Consultation on reforming the non-domestic rates system: proposals, the draft valuation roll, content of valuation notices, etc.

We asked for your views on five draft Scottish Statutory Instruments (a mixture of regulations and orders) that relate to complex technical reforms to the non-domestic rates system following the Non-Domestic Rates (Scotland) Act 2020. The reforms include the requirement for assessors to publish a draft valuation roll before revaluation; additional content required in valuation notices; and the introduction of a two-stage appeals system which is scheduled for 1 January 2023. The consultation which ran from 22 September to 15 December 2021 asked for views on the following draft Scottish Statutory Instruments:

• The draft Valuation Timetable (Scotland) Amendment Order 2022
• The draft Non-Domestic Rates (Valuation Notices) (Scotland) Regulations 2022
• The draft Valuation (Proposals Procedure) (Scotland) Regulations 2022
• The draft Valuation Timetable (Scotland) Amendment (No.2) Order 2022
• The draft Valuation Roll and Valuation Notice (Scotland) Order 2023

The ‘We asked, You said, We did’ has published in multiple phases with the final update published 12 July 2022.

The consultation attracted 37 responses from organisations and groups of stakeholders, most from commercial real estate/surveying firms and business organisations. A full consultation analysis is available on the Scottish Government website. A brief analysis of these responses in relation to the draft Valuation Timetable (Scotland) Amendment Order 2022 and the draft Non-Domestic Rates (Valuation Notices) (Scotland) Regulations 2022 is detailed below.

The draft Valuation Timetable (Scotland) Amendment Order 2022

Many respondents did not comment on the proposed date of publication of the draft roll (30 November the year before a revaluation year). Amongst those who did, there was some support for this date. One response called for this to be 15 January in the year before revaluation instead, while a few others called for it to be earlier, for instance on 1 October. One response questioned whether 30 November was the most appropriate date given that draft rateable values were likely to be useful for ratepayers only once the proposed poundage for the revaluation year is available. It was further suggested that the publication date of the draft roll be tied to a working day rather than a specific date.

It was highlighted that valuations for the next valuation roll are to be made on the basis of the physical circumstances of properties as at 1 January in the year preceding a revaluation year; and that this creates a long period - between 1 January and the revaluation date - when physical changes cannot be reflected in the new valuation roll. It was recommended that this gap be reduced and the cut-off date changed to match the date the valuation roll is made up and sent to local authorities and the Scottish Government (15 March).

The draft Non-Domestic Rates (Valuation Notices) (Scotland) Regulations 2022 

The objective of the draft regulations was to require that the assessor publish alongside each valuation notice, the addresses of let properties the rental evidence of which was used to inform the basic rate used in the valuation, specifically for ‘standard’ shops, offices, warehouses and workshops valued using the comparative method, as recommended by the Barclay Implementation Advisory Appeals sub-group.  

There was broad agreement that applying the use classes set out in the Town and Country Planning (Use Classes) (Scotland) Order 1997, as proposed, was not appropriate and that descriptions more closely matching those used in rating valuation should be adopted.   

Many respondents called for the information-sharing requirements in valuation notices to be expanded, both in terms of the properties covered by the requirements and the information to be provided. For instance, some respondents called for a full rental analysis of each property used in comparison for the valuation, on the basis that a list of these properties’ addresses in and of itself would be of limited use. It was conversely argued that such a list would in fact provide owners and/or occupiers with sufficient information to do their own research.  

Concern was raised that the information used in some valuations was commercially sensitive and confidential, and should not be included in Valuation Notices (e.g. turnover). 

There were also calls for these new information-sharing requirements to apply to all non-domestic properties on the basis of fairness and for there to be different deadlines for lodging a proposal depending on whether additional information was provided in the valuation notice or not.  

