Local Taxation - Regulations

Question 1

The Valuation and Rating (Scotland) Act 1956

Answer 1

The main features of the Act are:

It establishes valuation areas and authorities, and appoints assessors and staff to carry out the valuation of lands and heritages (properties) in Scotland1.

It creates a Scottish Valuation Advisory Council to advise the Secretary of State on matters relating to valuation1.

It sets out the methods and principles for determining the gross annual value, net annual value and rateable value of different types of properties, such as dwellings, shops, offices, factories, farms, fishings, etc1.

It specifies the subjects to be excluded from the valuation roll, such as churches, schools, hospitals, roads, etc1.
It prescribes the duties of assessors, such as preparing and publishing draft and final valuation rolls, giving notices to owners and occupiers, making alterations and amendments, etc1.

It provides for appeals against valuation by owners or occupiers to valuation appeal committees or the Lands Valuation Appeal Court1.

It transfers the liability for owners’ rates to occupiers and reduces the rents accordingly1.

it grants exemptions or reductions of rates to certain properties or organisations, such as charities, gas boards, lighthouses, etc1.
It makes provisions for contributions in aid of rates by police authorities and Commissioners of Northern Lighthouses1.

Question 2

The Lands Valuation (Scotland) Act 1854

Answer 2

was a significant piece of legislation in Scotland as it established the basis for a uniform valuation of landed property, which had previously been rated based on varying and often unclear criteria. This Act was critical in establishing an equitable and consistent system for property taxation. It laid the groundwork for the creation of the Valuation Roll, which was a public document that listed every property, its owner, occupier, and its rateable value. The Act was a response to the need for a fairer system of local taxation, and its provisions have been updated and expanded in various pieces of legislation since, but it remains the foundation of property valuation in Scotland

Question 3

Valuation and Rating (Scotland) Act 1956 s.6(8)

Answer 3

Definition of NAV
The rent at which the L & H might reasonably be expected to let from yr to yr if no grassam or consideration other than the rent were payable in respect of the lease and where the tenant undertakes to pay the rate and bear the costs of repairs and insurance and other costs, if any, necessary to maintain the lands and heritages in a state to command that rent.

Question 4

Local Government (Scotland) Act 1966

Answer 4

Section 15 of the Local Government (Scotland) Act 1966 is about the valuation of lands and heritages according to the tone of the roll1. It specifies how the value or altered value of lands and heritages should be determined for the purposes of any new or altered entry in the valuation roll, and what factors should be taken into account. It also excludes lands and heritages occupied by a public utility undertaking from the application of this section1.

Base of value

Question 5

Local Government (Scotland) Act 1975

Answer 5

Assessors duty is restricted to valuation of L & H in his area
s 1(6) – Alteration of the roll after it has been made up but prior to being enforced
(a) In existence when roll made up but omitted in error
(b) New properties coming into existence or occupation
(c) Alteration to value due to a material change of circumstances
(d) Correction of errors (measurement, survey, class, clerical or arithmetical)

s.2(1) - Alteration of the valuation roll that is in force
(a) In existence when roll made up but omitted in error
(1 April of current financial year)
(b) New properties coming into existence or occupation

(start date or 1 April of current financial year)

(c) New properties coming into area due to boundary changes (date of boundary change legislation)
(d) Alteration to value due to a material change of circumstances (event date or 1 April of current financial year)

(e) To account for changes in NAV/RV (Order / Reg date)
(f) Correction of errors (measurement, survey, class, clerical or arithmetical) (Error date or start of year the correction was made, whichever is the later)
(h) Deletions (Assessor thinks fit)

s. 37(1) – MCC
means in relation to any L & H a change in circumstances affecting their value and without prejudice to the foregoing generality, includes any alteration in such L & H any relevant decision of the LVAC or VAC serving the valuation area in which the L & H are situated or the LT for S under s.1(3A) of the LT Act 1949, and any decision of that court, committee or Tribunal which alters the NAV or RV of any comparable L & H.

Question 6

Rating and Valuation Amendment (Scotland) Act 1984

Answer 6

s. 20 - Material Change of Circumstances – permits a reduction in rent as grounds
MC of C means in a change of circumstances affecting value (also reduction in rental levels)
Alteration in the L & H
Relevant decision of the LVAC, VAC or LT for S
Any decision of the three above that changes the NAV of comparable L & H.

