with the production of heat or power (or both) from the following sources:
     1. biomass
     2. biofuels
     3. fuel cells
     4. photovoltaics
     5. water (including waves and tides, but excluding production from the pumped storage of water) (“hydro schemes”)
     6. wind
     7. solar power
     8. geothermal sources
141. The regulations for this relief are not time-limited i.e. there is no expiry date.
142. In addition, hydro schemes with a RV of no more than £5 million are also eligible for 60% relief.[32] This relief is available until 31 March 2032.[33]
143. These reliefs are mandatory and 100% funded by the Scottish Government.
144. These reliefs are likely to be considered a subsidy under the Act and are listed in the Non-Domestic Rates (Restriction of Relief) (Scotland) Regulations 2023. Public authorities should consider whether this relief is awarded as MFA, or whether it meets the other subsidy control requirements of the Act.

RURAL RELIEF

145. The key legislation is the Non Domestic Rating (Rural Areas and Rateable Value Limits) (Scotland) Order 2005 and Schedule 2 to the Local Government and Rating Act 1997 as well as the Non Domestic Rates (Rural Areas) (Scotland) Regulations 2017.[34]
146. The legislation for this relief is not time-limited i.e. there is no expiry date.
147. Mandatory relief of 100% is available to certain properties, indicated in Table 4, which are the only such property located in a settlement in the local authority’s rural settlement list. The council’s determination of this is generally informed by local knowledge and the applicant’s declaration. The council compiles and maintains the rural settlement list, which is generally updated annually by the council in December to be in place for the start of the next financial year.

Table 4: Rural relief thresholds

Qualifying subject[35]	RV threshold
Small food shop, general store or post office	£8,500
Petrol filling station, small hotel or public house[36]	£12,750

148. In addition, local authorities have discretionary powers to grant up to 100% relief to properties with an RV up to £17,000 which provide a service which is of benefit to the community where they consider it would be in the interest of council tax payers to do so.
149. This relief is likely to be considered a subsidy under the Act and is listed in the Non-Domestic Rates (Restriction of Relief) (Scotland) Regulations 2023. Public authorities should consider whether this relief is awarded as MFA, or whether it meets the other subsidy control requirements of the Act.

SMALL BUSINESS BONUS SCHEME

150. The key legislation is The Non-Domestic Rates (Levying and Miscellaneous Amendment) (Scotland) Regulations 2024. These regulations apply to 2024-25 only.
151. Occupiers of property located in Scotland (or those entitled to occupy it) with combined RV of £35,000 or less may be eligible for relief. Multiple properties linked to one business (e.g. a chain of shops) may be eligible for relief if their combined RV does not exceed £35,000.
152. Tables 5 and 6 outline reliefs and thresholds.

Table 5: Relief thresholds for SBBS where the ratepayer is liable for rates for only one entry in the valuation roll

Cumulative RV range (single entry in valuation roll)	Percentage of rate relief
£12,000 or less	100%
£12,001 to £15,000	Relief percentage = 100 – (75 x (1 - (15000-RV)3000))
£15,001 to £20,000	Relief percentage = 25 x ((20000-RV)5000)

Table 6: Relief thresholds for SBBS where the ratepayer is liable for rates for multiple entries in the valuation roll

Cumulative RV range (multiple entries in valuation roll)	Percentage of rate relief
£12,000 or less	100%
£12,001 to £35,000	25% on each individual property with a rateable value of £15,000 or less For individual properties with rateable value £15,001 to £20,000, relief percentage = 25 x ((20000-RV)5000)

153. Multiple properties occupied respectively by different businesses (e.g. with separate accounts, premises, employees, suppliers, leases, marketing and websites), which nonetheless seem to be linked, may be considered by the local authority as if they were occupied by separate occupiers, subject to subsidy control rules.
154. Where there may be links between businesses occupying different properties, the onus is on the applicant to provide sufficient evidence that the businesses are run independently of each other.
155. Payday lenders ceased to be eligible for SBBS from 1 April 2014. Advertisements, car parks and betting shops ceased to be eligible for SBBS from 1 April 2023. To determine eligibility, local authorities may, for example, adapt their application form to request a lender’s applicable interest rate, visit the property to establish whether payday lending or another excluded purpose is taking place, or use local knowledge.
156. From 1 April 2020, unoccupied properties are not eligible for SBBS. 
157. Worked examples for Small Business Bonus Scheme relief may be found in Annex D.
158. If backdated relief is applied for, local authorities will need to establish whether the applicant has been liable for the property’s rates for the period in question (they may request supporting evidence from the applicant), and also the applicable relief legislatively provided for relating to different time periods. There is no statutory time limit for which the award of SBBS can be backdated, other than the commencement of the respective legislative provisions.
159. This relief is mandatory and 100% funded by the Scottish Government.
160. It is unlikely that this relief would be considered a subsidy as it is a general measure.