The draft Valuation (Proposals Procedure) (Scotland) Regulations 2022

There was concern that the proposed new information-sharing requirements at the point of lodging a proposal were overly onerous, especially for those who are not professionally represented, or with large portfolios, and that the proposed approach would result in unfairness and disadvantage. The importance of maintaining access to justice and of not discouraging applicants through overly complex processes was highlighted.

Suggestions included less onerous information-sharing requirements at the point of lodging a proposal, maintaining the current information-sharing requirements that exist under the non-domestic rating appeals process whereby the issuance of a citation for a hearing triggers statutory deadlines for exchanging information, and/or a longer time period to lodge proposals, such as six months instead of the proposed four.

A number of responses voiced concern that the right to refuse an incomplete proposal would give the assessor too much power. The draft legislation requires that incomplete proposals ‘must’ be refused by the assessor; some respondents suggested that this be amended to ‘may’ on the grounds this would give the opportunity for any queries found within a proposal to be considered and rectified without the need for formal review of the decision that the proposal is incomplete. It was further suggested that the assessor should, if they deem a proposal to be incomplete, send the proposer a notice specifying what information is missing within certain timescales. This would give the proposer the opportunity to send an updated version of the proposal to address the points, rather than having to make a fresh proposal.

Some responses called for the assessor to provide to the proposer the same level of information as the proposer would have to share at the point of lodging a proposal. Others suggested that the assessor’s written statement in response to the proposal should be specifically ‘in relation to the detailed grounds and evidence on which the proposal was made’.

The draft regulations as consulted upon provide that information can only be shared after lodging a proposal if it was ‘not in existence’ at the point of lodging and that further information ‘may’ be accepted at the discretion of the assessor.  In respect of the provision of additional evidence by the proposer, there were calls for the proposer to be able to share information that was not ‘known’ at the time the proposal was made, after the proposal is lodged.   There were also calls for the assessor to be required to take this information into account.

Certain respondents stated that once the proposal is lodged and the assessor has provided their written statement in response, the proposer should have 28 days to respond to that, rather than the proposed 14, though it was noted that if no additional information were allowed at this point, this right of response would not be meaningful.

A small number of responses stated that the assessor should not be able to postpone the Proposal Determination Date (PDD), or that if they could do so, the proposer should be able to do so as well.

There were also calls for the assessor to have to provide written reasons to the proposer if they fail to make a decision by the PDD, and many thought that the assessor should statutorily be required to issue a decision on the proposal.

The draft Valuation Timetable (Scotland) Amendment (No.2) Order 2022

While one response called for the time period during which a proposal could be lodged to be reduced to three months instead of the proposed four, the majority of responses called for a longer timescale with some suggested a period of six months.

A number of responses called for it to be possible to lodge a proposal on the basis of error at any time whilst the valuation roll is in force as is currently the case, rather than as proposed (four months after the valuation notice containing the alleged error is issued or, where this is later, 31 July in the year of revaluation). 

Equally, there were calls for it to be possible to lodge a proposal on the basis of a material change of circumstances until six months after the roll is in force, as is currently the case, rather than the proposed four.

Some respondents called for the proposed deadline of 30 June the year before the next revaluation for revaluation proposals to be disposed of to be shortened to March the year before revaluation, or for the deadline to be 12, or 18 months after a proposal is made. One response conversely called for this deadline to be extended to 30 September in the year before revaluation. 

A number of respondents called for the deadline for lodging an appeal to be extended to 21 or 28 days instead of the proposed 14 days.

The draft Valuation Roll and Valuation Notice (Scotland) Order 2023

A number of suggestions were made for additional information to be provided by the assessor in valuation notices beyond those set out in the Non-Domestic Rates (Valuation Notices) (Scotland) Regulations which were also consulted on, for instance further supporting evidence for the valuation including the lease details or analysed rent/unit costs of the property. Issues of confidentiality were raised over the provision of commercially sensitive information however, such as financial data and lease details to third parties.

There was support for valuation notices to be consistent across Scotland, for the schedule setting out the information which valuation notices must contain to be shorter and more comprehensive, and for the valuation notice to be required to include the reason for issue.  

