Non-Domestic Rates - Empty Property Relief
North Lanarkshire Council · 1 March 2023
Back to Finance and Resources Committee — 1 March 2023 and its agenda
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North Lanarkshire Council Report Finance and Resources Committee Does this report require to be approved? ☒ Yes ☐ No Ref EK / GT Date 01/03/23 Non-Domestic Rates – Empty Property Relief From Elaine Kemp, Chief Officer (Finance) E-mail kempe@northlan.gov.uk Telephone 07939 280601 Executive Summary As part of the Scottish Government’s 2019/20 budget proposals a commitment was made to devolve Empty Property Relief to local government from 1 April 2023. The aim of devolving this relief is to ensure greater fiscal empowerment, enabling councils to administer rates charges for unoccupied properties in a way that is tailored to local needs. There has been considerable discussion and debate at professional forums, COSLA and with the Scottish Government about the implementation of changes and reporting requirements with the quantum of funding only recently agreed through COSLA. Given the short timescales available prior to 1 April 2023, it is proposed that North Lanarkshire Council’s Empty Property Relief Policy mirrors existing reliefs for a period of at least one year to 1 April 2024. It is the intention of Financial Solutions to undertake a review of the Empty Property Relief Policy during 2023 with a view to implementing a revised policy from 1 April 2024. The Service will ensure engagement with key internal and external stakeholders as part of the policy review. Recommendations It is recommended that Committee: (1) Approves the proposed policy to be effective from 1 April 2023; (2) Recognises that Financial Solutions intends to review the Empty Property Relief policy during 2023 with a view to implementing a revised policy from 1 April 2024 onwards; and (3) Recognises that Financial Solutions will consult with key stakeholders to inform the revised policy from 1 April 2024. The Plan for North Lanarkshire Priority Improve North Lanarkshire's resource base Ambition statement (25) Ensure intelligent use of data and information to support fully evidence based decision making and future planning
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1. Background 1.1 All Scottish local authorities currently administer Empty Property Relief (EPR) using the following legislation and regulations: • Local Government (Scotland) Act 1966 – Sections 24 and 24A, • Non-Domestic Rating (Unoccupied Property) (Scotland) Regulations 1994, and • Non-Domestic Rating (Unoccupied Property) (Scotland) Regulations 1998. 1.2 As part of its 2019/20 budget agreement, the Scottish Government committed to the devolution of EPR at the next Non-Domestic Rates (NDR) valuation. The next revaluation will be on 1 April 2023 at which point all elements of EPR will be devolved to local government. 1.3 To enact this change, the Scottish Parliament has repealed the existing provisions for award of relief for unoccupied properties in Section 24 of the Local Government (Scotland) Act 1966 from 1 April 2023. The repeal was legislated through the Non- Domestic Rates Act (Scotland) 2020. 1.4 Councils have the power to award discretionary local reliefs for Non-Domestic Rates through Section 3A of the Local Government (Financial Provisions etc.) (Scotland) Act 1962 as amended by Section 140 of the Community Empowerment (Scotland) Act 2015. 1.5 The devolution of EPR aims to deliver greater fiscal empowerment, enabling councils to administer support 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. 2. Report 2.1 The Council is required to establish its own policy for Empty Property Relief to be effective from 1 April 2023 following the repeal of existing legislation. 2.2 Despite the commitment being made to devolve EPR in the Scottish Government’s 2019/20 budget agreement, there has been considerable discussion and debate at professional forums, COSLA and with the Scottish Government about the nature of the implementation of changes, the quantum of funding being made available, reporting requirements and future reviews of the policy intent. Some of these aspects have only recently been agreed nationally. 2.3 Therefore, it is proposed that given the timescales involved, North Lanarkshire Council mirrors the existing reliefs for a period of at least one year to 1 April 2024. The proposed North Lanarkshire Council Non-Domestic Rates Empty Property Relief Policy is shown in Appendix 1. 2.4 If the Council does not set a policy full rates would be charged on all empty non- domestic properties from 1 April 2023. Funding 2.5 The Scottish Government will provide an annual allocation of £105m distributed amongst local authorities until the next revaluation in 2026. The quantum of £105m reflects the Scottish Fiscal Commission’s Medium Term Financial Strategy Forecasts and incorporates estimates of future inflation.