SPORTS CLUB RELIEF

161. The key legislation is section 4(2)(aa) (mandatory relief) and 4(5)(c) (discretionary relief) of the Local Government (Financial Provisions etc.) (Scotland) Act 1962.
162. Properties occupied by a Community Amateur Sports Club (CASC) registered with HM Revenue and Customs,[37] for the purposes of that club, or for the purposes of that club and of other clubs which are, or are entitled to be, registered as a CASC, are entitled to 80% mandatory rates relief under section 4(2)(aa) of the Local Government (Financial Provisions etc.) (Scotland) Act 1962. Note that OSCR-registered charities may also claim 80% mandatory relief under section 4(2)(a) of the Local Government (Financial Provisions etc.) (Scotland) Act 1962. Where these are sports clubs, it would be considered that they are applying for Sports Club Relief.
163. The legislation for this relief is not time-limited i.e. there is no expiry date.
164. The mandatory element of this relief is 100% funded by the Scottish Government.
165. The local authority also has discretion to ‘top up’ this relief to 100%.[38] This element of the relief is 75% funded by the Scottish Government. This means that a property receiving 80% mandatory relief and a 20% discretionary top up would see this relief 95% funded by Scottish Government (80*100 + 20*75).
166. Properties occupied by certain other sports clubs that are not CASCs or registered charities are eligible to receive up to 100% relief at the discretion of the local authority.[39] Any such relief, whilst it is discretionary, is 100% funded by the Scottish Government. From 1 April 2021, councils must have regard to the statutory guidance set out in Local Government Finance Circular No. 3/2021 when awarding this relief.
167. Local authorities must have regard to subsections (6) to (7) of section 4 of the 1962 Act with regards to how award of a relief may be granted or modified/terminated.
168. As the activity is non-economic in nature, this is unlikely to be considered a subsidy.

STUD FARMS RELIEF

169. The key legislation is the Valuation (Stud Farms) (Scotland) Order 2005 and Paragraph 4(2B) of Schedule 2 to the Local Government and Rating Act 1997, as inserted by section 28(4)(c) of the Local Government in Scotland Act 2003.
170. Councils may award up to 100% relief to qualifying stud farms with a rateable value up to £7,000. Note this relief is separate from the de-rating provision under section 7B of the Valuation and Rating (Scotland) Act 1956.
171. The legislation for this relief is not time-limited i.e. there is no expiry date.
172. This relief is discretionary and is 75% funded by the Scottish Government.
173. This relief is likely to be considered a subsidy under the Act. Public authorities should consider whether this relief is awarded as MFA, or whether it meets the other subsidy control requirements of the Act.

TRANSITIONAL RELIEFS

174. The key legislation is The Non-Domestic Rates (Transitional Relief) (Scotland) Regulations 2024, as amended.
175. Worked examples for Transitional Reliefs may be found in Annex E.

General Revaluation Transitional Relief

176. A General Revaluation Transitional Relief is available for all property types, capping gross bill increases at a specified percentage increase, dependent on the rateable value on 1 April 2023.
177. Tables 7 – 9 show the annual and cumulative impact of General Revaluation Transitional Relief on annual gross bill increase limits for qualifying properties.

Table 7: Properties with rateable value on 1 April 2023 up to and including £20,000

	2023-24	2024-25
Annual cap	12.5%	25.0%
Cumulative cap	12.5%	40.6%
Cumulative multiplier	1.125	1.406

 

Table 8: Properties with rateable value on 1 April 2023 from £20,0001 and up to and including £100,000

	2023-24	2024-25
Annual cap	25.0%	50.0%
Cumulative cap	25.0%	87.5%
Cumulative multiplier	1.250	1.875

Table 9: Properties with rateable value on 1 April 2023 in excess of £100,000

	2023-24	2024-25
Annual cap	37.5%	75.0%
Cumulative cap	37.5%	140.6%
Cumulative multiplier	1.375	2.406