A number of respondents were concerned that the assessor may be able to alter the valuation roll with effect before the beginning of the financial year in which the entry is made, or a correction is made for instance; conversely some criticised the possibility that the assessor would not be able to do so unless a proposal/appeal had been lodged in that financial year, for instance where there is a Material Change of Circumstances.

Further comments

A number of respondents called for new non-domestic rates legislation to be drafted to consolidate existing legislation given the large number of successive amendments that have been made to the legislation over time and the complexity this creates. 

The publication of the draft valuation roll will take place on 30 November the year before revaluation. The draft roll in respect of the 2023 revaluation will therefore require to be published on 30 November 2022.

The date on which valuations are to be made on the basis of the physical circumstances of properties for the next roll will be 15 March in the year preceding a revaluation instead of 1 January, in order to reduce the period during which alterations cannot be reflected in the new valuation roll. This date will also be the date for the valuation roll for the revaluation to be made up.

The Valuation Timetable (Scotland) Amendment Order 2022 was laid on 22 April 2022.

Given the arguments made against the use of the use classes set out in the Town and Country Planning (Use Classes) (Scotland) Order 1997 in order to identify the classes of property for which additional information is to be provided in valuation notices, we will not use this categorization as a basis for identification of the properties for which the assessor must provide additional information in the valuation notice; instead the categories will reflect the Scottish Assessors Association’s (SAA) valuation Practice Notes published on the SAA Portal.  

In response to calls for more property classes to be covered, whilst being mindful of the practicability of expanding the requirements at this point for the 2023 revaluation, we have now included over thirty property classes valued using the comparative method in the draft Non-Domestic Rates (Valuation Notices) (Scotland) Regulations 2022 for which the assessor must provide the addresses of let properties, the rental information of which was used to produce the rate per square metre applied in the valuation.  

The Scottish Government commits to exploring from 2023-2025 how more property classes might be covered from the next revaluation, though it notes the issues of commercial sensitivity and data confidentiality raised in consultation responses around the information used for some valuations such as company turnover. 

The Non-Domestic Rates (Valuation Notices) (Scotland) Regulations 2022  came into force on 15 June 2022. 

The Barclay Review highlighted that “many ratepayers, including those in the public sector […] tend to lodge appeals as a matter of course” and that while everyone should have a right of appeal, the current resulting volume of appeals “inevitably clogs the system and measures should be taken to reduce the number of appeals.” It is important as we move to a three yearly revaluation cycle to avoid this.

On this basis, it is important that under the new system, proposals can only be lodged if there is a clear reason, hence the maintained requirement to provide supporting grounds, and evidence as well as a statement to support those grounds at the point of lodging a proposal.

We will require that the assessor, in the written statement which they must send no later than 70 days before the Proposal Determination Date (PDD), send to the proposer comments in relation to the detailed grounds and evidence on which the proposal was made. We will allow the proposer, in their response to the assessor’s statement, 28 days  to respond to this rather than the proposed 14. The proposer will be able to share information that was not in existence at the time of lodging the proposal up until 28 days before the PDD. It will however remain at the discretion of the assessor, as proposed in the consultation, to accept information that was in existence at the time the proposal was lodged, but not shared (for whatever reason) at that time.

The assessor will retain the right to refuse to consider an incomplete proposal but this will no longer be a requirement, and we will also require the assessor, when deeming a proposal incomplete, to specify what information is missing within 56 days of receiving the proposal. The proposer will then have 28 days to provide this information before the proposal is deemed withdrawn. This will avoid the need to submit a fresh proposal.

The assessor will retain the right to postpone a PDD. This mirrors the current arrangements in place for valuation appeal committee hearings. Recent events such as the COVID pandemic have demonstrated the importance of this administrative flexibility. The proposer will have the right to request an earlier PDD if they deem this to be too late.