Question 7

The Valuation for Rating (Plant & Machinery) (Scotland) Regulation 2000

Answer 7

It specifies the 6 classes of plant and machinery that are to be assumed to be part of lands and heritages for the purposes of valuation for non-domestic rating in Scotland.

Class 1: used or intended to be used mainly or exclusively in connection with the generation, storage, primary transformation of power or main transmission of power in or on the lands and heritages.

Class 2:) used or intended to be used mainly or exclusively in connection with the provision of water, gas, electricity, hydraulic power, steam, compressed air or other services in or on the lands and heritages.

Class 3: used or intended to be used mainly or exclusively for manufacturing operations or trade processes in or on the lands and heritages.

Class 4: used or intended to be used mainly or exclusively for storage purposes in or on the lands and heritages.

Class 5: used or intended to be used mainly or exclusively for display purposes in or on the lands and heritages.

Class 6: used or intended to be used mainly or exclusively for security purposes in or on the lands and heritages.

Question 8

The Non-Domestic Rates (Scotland) Act 2020

Answer 8

The Non-Domestic Rates (Scotland) Act 2020 is a law that reforms the system of non-domestic rates in Scotland1. It was passed by the Scottish Parliament on 4 February 2020 and became an Act on 11 March 20201. The Act creates a two-stage appeal system for owners, tenants or occupiers who disagree with the valuation of their property2. It also introduces other changes to the rates system, such as reducing the revaluation cycle from five to three years and increasing the relief for certain properties1

Question 9

What is the Woolway case regarding?

Answer 9

Woolway v Mazars relates to offices occupied by Mazars on the 2nd and 6th floor of an office building. This case was whether this formed one or two separate assessments.

This went to the Supreme Court in 2015 who decided that contiguous units need to be interconnected and easily accessed by one another. As the two floors could be let separately they were functionally independent. No exceptional factors with regard to enjoyment were present.

Question 10

Lotus & Delta - tell me what this is?

Answer 10

Is a case which gives guidance on how rents on subject and comparable properties are to be treated. It lays out 6 ‘rules’ for assessing rents.
1. Subject rent is the starting point
2. The more this conforms to the definition of RV the more weight should be attached to it
3. Rents of similar properties are to be looked at
4. Assessments of other comparable properties are relevant
5. An opinion of value can be formed
6. Where no rents available a review of other assessments may be helpful

Question 11

What are the four classes of plant and machinery?

Answer 11

1) Power generation e.g. cables, conductors and wind turbines
2) Services to a property e.g. heating, cooling and supplying water
3) Rateable infrastructure e.g. including lifts and railway tracks
4) Process plant such as fixed cranes, masts and tanks

Question 12

What UK principles determines if P&M is rateable?

Answer 12

These factors are also guided by Schedule 5 of the Local Government Finance Act 1988.
1. The Reality Principle: This examines whether the item forms part of the overall hereditament (the property that is being rated). If it does, then it may be classified as rateable
. 2. The Premises Test: If the machinery is part of the premises, for example, it is built into the structure and cannot be removed without causing damage, this can be classified as rateable
3. The Use Test: Essentially, this involves determining if the item is used for beneficial occupation of the property, if it is, then it could be considered rateable