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2.6 The Local Government Finance Settlement for 2023/24 confirms a total of £3.974m for North Lanarkshire Council. It is for individual local authorities to allocate the recurring revenue as they wish, however, the Scottish Government intends to review the impact of devolving EPR during 2025/26 which may limit any longer-term policy changes. 2.7 The following table highlights the EPR awarded for 2022/23: Type of Relief Number of Awards Value of Relief Awarded (£) Industrial Property – 100% 115 412,963 Industrial Property – 10% 96 135,493 Other Property – 50% 47 19,190 Other Property – 10% 389 346,214 Listing Building 29 633,534 Land – no buildings 76 76,532 Small Rateable Value (£1,700) 266 44,532 Trustee 1 3,332 Prohibited by Law 2 23,203 Compulsory Purchase 0 0 Administration 8 127,973 Company Wound Up 19 299,407 Total 1,048 2,122,374 2.8 The funding being provided is greater than the total awards made for empty relief during 2022/23. However, the funding is fixed for a three year period and actual relief awarded may be affected by a number of factors including: • The rate poundage applied by the Scottish Government when it sets its budget each financial year. It should be noted that the rate poundage will be fixed between 2022/23 and 2023/24, • The impact of the 1 April 2023 revaluation on the rateable value of individual properties, and • Wider economic impacts increasing the number and type of empty properties eligible for relief. Administration 2.9 Given the recommendation to mirror the existing statutory reliefs in North Lanarkshire’s policy, businesses eligible for continuing relief on 31 March 2023 will transfer onto the new relief policy on 1 April 2023. Any balance of relief remaining will continue into the new financial year. Any application for new relief from 1 April 2023 until 31 March 2024 will be assessed in line with the Council’s new policy. 2.10 The Council will be required to amend its statistical reporting and administration of local reliefs to align with the new statutory basis of reliefs and ensure it can continue to report on any bad debts and debt write offs for empty properties through the old regime. This may require system changes to support efficient collection and reporting of data and keeping rates records up to date. The Council will continue to comply with Scottish Government reporting requirements for Non-Domestic Rates. 2.11 Financial Solutions will carry out a full review of empty property relief records to ensure they reflect the correct proprietor, tenant and occupier information. 2.12 The Council will also continue to take cognisance of its commitments in relation to Subsidy Control and will consider whether reliefs awarded under the new policy
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represent a subsidy under the Trade and Cooperation Agreement and the Subsidy Control Act 2022 when it comes into force. Review 2.13 It is the intention of Financial Solutions to undertake a review of the Empty Property Relief Policy during 2023 with a view to implementing a revised policy from 1 April 2024. The review will include consideration of the following areas: • The appropriateness of award categories, • The appropriateness of relief percentages, • The appropriateness of relief time limits, • Whether there are any policy interventions that could incentivise bringing empty properties back into use, and • The Council’s ongoing financial sustainability. 2.14 The Service will ensure engagement with key internal and external stakeholders to inform the policy review. 3. Measures of success 3.1 Approval of the policy will ensure empty properties continue to benefit from relevant reliefs. The review of the Council’s policy during 2023/24 will ensure the future policy supports local businesses and communities, incentivises brining empty properties back into use and supports the Council’s financial sustainability. 4. Supporting documentation Appendix 1 – Non-Domestic Rates Empty Property Relief Policy Elaine Kemp Chief Officer of Finance