178. In order to be eligible for this relief, the property had to be shown in an entry on the valuation roll on both 31 March 2023 and 1 April 2023. Properties with a nil RV on 1 April 2023, or which had a nil RV on 31 March 2023 are not eligible. Eligibility for the relief also ceases if there is a merger, split or reorganisation of the valuation roll entry for the property occurring after 1 April 2023.
179. If the property is shown in a split or reorganised entry taking effect on 1 April 2023, a reduction is applied to the gross bill and then uplifted by the relevant factor noted in the table above to calculate the transitional limit. The reduction to be applied is:
     1. 1.2 for properties with a rateable value up to and including £20,000
     2. 1.25 for properties with a rateable value from £20,001 up to and including £100,000
     3. 1.4 for properties with a rateable over £100,000
180. A property can continue to be eligible for this relief upon a change of ratepayer.
181. An application is not required for this relief and it may be awarded automatically.
182. This relief is mandatory and 100% funded by the Scottish Government.
183. It is unlikely that this relief would be considered a subsidy as it is a general measure.

Small Business Transitional Relief

184. This relief caps the maximum increase in the net rates liability relative to 31 March 2023 at £1,200 in 2024-25 after any relief is applied (including the General Revaluation Transitional Relief) and is available for properties:
     1. entitled to Small Business Bonus Scheme (SBBS) relief, and/or
     2. entitled to mandatory or discretionary Rural Relief on 31 March 2023 and no longer entitled on 1 April 2023 due to their rateable value increasing at the 2023 revaluation beyond the qualifying threshold(s) set out in the Non-Domestic Rating (Rural Areas and Rateable Value Limits) (Scotland) Order 2005, as amended.
185. To be eligible for this relief, the property requires to have been shown in an entry on the valuation roll on both 31 March 2023 and 1 April 2023. Properties with a nil RV on 1 April 2023 or which had a nil RV on 31 March 2023 are not eligible. Eligibility ceases if there is a merger, split or reorganisation of the valuation roll entry for the property occurring after 1 April 2023.
186. Any increases in RV after revaluation are not subject to the cap, and any decrease in rates caused by a decrease in RV after revaluation would also be taken into proportionate account.
187. An application is required for this relief.
188. This relief is mandatory and 100% funded by the Scottish Government.
189. It is unlikely that this relief would be considered a subsidy as it is a general measure.

Parks Transitional Relief

190. This provides 33% relief in 2024-25 for parks, or parts of parks, that existed but were not rateable on 31 March 2023, and which became rateable on 1 April 2023 following the coming into force of section 5 of the Non-Domestic Rates (Scotland) Act 2020, which amends section 19 of the Local Government (Financial Provisions) (Scotland) Act 1963.
191. An application is required for this relief.
192. This relief is mandatory and 100% funded by the Scottish Government.
193. This relief is likely to be considered a subsidy under the Act and is listed in the Non-Domestic Rates (Restriction of Relief) (Scotland) Regulations 2023. Public authorities should consider whether this relief is awarded as MFA, or whether it meets the other subsidy control requirements of the Act.

LOCAL RELIEFS AND REDUCTIONS

194. The key provision is section 3A of the Local Government (Financial Provisions etc.) (Scotland) Act 1962 inserted by section 140 of the Community Empowerment (Scotland) Act 2015.
195. As well as the statutory reliefs covered in this document, local authorities can apply further rates reliefs and reductions.
196. This power to set rates, in accordance with a scheme made by the local authority, came into force on 31 October 2015, and can be applied back to 1 April 2015.
197. A scheme could be based on category of property, area, activity, or by reference to such other matters as a scheme specifies; e.g. a scheme could provide for a general reduction across all rateable properties, or for a single property. Local authorities will wish any schemes to have clear, practicable and robust criteria for practitioners and ratepayers.
198. Any such reduction is fully funded by the local authority, and in exercising the power it must have regard to its income & expenditure and the interests of persons who are liable to pay council tax. A local authority may determine when a reduction is to cease, but it will always cease when there is a change in occupation of the property (although it could then be applied anew if that accords with the scheme).
199. The level of NDR income reported in councils’ returns to the Scottish Government would not be affected by any such schemes (i.e. the council would fully fund the cost of rates remission or reduction under any scheme). However, councils’ NDR income returns to the Scottish Government could potentially be used as a means of collecting information on the level of relief awarded under this power.
200. As with statutory reliefs, councils must consider and comply with the Act.
201. There is no statutory requirement for councils to require an application process for any relief (e.g. councils could reduce or remit rates in the initial rates bill). However, using application forms to request information about other public support would assist councils in determining the subsidy position.
202. A council scheme could potentially not be awarded as MFA providing it were compliant with the subsidy control requirements. The Scottish Government may offer councils guidance on any proposals, although councils should seek their own legal and subsidy advice.