Question 13

Can you explain some of the changes proposed by the Barclay Review

Answer 13

Draft assessments published by assessors on 30/11/2022
 Final assessments will be published late march 2023
 Revaluation cycle now 3 years - 2023 / 2026 etc
 Valuation date 01/04/2022 - 1 year prior
 Ratepayers can correct factual errors / agree valuation approach with assessor between draft and final assessments (30/11/2022 – 01/04/2023)
 Ratepayers have 4 months from 01/04/2023 – 31/07-8/2023, to lodge a proposal with the assessor
 Any party reaching an Agreement between draft and final assessments (30/11/2022 – 01/04/2023) will forfeit their right to lodge a proposal
 separate proposal required for each property
 Once a proposal is submitted, no amendments can be made
 Assessor may refuse the proposal if believed to incomplete, however must advise what information is missing
 If not refused, Assessor has 56 days from the date the proposal is made, to acknowledge the proposal
 Assessor must provide at least 70 days notice of the proposal determination date (pdd) and provide their grounds of appeal at the same time, appellant has 14 days to respond
 Assessor must provide, within 56 days of the pdd, the final decision on the ratepayers proposal
 If refused, proposal converted to an appeal and heard before a new first tier tribunal (ftt), ratepayer/agent has 28 days to refer the proposal to the FTT
 ftt will decide upon ratepayers/agents submission at proposal stage and assessors comments
 ftt will take over role of vac from 01/04/2023
 Upper Tribunal (UT) will take over the role of the LTS
 No later than 14 days prior to the FTT hearing date, appellant or assessor may request appeal be referred to the Ut
 Final decision from the ftt and ut can be appealed to the lands valuation appeal court

Question 14

Can you explain the Burns Stewart Distillers Limited V’s Lanarkshire Assessors 2001 case

Answer 14

The case of Burns Stewart Distillers Limited V’s Lanarkshire
Assessors 2001 – The Lands Tribunal for Scotland held - that the 2 subjects should not be treated as unum quid as the 2 subjects were separated by a common public road and
neither of the subjects were reliant upon each other in order to operate and function, even although they were occupied by the same occupier.

Question 15

What is PICO?

Answer 15

The rating (Property in common occupation) and council tax (empty dwellings) act 2018.
Reverse part of Mazars to allow properties which are contigous but not intercommunicating. Allowed a small window for appeals to be put in.

Question 16

What do you know about iceland v berry 2018

Answer 16

SC case. Iceland is a well known supermarket selling frozen goods. Question to the court was whether the Air handling system is part of the manufacturing or trade processes. If they are then they are to be ignored. Usuallly it is rateable as it provides services to the hereditament but is it excluded in this case by the regulations 2000 themselves which state it is ignored for manufacturing or trade processes. Decision was that the AHS is used to keep goods in frozen manner. It is part of trade process.

Question 17

How do you determine if two non-domestic hereditaments can be merged?

Answer 17

The ‘ Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Act 2018’

One rating assessment will generally now be applied to neighbouring floors or units occupied by the same business, so long as:

They are “contiguous”; and
They are not used for wholly different purposes.
Premises are contiguous with each other if they share at least part of a common boundary (e.g. a wall or fence), or if they are on consecutive floors and at least part of the floor of one unit lies directly above at least part of the ceiling of the other unit. Premises might still be contiguous even where there is a space between them that is owned or occupied by another person, for example the ceiling void between two floors.

Question 18

Define NAV

Answer 18

Net annual value is the rental value that is paid year on year, from a hypothetical tenant to a hypothetical landlord, assuming that the tenant is responsible for all repairs

Question 19

The Non-Domestic Rates (Scotland) Act 2020

Answer 19

The Act introduces several changes to the rates system, such as:

reducing the revaluation cycle from five to three years
creating a two-stage appeal system for property valuations
introducing new reliefs for certain properties, such as new or improved properties, specialist music provision in public schools, and contribution to net-zero emissions target
devolving empty property reliefs to local authorities from 1 April 20232
giving local authorities the power to reduce or remit rates for certain organisations
allowing electronic communication of information
making anti-avoidance regulations
reporting on the number of assessors and availability of resources

The Act also affects some existing reliefs, such as charitable relief for independent schools and unoccupied properties.

Question 20

What was the outcome of the burns distillers case

Answer 20

The outcome of the Burns Distillers vs Lanarkshire Council case was that the Lands Tribunal for Scotland decided that the subjects at West Mains Road and Milton Road should not be treated as a unum quid, but as two separate entries in the valuation roll. The Tribunal held that there was a clear geographical separation of the subjects and that they were physically and visually distinct. The Tribunal also rejected the argument that the subjects were part of an integrated business and that there was a precedent for treating similar subjects as a unum quid. The Tribunal affirmed the assessor’s entries in the valuation roll and dismissed the appellants’ appeal

Question 21

The Valuation for Rating (Plant & Machinery) (Scotland) Regulation 2000 was amended in 2023 what P&M did it exclude?

