Barclay Review a mixed bag for property owners and ratepayers – Knight Frank

In response to the Barclay Review on non-domestic rates, Iain McGhee, Valuations Partner at Knight Frank, said: “The key recommendations from today’s review are five-fold: closing avoidance loopholes, reforming charity reliefs; a reduced three-year revaluation cycle; reviewing empty rates relief on buildings; and a proposed 12-month delay in introducing or increasing rates bills, following a development or improvement.

“The current 42-day occupation period required to ‘reset’ the clock on relief would be increased to six months under the proposals, which will have a significant impact on holding costs for empty properties. Meanwhile, recommended changes to charitable relief could bring certain types of occupiers, such as private schools and universities, into the payment regime and only properties in active occupation by a charity will be exempt.

“The business community has sought more frequent revaluations for some time and this recommendation is a positive step; although, the practicalities of implementing this would require careful consideration, particularly regarding the appeal timeframes.

“A proposed moratorium on introducing or increasing rates bills following completion of a development or improvements extensions is welcome news – the impending rates bill for many schemes has arguably provided a disincentive to develop in the absence of pre-lets. However, some detail on how this recommendation would work is required, as it raises a number of questions – not least, what if improvements are phased and what if the building is sold in the 12-month period following the works?

“Less welcome, from a property owner’s perspective, is the recommendation that any non-domestic buildings vacant for five years or more would have a 10% supplement added to the rate poundage to ‘encourage the owner to better utilise the property’. The report also suggests a change in empty rates relief on listed buildings, limiting 100% relief to a maximum of two years, and reduced to 10% thereafter.

“To a certain degree, these last two recommendations ignore the commercial realities of the property market: landlords want their properties to produce income and they want to reduce holding costs. It’s very rare for a landlord to deliberately hold vacant properties for a prolonged period of time.

“Of course, all of these proposals are recommendations for now – the Scottish Government will need to legislate to bring them into force.”