ANTI-AVOIDANCE MEASURES

203. From 1 April 2023, local authorities have powers to prevent or minimise advantages arising from known non-domestic rates avoidance practices. Within prescribed circumstances, councils can make the owner, rather than the occupier, liable for the payment of rates, or disregard deliberate physical changes to the state of the property solely for the purposes of avoiding or reducing the rates liability.
204. The key legislation is The Non-Domestic Rates (Miscellaneous Anti-avoidance Measures) (Scotland) Regulations 2023.

Artificial non-domestic rates avoidance arrangements

205. A local authority must be satisfied that there is an artificial avoidance arrangement and the main purpose, or one of its main purposes, is to gain an advantage. The Non-Domestic Rates (Scotland) Act 2020 explains what is meant by an “advantage”, “non-domestic rates avoidance arrangements” and “artificial”.[40]
206. An ‘advantage’ is anything that reduces the amount of rates payable, delays payment of the rates or results in repayment of rates.
207. A non-domestic rates ‘avoidance arrangement’ includes any agreement, transaction, undertaking, action and event, whether legally enforceable or not, that has the main purpose, or one of the main purposes, of gaining an non-domestic rates advantage.
208. Arrangements are ‘artificial’ where either of the following apply:
     1. entering into, or carrying out, the arrangement is not a reasonable course of action in relation to the non-domestic rates provisions, in the circumstances. Factors to be taken into account include whether the substantive results of the arrangement are consistent with express or implied principles on which the provisions are based and the policy underpinning the provisions, and whether the arrangement is intended to exploit shortcomings (or loopholes) in them.
     2. the arrangement lacks economic or commercial substance. A lack of economic or commercial substance may be indicated by:
        1. the arrangement is carried out in a manner which would not normally be employed in reasonable business conduct,
        2. the legal characterisation of the steps in the arrangement is inconsistent with the legal substance of the arrangements as a whole,
        3. the arrangement includes elements which have the effect of offsetting or cancelling each other,
        4. transactions are circular in nature,
        5. the arrangement results in an advantage that is not reflected in the business risks undertaken.
209. This only applies to tenancies or other arrangements entered into, or physical changes to a property, on or after 1 April 2023. 

Transferring liability to an owner

210. In certain circumstances, a local authority may transfer non-domestic rates liability from the occupier of a rateable property to the owner. These circumstances are where the tenancy or arrangement is not on a commercial basis, where a new occupier enters insolvency within 12 months and/or where the occupier or liable person displays particular characteristics or behaviours.

Tenancy is not on a ‘Commercial Basis’

211. Common features distinguish a tenancy not on a ‘commercial basis’ from legitimate leases entered into for a legitimate commercial reason. The circumstances for a tenancy not being on ‘commercial basis’ are:
     1. there has been no change to the occupation of the lands and heritages since the tenancy or other arrangement took effect
     2. the lands and heritages are being occupied by a person or body other than the person or body named in the tenancy or other arrangement
     3. payment of the rent for the lands and heritages is optional in terms of the relevant tenancy or other arrangement
     4. the rent charged for the lands and heritages is significantly below the level of the rent (nominal or peppercorn rent) which could reasonably have been obtained for the lands and heritages on the open market at the time the tenancy or other arrangement was entered into
     5. payment of the rent for the lands and heritages is offset or cancelled, in whole or in part, by other transactions or arrangements, whether individually or as a whole
     6. the arrangement has been identified in the tenancy or other arrangement as being for the purpose of mitigating rates liability
     7. the occupier, or the person or body entering the tenancy or other arrangement, has no assets that are directly linked to the economic use being made of the lands and heritages.

Wound up within the first 12 months of Tenancy

212. Where a new occupier enters into insolvency within 12 months from the start of the lease the owner can be treated as liable for non-domestic rates in the following circumstances.
213. The liable occupier is a body being wound up voluntarily under the Insolvency Act 1986, within a period of 12 months from the date on which the property first became occupied under the lease agreement, and:
     1. the property continues to be occupied, including by a person or body other than the body which has entered the tenancy or other arrangement; or
     2. the liability holder is in receipt of mandatory non-domestic rates relief.