Answer 21

These regulations were amended in 20232 to exclude plant and machinery with microgeneration capacity, excepted renewables plant and machinery and excepted electric vehicle charging point plant and machinery from valuation until 1 April 2035.

Question 22

The most important legislation around business rates in Scotland are:

Answer 22

The Non-Domestic Rates (Scotland) Act 20201, which introduced various reforms to the non-domestic rates system, such as more frequent revaluations, improved appeals process, and expanded relief for empty properties.

The Local Government Finance Act 19922, which established the basic framework for the calculation and collection of non-domestic rates, including the setting of the national poundage rate and the distribution of the revenue to local councils.

The Lands Valuation (Scotland) Act 18543, which still provides the foundation for the structure and machinery of the valuation system, including the appointment and duties of independent assessors who determine the rateable value of properties.

Question 23

What does the Local Government (Scotland) Act 1975 say about MCC

Answer 23

Section 3ZA (2) of the act provides that a proposal may be made to alter the entry in the valuation roll on the ground that since the entry was made, there has been a material change of circumstances.

Section 37 (1) of the act defines what constitutes a material change of circumstances and what does not

Question 24

Where is the definition of MCC Local Government (Scotland) Act 1975

Answer 24

This definition is found in section 37 (1) of the act

Question 25

What does Section 15 of the Local Government (Scotland) Act 1966 say

Answer 25

is about valuation according to tone of roll.

It states that for the purposes of any new or altered entry to be made in a valuation roll after the passing of this act, the value or altered value to be ascribed to lands and heritages shall not exceed the value that would have been ascribed to them in that roll if they had been subsisting throughout the year before the last year of revaluation, on certain assumptions1. It also defines what are relevant factors for valuation, such as the mode or category of occupation, the quantity of minerals or other substances, and the volume of trade or business1. It also specifies that this section does not apply to lands and heritages that are occupied by a public utility undertaking and of which the value falls to be ascertained by reference to the profits of the undertaking1.

Question 26

What is the tone of the roll?

Answer 26

The tone of the roll is a term that refers to the valuation of properties for the purpose of non-domestic rates in Scotland. It means that the value of a property should not exceed the value that would have been ascribed to it in the valuation roll if it had been subsisting throughout the year before the last year of revaluation, on certain assumptions1. The tone of the roll is established by section 15 of the Local Government (Scotland) Act 19662, which aims to ensure fairness and consistency in the valuation system3.

Question 27

Tone of the roll

Answer 27

A “tone date” is used for the revaluation. The “tone of the roll” is a measurement provision which ensures that the revaluation rate and the valuations made during the currency of the Roll share a common base. During the currency of the Roll, the valuations should not exceed the value ascribed in the tone date. The tone date is therefore crucial, as it sets a ceiling for rateable values for the next five years. The tone date chosen for the 2010-2015 roll was 1 April 2008.

Question 28

Any case law regarding the tone of the roll?

Answer 28

The Assessor for Tayside Valuation Joint Board v Land Securities PLC and Others [2012] CSIH 68

Question 29

Can you explain The Assessor for Tayside Valuation Joint Board v Land Securities PLC and Others [2012] CSIH 68

Answer 29

The point of contention in Tayside v Land Sec was the rate per square metre applied in the Overgate Centre, Dundee. During the previous Valuation Roll (2005-2010), the global financial downturn was accepted as a material change in circumstances and new lettings rates for 2009 - 2010 were negotiated at a lower value than those negotiated between 2005 and 2008.

So when the tone date for 2010-2015 was set at 1 April 2008, this reflected pre-recession rates, whilst rates agreed in the preceding calendar year had been negotiated at post-recession rates. The difference in value is considerable. Zone A rates were reduced from £1050 psm in 2005 to £700 psm in 2009. The value as at 1 April 2008 was £875 psm. The Lord President, Lord Gill noted that the successful appeals made during the previous roll had no bearing on the Assessor’s ability to set the tone date for the current roll.

The material change in circumstance (the downturn in 2009) occurred before the 2010-2015 Roll came into force and, as such, could not be regarded as a material change in circumstance for the new Roll. The Lord President agreed with the Assessors that in setting the tone date as at 1 April 2008, they had performed their duty, and that the appeals against higher rates during the previous roll had no bearing on setting the tone date for the current Roll