Non-domestic rates: decapitalisation rates for the 2023 revaluation

The next revaluation of non-domestic property in Scotland is due to take effect from 1 April 2023 based on rental values as at 1 April 2022 (the 'tone date'). At revaluation Scottish Assessors review rateable values resulting in a new valuation roll for all non-domestic properties in Scotland. While most rateable values are based on estimated annual rent, around 9% of subjects, accounting for 22% of total rateable value are derived using the contractor's basis method of valuation.

In the contractor's basis method of valuation, the capital value (cost of rebuilding) of a property is estimated, then a decapitalisation rate is applied to give an annual equivalent rateable value.

The purpose of the consultation was to seek views on the prescription of the decapitalisation rate(s) to be used when non-domestic subjects are valued using the contractor’s basis for the 2023 revaluation.

The consultation asked for views on four questions:

1. Should the Scottish Government continue to prescribe decapitalisation rates to be used for the contractor’s basis method of valuation at the 2023 revaluation?
2. Should the Scottish Government continue to prescribe two decapitalisation rates?
3. If prescribing two decapitalisation rates, should the Scottish Government continue to maintain the current groupings of properties in each rate?
4. Do you have any further views on the decapitalisation rates for the 2023 revaluation?

We received 13 responses to the consultation. Twelve responses were from organisations and one was from an individual. All of the responses received have been considered.

All of the respondents would welcome continued prescription of decapitalisation rates for the 2023 revaluation, and all respondents either supported or had no objections to there being two decapitalisation rates (standard and lower).

A range of comments were received in relation to the groupings for each of the decapitalisation rates, the decapitalisation rates adopted by other UK administrations, and the methodology used to inform the rates.

A consultation analysis report has been published on the Scottish Government Website.

The responses, together with other relevant information, informed the considerations for the appropriate decapitalisation rates for the 2023 revaluation which have been confirmed at 4.6% and 2.9% for the standard and lower rates respectively. This is also confirmed in Local Government Finance Circular 7/2022: Decapitalisation Rates for the 2023 Revaluation.

A Business & Regulatory Impact Assessment has also been published on the Scottish Government’s website