Characteristics and Behaviours of the Occupier

214. There are a number of characteristics and behaviours of the occupying party which, when coupled with the presence of a non-domestic rates advantage, are strong indicators of avoidance. As listed in the Regulations these are:
     1. the occupier fails to provide the name of a person who is liable for payment of the rates, or who is liable on behalf of the occupier;
     2. the person liable for payment of the rates, or liable on behalf of the occupier, is a person who has no connection to the operation taking place on the lands and heritages;
     3. the person liable for payment of the rates, or liable on behalf of the occupier, is a person who is an employee or a contractor of the owner of the lands and heritages, or who is the partner or a close relative of the owner,
     4. the person liable for payment of the rates, or liable on behalf of the occupier, has within the period of two years prior to the date on which the tenancy or other arrangement was entered:
        1. carried out the business or exercised the borrowing powers of a public company which did not have a trading certificate, contrary to section 761(1) of the Companies Act 2006,
        2. have been declared by a court to be liable to make a contribution to the assets of a company, in the course of its winding up, as a result of:
           1. knowingly having been a party to the carrying on of business in the manner described in section 213(1) of the Insolvency Act 1986 (fraudulent trading) or section 246ZA(1) of that Act (fraudulent trading: administration), or
           2. being or having been a director to whom section 214(2) of that Act (wrongful trading) or section 246ZB (wrongful trading: administration) of that Act applies,
        3. have had a disqualification order made against them, or a disqualification undertaking accepted, under the Company Directors Disqualification Act 1986,
        4. have been convicted of a contravention of section 216 of the Insolvency Act 1986 (restriction on re-use of company names),
        5. have been subject to a bankruptcy restrictions order, or a bankruptcy restrictions undertaking, under the Bankruptcy (Scotland) Act 2016, the Insolvency Act 1986, or the Insolvency (Northern Ireland) Order 1989, or
        6. have been issued a notice under section 20 of the 2020 Act (non-use or underuse of lands and heritages: notification) in relation to which the local authority has, following the expiry of the period mentioned in section 20(5)(b) or receipt of an explanation from the ratepayer, concluded that either of the conditions in section 20(3) or (4) of that Act have been satisfied.

Requirement to notify – information notice

215. Before transferring liability the local authority must notify the owner of the intention to treat them as liable for non-domestic rates, explaining the reason, the dates from which it will take effect and where relevant, the discontinuation of any relief. 
216. The owner can make written representation within 28 days to demonstrate that the tenancy or other arrangement does not have as a main purpose the gaining of an artificial advantage, or to agree an alternative payment arrangement. 
217. A final notice must be issued by the local authority before liability can be transferred to an owner. The final notice should set out that the owner is to be treated as liable to pay the non-domestic rates, the reason for the decision, including a summary of consideration of any representations received; the rates liability (and any relief removed); and the date it will have effect.
218. A final notice must be issued within 28-days from the last day on which representation can be submitted. The date of effect must be no earlier than 28 days after the date on which the final notice is to be presumed to have been received, unless they have engaged in the practice in the past. If there is a repeat engagement within the next five years, then they may be treated as liable from the start of the lease or other arrangement which is ongoing at the time of the transfer.

Disregarding Physical Changes to Empty Properties

219. Where physical change has been made to a property certain conditions are met, and the action deemed as artificial and for the purposes of gaining an advantage, a local authority can treat the property as if the change had not taken effect and levy rates based on the rateable value which applied prior to that change to the property.
220. The following conditions must be met:
     1. prior to 1 April 2023 the property was either not charged rates, or charged lower rates, due to being unoccupied;
     2. the change was made and took effect after 1 April 2023;
     3. there is no evidence of an intention to use the lands and heritages for economic activity in the future;
     4. the local authority is satisfied that the change was artificial with a main purpose of gaining of an advantage and avoiding rates liability.

Requirement to notify – information notice

221. Before a change can be disregarded, the local authority must notify the owner or occupier of the intention to counteract the change, and the reason for it.
222. The owner can make written representation within 28 days to demonstrate that the change was not intended to gain an artificial advantage. 
223. A final notice must be issued within 28-days from the last day on which representation can be submitted. This must include the final decision on whether the liability should be adjusted to reflect the change, reasons for it and any change in rates liability arising as a result. Liability will be based on the rateable value which applied the day before it was revised to reflect the change to the premises. 

FURTHER INFORMATION

224. If further information on NDR reliefs is required, please email the Scottish Government at ndr@gov.scot.
225. The Scottish Government’s Subsidy Control Unit can be emailed at subsidycontrol@gov.scot.
226. Please note that the Scottish Government cannot offer legal advice or intervene in relation to individual cases.