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5. Impacts 5.1 Public Sector Equality Duty and Fairer Scotland Duty Does the report contain information that has an impact as a result of the Public Sector Equality Duty and/or Fairer Scotland Duty? Yes ☐ No ☒ If Yes, please provide a brief summary of the impact? If Yes, has an assessment been carried out and published on the council’s website? https://www.northlanarkshire.gov.uk/your-community/equalities/equality- and-fairer-scotland-duty-impact-assessments Yes ☐ No ☐ 5.2 Financial impact Does the report contain any financial impacts? Yes ☒ No ☐ If Yes, have all relevant financial impacts have been discussed and agreed with Finance? Yes ☐ No ☐ If Yes, please provide a brief summary of the impact? Funding received from the Scottish Government will exceed the cost of current Empty Property Reliefs. However, the total reliefs awarded may be impacted by changes to the rate of poundage, the upcoming rates revaluation and a potential recession on the North Lanarkshire economy. Additional temporary staffing costs to support the review of existing properties awarded relief, system change requirements and the policy review will cost £0.143m and be funded from Scottish Government grant support. 5.3 HR policy impact Does the report contain any HR policy or procedure impacts? Yes ☐ No ☒ If Yes, have all relevant HR impacts have been discussed and agreed with People Resources? Yes ☐ No ☐ If Yes, please provide a brief summary of the impact? 5.4 Legal impact Does the report contain any legal impacts (such as general legal matters, statutory considerations (including employment law considerations), or new legislation)? Yes ☐ No ☒ If Yes, have all relevant legal impacts have been discussed and agreed with Legal and Democratic? Yes ☐ No ☐ If Yes, please provide a brief summary of the impact? 5.5 Data protection impact Does the report / project / practice contain or involve the processing of personal data? Yes ☐ No ☒ If Yes, is the processing of this personal data likely to result in a high risk to the data subject? Yes ☐ No ☐
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If Yes, has a Data Protection Impact Assessment (DPIA) been carried out and e- mailed to dataprotection@northlan.gov.uk Yes ☐ No ☐ 5.6 Technology / Digital impact Does the report contain information that has an impact on either technology, digital transformation, service redesign / business change processes, data management, or connectivity / broadband / Wi-Fi? Yes ☐ No ☒ If Yes, please provide a brief summary of the impact? Where the impact identifies a requirement for significant technology change, has an assessment been carried out (or is scheduled to be carried out) by the Enterprise Architecture Governance Group (EAGG)? Yes ☐ No ☐ 5.7 Environmental / Carbon impact Does the report / project / practice contain information that has an impact on any environmental or carbon matters? Yes ☐ No ☒ If Yes, please provide a brief summary of the impact? 5.8 Communications impact Does the report contain any information that has an impact on the council’s communications activities? Yes ☐ No ☒ If Yes, please provide a brief summary of the impact? 5.9 Risk impact Is there a risk impact? Yes ☐ No ☒ If Yes, please provide a brief summary of the key risks and potential impacts, highlighting where the risk(s) are assessed and recorded (e.g. Corporate or Service or Project Risk Registers), and how they are managed? 5.10 Armed Forces Covenant Duty Does the report require to take due regard of the Armed Forces Covenant Duty (i.e. does it relate to healthcare, housing, or education services for in-Service or ex- Service personnel, or their families, or widow(er)s)? Yes ☐ No ☒ If Yes, please provide a brief summary of the provision which has been made to ensure there has been appropriate consideration of the particular needs of the Armed Forces community to make sure that they do not face disadvantage compared to other citizens in the provision of public services.