The assessor will not be able to postpone the last date for issue of a decision on the proposal (these will be statutorily set out), which also mirrors the current situation with valuation appeal committees.

The  Local Government (Scotland) Act 1975, as amended by the Non-Domestic Rates (Scotland) Act 2020, specifies that in response to a proposal, the assessor may alter the entry, or not alter it. If the assessor alters the entry in accordance with the proposal, or a subsequent agreement reached with the proposer, we will not require that they issue a reason for amending the value.

We agree that in cases where the assessor fails to issue a decision on the proposal, the assessor should  be required to provide a written notification to the proposer with an explanation of why this is the case.

The time period for lodging a proposal, where it is made in response to the issue of a valuation notice, will be four months as proposed in the consultation. Combined with  publication of the draft roll on 30 November the year before revaluation, this means that proprietors, tenants and occupiers will have four months between the publication of their draft rateable value (30 November the year before revaluation) and revaluation (1 April), and four months thereafter (1 April to 31 July in the year of revaluation), in other words eight months to scrutinise their rateable value and consider whether they want to lodge a proposal.

Under changes made to the Local Government (Scotland) Act 1975  by  the Non-Domestic Rates (Scotland) Act 2020, a legally binding agreement on value can further be reached with the assessor before revaluation. Where such an agreement is reached, proprietors, tenants and occupiers are excluded from making proposals.

We will further allow for a proposal to be lodged on the basis of error at any time while the roll is in force, and for a proposal on the basis of a material change of circumstances to be lodged within four months of the relevant valuation roll ceasing to be in force.

We will also extend the proposed deadline for the disposal of proposals to whatever is the later of 30 September in the year before the revaluation year,  30 September in the year after the year in which the proposal is made, or the last day of the period of 12 months beginning with the date on which the proposal is made.  

The draft Valuation Timetable (Scotland) Amendment (No.2) Order 2022 as consulted on provides the proposer with the right to lodge an appeal within prescribed timescales even if the assessor does not issue a decision on the proposal and we will extend this from 14 to 28 days. The dates for bringing an appeal in relation to a proposal will now be set in the Valuation ( Proposals Procedure)(Scotland) Regulations 2022.

The Valuation Timetable (Scotland) Amendment 1995 will be revoked and replaced with a new consolidated Valuation Timetable (Scotland) Order in order to address the calls for simplified legislation.

Given the recommendations of the Barclay Implementation Advisory Appeals sub-group as to the phased approach to the inclusion of additional information in valuation notices, the confidentiality issues highlighted in consultation responses, the workload of assessors in 2022-23 with a one-year tone date, the transfer of valuation appeal committees to the Scottish Tribunals on 1 January 2023 and the volume of COVID appeals in the system; and taking into account ongoing efforts by the Scottish Assessors’ Association to improve the provision and presentation of data on the Portal (e.g. the recent introduction of a mapping tool), no further information than that provided for in the Non-Domestic Rates (Valuation Notices) (Scotland) Regulations 2022 will be required on valuation for the 2023 revaluation. The exception to this is the reason for issue, which we agree should feature in valuation notices. We will therefore require that this be provided from the 2023 revaluation onwards.

We support the consistency of valuation notices across Scotland and encourage Scottish Assessors to introduce a consistent format in time for the 2023 revaluation.

The Schedule of the draft Valuation Roll and Valuation Notice (Scotland) Order 2023 specifying how a proposal can be lodged, etc. will be simplified, and given the support in the consultation responses for electronic communication where possible, we will also allow assessors to provide an indication as to where this information can be viewed on the valuation notice (e.g. a website) rather than routinely require that this be sent by post. Recipients of notices will, though, be entitled to request that the material be sent in hard copy.

The Valuation (Proposals Procedure) (Scotland) Regulations 2022, Valuation Timetable (Scotland) Order 2022 and Valuation Roll and Valuation Notice (Scotland) Order 2022 are scheduled to be laid on 26 October 2022.