Non-Domestic Rates (Miscellaneous Anti-Avoidance Measures) (Scotland) Regulations 2023 – 26th January
The independent Barclay Review of Non-Domestic Rates recommended that a General Anti-Avoidance Rule be created to reduce avoidance and make it harder for loopholes to be exploited in future. The Non-Domestic Rates (Scotland) Act 2020 (“the Act”) (Part 4) empowered Scottish Ministers to make regulations with a view to preventing or minimising advantages arising from non-domestic rates avoidance arrangements that are artificial.
The Bute House Agreement committed to use the anti-avoidance powers in the Non-Domestic Rates (Scotland) Act 2020 to assist local authorities in tackling known tax avoidance tactics, including when they make decisions on applying empty property relief and charity relief.
Following on from this, a draft of the Non-Domestic Rates (Miscellaneous Anti-Avoidance Measures) (Scotland) Regulations 2023 was circulated in a ‘closed consultation’ to specific practitioners between 19 October and 2 December 2022. A public consultation was not held due to the content of the draft regulations, which essentially contain a list of potential artificial avoidance practices.
The Draft Regulations make provision for owners of non-domestic properties to be treated as liable for payment of non-domestic rates, rather than occupiers (who in all other circumstances are the liable party). The effect date for the transfer of liability will be from the point of notification, or if it is a repeat offence within the last 5 years, then it may be a retroactive transfer of liability (including outstanding liability) from the start of any lease agreement.
Additionally, any non-domestic rates relief associated with the lands and heritages is to cease where the liability transfers, with effect from the date on which the transfer takes effect. The circumstances where liability may transfer are:
Tenancy is not on a ‘Commercial Basis’ (set out in the regulations)
Where the occupier is wound up within the first 12 months of Tenancy (as well as other criteria set out in the regulations)
Characteristics and Behaviours of the Occupier (set out in the regulations)
The regulations will also seek to empower local authorities to counteract deliberate actions which to seek avoid payment of rates on a property through a reduction of rateable value by making physical change to its state (i.e. property destruction), where certain conditions are met.
Further information can be found in the Draft Policy Note for this instrument: The Non-Domestic Rates (Miscellaneous Anti-Avoidance Measures) (Scotland) Regulations 2023 - Draft Policy Note (legislation.gov.uk)