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Appendix 1 North Lanarkshire Council Non-Domestic Rates – Empty Property Relief Policy 1. Background Following the repeal of Section 24 of the Local Government (Scotland) Act 1966, Empty Property Relief policy is no longer set by the Scottish Government. From 1 April 2023 individual local authorities can set their own policy for the administration of Empty Property Relief. This policy is written in accordance with Section 3A of the Local Government (Financial Provisions etc.) (Scotland) Act 1962 as amended by Section 140 of the Community Empowerment (Scotland) Act 2015. This policy does not include any reliefs on part occupied properties which are still governed by Section 24A of the Local Government (Scotland) Act 1966. 2. Time Limited Reliefs 2.1. Industrial properties will receive 100% relief for 6 months from the last date of occupation and 10% relief thereafter indefinitely. 2.2. All other properties will receive 50% relief for the 3 months from the last date of occupation and 10% relief thereafter indefinitely. 2.3. A change of ratepayer does not affect the qualifying time period. 2.4. A property is treated as if it has been unoccupied during any period of occupation that ended within six months of when it started. 2.5. Short periods of occupation of 3 months or less will be ignored when assessing last occupation date for 2.1 and 2.2 above. 3. 100% Relief The following types of properties / owners / rateable occupiers will received 100% relief for an indefinite time on unoccupied properties as follows: 3.1. Listed Buildings or subject to preservation order where the rateable subjects are: 3.1.1. Subject of a building preservation notice(s) as defined by Section 56 of the Town and Country Planning (Scotland) Act 1972 or included in a list compiled under Section A of that Act; or 3.1.2. Included in the Schedule of Monuments compiled under Section 11 of the Ancient Monuments and Archaeological Areas Act; or 3.1.3. Industrial lands and heritages. 3.2. Properties not comprising one of more buildings or part of a building. 3.3. Properties with a rateable value (RV) under £1,700. 3.4. Properties where the rateable occupier is in administration (or subject to an administration order)
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3.5. Properties where the rateable occupier is a person entitled to possession only so entitled as a liquidator, as the trustee under a trust deed for creditors or an award of sequestration, or as the executer of a deceased person’s estate. 3.6. Properties where the rateable occupier is a company or limited liability partnership subject to a winding-up order made under the Insolvency Act 1986 or being wound up voluntarily under that Act. 3.7. Properties where occupation is prohibited by law. For properties prohibited by law from occupation, a rates exemption would be granted where legal action had been taken to prevent its use. However, if legal action had been taken to prevent one particular person or trade from using the property, then it would be unlikely to be exempt unless that person was the owner. 3.8. Properties where action is being taken by or on behalf of the Crown or any public authority with a view to prohibiting occupation or to acquisition (e.e. compulsory purchase order). 3.9. The Council will restrict the award of 100% empty property relief where the ratepayer has entered insolvency, compulsorily or voluntarily, shortly after occupation where properties which are let under a lease agreement, and have become unoccupied within a period of 6 months from the date the property first became unoccupied under the lease agreement, with at least one of the three further indicators connected to reduction or mitigation of rates liability also present. The three additional criteria are: 3.9.1. the rent charged for the lands and heritages is significantly below the level of the rent which could reasonably have been obtained at the time the lease was entered into, in all the circumstances; 3.9.2. payment of the rent is optional in terms of the relevant lease; 3.9.3. the purpose of the arrangement is identified in the lease as being for the purpose of mitigating rates liability. 3.10. Any unoccupied property that is rateable is, for the purposes of determining charity relief eligibility, treated as if it is being used for the purpose for which it was used when last occupied. It may not however be eligible for Charity Relief unless the proprietor (or the party entitled to occupation) also satisfies the relevant criteria. 4. Awarding Reliefs 4.1. 100% Reliefs awarded as at 31 March 2023 in accordance with Section 24 of the Local Government (Scotland) Act 1966 will continue to be awarded in accordance with this Policy on 1 April 2023. 4.2. Where time limited reliefs are in place at 31 March 2023, the Council will continue to award the relief. However, each premises will only receive the balance of relief based on the overall maximum period of relief outlined in Section 2 of this Policy. 4.3. For new relief applications, the rateable occupier will be required to make an application to the Council for the relief to be applied. The application form and required evidence are available on the Council’s website.