Setting The Tone For Your Scottish Rateable Value

A rateable value based on a pre-recession tone date has recently been allowed despite earlier rates appeal cases being based on post-recession levels. Two decisions have been handed down by the Inner House of the Court of Session (the highest civil court outwith the Supreme Court) and are therefore not only binding on Scotland, but "persuasive" under English law as well. This may have a significant impact on rates paid.

The tone date chosen (1 April 2008) reflects a very different economic market, and due to the global financial crisis that has occurred since then, the values for most commercial properties in Scotland are now actually lower than they were in 2008. By way of example, if the market value of a commercial property as at 1 April 2008 was £100,000, and presently stands at £50,000 due to the downturn in the market, the building occupier may still be charged the commercial rates calculated on the £100,000 valuation. This will squeeze profit margins for commercial building owners or occupiers in an already difficult economic climate.

Mechanics of the Valuation Roll and Tone Dates

The Valuation Roll is used by local authorities to calculate market values for non-domestic property and their rateable values, and it is derived from the net annual value, established every five years at a revaluation, the most recent being on 1 April 2010.

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.

The Cases

The two cases are (1) The Assessor for Tayside Valuation Joint Board v Land Securities PLC and Others [2012] CSIH 68 and (2) The Assessor for Fife v Mercat Kirkcaldy Ltd and Others [2012] CSIH 67. This Law-Now reports on the first of the cases, the second one has a similar decision. 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...