The saying goes "what can be given can also be taken away" and this is quite true in the context of the Barclay Review of Non-Domestic Rates and the new Non-Domestic Rates (Scotland) Bill (the "Rates Bill").

We have blogged before on the Barclay Review (here and here) and the impact that some of its recommendations could have on, amongst other organisations, charities. With the introduction of the Rates Bill, as announced here, to the Scottish Parliament we have a clearer picture of how the non-domestic rates regime in Scotland is going to change. ...

Charity rates relief: what is it?

Currently 80% relief from non-domestic rates is available for land occupied by a charity (that means one registered with OSCR) and used wholly or mainly for charitable purposes. There is also scope for an additional 20% relief to be granted by a local authority if it so chooses, thereby allowing up to 100% relief from rates. Very valuable. Indeed, we have blogged on the value of charity relief before.

Independent schools that are charities: the end of the universal?

As we already know the Barclay Review viewed negatively the position of independent schools that are also charities and benefitted from charity relief from rates. The recommendation was that charity relief should be abolished for such schools and this is precisely what is happening with the Rates Bill:

The Rates Bill will change the rules such that "mainstream" (in the parlance of the Rates Bill's Policy Memorandum) independent schools which are charities for the relief are excluded from eligibility. Independent special schools (those providing support for children with complex needs) and specialist independent music schools will continue to be eligible for charity relief. There is thus an exception for St Mary's Music School on the basis of its funding mix, support for pupils and its cultural position.

We work with various different definitions or tests of "charitable" across the UK: English law, tax law and for OSCR purposes to name just three (that can apply to a single charity at the same time). But within each definition or test it is currently universal: a charity is a charity is a charity and all that comes with that. The Rates Bill will move away from a universal notion of charity in Scotland.

Guidance on rates relief for sports and non-profit organisations... and the future of ALEOs

Rates relief for sports organisations is not mandatory. However, currently local authorities can provide up to 100% relief for sports clubs registered with OSCR or with Community Amateur Sports Club ("CASC") status from HMRC as well as a club, society or other organisation not established or conducted for profit and used wholly or mainly for the purposes of recreation.

The Rates Bill changes the game somewhat by introducing a power for the Scottish Ministers to issue guidance to local authorities about the exercise of their discretion to grant rates relief to those organisations. The guidance is to be informed by representatives of local authorities and the sports club sector..

From the Rates Bill's Policy Memorandum, it could be that the guidance will consider issues such as the size of a club, openness of membership, membership fees and availability of facilities. Apart from size, the other factors already feature in being OSCR registered or having CASC status. If size of an organisation (and therefore perceived ability to 'cope' with paying rates) is to be a factor, this could provoke a wider issue for charity relief. It might be that larger charities are considered able to 'cope' with paying rates and lose the discretionary 20% element.

The Rates Bill reflects the Scottish Government's announcement in 2017 that local authority arm's-length external organisations ("ALEOs") that presently provide important leisure and cultural facilities will not suffer the withdrawal of charity relief that the Barclay Review recommended. While ALEOs could be affected by the terms of any new guidance, it does provide a form of reprieve. It means ALEOs could still continue to be useful vehicles for delivering sport and other activities to the community.

A reminder on charity trading subsidiaries

Trading subsidiaries do not feature in the Rates Bill, as they does not need to be included. But the Barclay Review provided a reminder that a trading subsidiary of a charity is not itself a charity and therefore not entitled to mandatory charity relief.

Side-stepping the new regime

It is worth noting that the Rates Bill also introduces a form of general anti-avoidance rule.


The Rates Bill could be seen as something of a bitter pill for some in the charities and third sector to swallow. Affected (immediately or potentially) organisations now need to consider a financial overhead that, until now, hasn't been a concern and budget and plan accordingly.


Kevin Winters