August 22, 2017 : Ruth Boyle
What does the Barclay Review of Business Rates mean for charities in Scotland?
Report out today calls for changes to non-domestic rates.
Earlier today, the Barclay Review of Business Rates released the report of their findings and recommendations.
This concludes the long process of evidence sessions, written submissions and Parliamentary scrutiny as the group assessed the non-domestic rates system in Scotland.
So, what do the recommendations mean for the third sector in Scotland? Well the system charitable rate relief, 80% mandatory and 20% discretionary, relief will continue for the majority of charities in Scotland.
The report is largely positive for our sector but there are some changes recommended in terms of who will be eligible for charitable rate relief. The recommendations include:
- ALEOs to lose charitable rate relief (and sports club relief, if applicable). This change would require primary legislation, however, the Group recommends that Scottish Government could cut each council budget by the appropriate amount from 1 April 2018 to realise those savings (£45 million) more quickly and allow them to be redistributed to other ratepayers. That local authorities can gain additional funding through the creation of ALEOs is branded as “tax avoidance”.
- Independent (Private) schools to lose charitable rate relief. The Review saw this to be an unfair competitive advantage when compared with state schools. This is expected to be changed in April 2020 and should save £5m.
- Day Nurseries – new 100% relief for day nurseries to support childcare provision, including third sector providers. This is recommended to start from April 1st
- Sports clubs –While ensuring community sport facilities, deemed to be the intended recipients of this relief, will continue to receive relief the Review has suggested that the bigger clubs should pay. In the report they detail that lucrative golf clubs and other member clubs with assets are currently relief or exemptions. This change is scheduled for 1st April 2020.
- Universities will keep their charitable rate relief but the Barclay Review recommends that they should start to pay business rates where they compete with private firms g. renting out student accommodation in the summer months and renting out venues for conferences and other functions
The main issue for the third sector is around recommendation 23 which calls for compliance issues to be resolved in the context of rate relief wrongly being awarded, such as councils are awarding charity relief to some of the trading arms of the parent charity. This means those charities which operate their charity shops as a subsidiary trading arm will not be able to claim relief for those shops.
This will pose issues for charities operating retail arms on this basis as, while this was already supposed to be the case, many local authorities continued to give rate relief to these organisations. This also means it’s difficult for our sector to contest, as this isn’t a new change. We’re unclear how many organisations will be affected by this change, but it could have a significant impact.
Beyond this trading arm change, these recommendations are broadly in-line with SCVO’s submission and indeed the submissions of the wider third sector. Our sector had asked for some clearer criteria for discretionary relief in each local authority, but perhaps this will come with a greater emphasis on transparency, which is pushed quite heavily in the report.
Some of these recommendations will require primary legislation to enact changes so this won’t happen overnight (see the road map of changes on page 13 of the Report). The most immediate changes will be around the administrative recommendations and there are to be further reviews into the Small Business Bonus Scheme and Plant and Machinery Valuations.
Overall, the Barclay Review has kept charitable rate relief in place for the majority of the third sector in Scotland, and that’s really positive. This is a recognition of the importance of charities in Scotland and the public benefit these organisations deliver.