MSPs pass emergency bill to fix business rates blunder

Up to 34,000 properties are thought to have been affected by the mistake

MSPs have passed an emergency bill to fix a legislative error that meant owners of thousands of properties paid business taxes when they did not need to.

The bill is designed to fix an earlier law that accidentally removed the legal right of councils to levy non-domestic rates on empty business properties.

Up to 34,000 properties are thought to have have been affected, and ministers have legislate retrospectively to avoid having to issuing refunds of up to £400m.

Opposition MSPs warned there was still a significant risk of legal challenges from property owners who had paid the rates.

Public Finance Minister Ivan McKee apologised to MSPs for the mistake, which he said "should not have happened".

He said the problem was missed by government lawyers as well as parliament, councils and tax experts due to the complexity of the law.

What are non-domestic rates?

Non-domestic rates are a tax levied on properties such as shops, offices, factories or warehouses.

They are based on their rental value and set by the Scottish government.

The Non-Domestic Rates (Scotland) Act 2020 was supposed to allow local authorities to tax owners of empty business properties.

However, a technical flaw in the legislation - which failed to account for laws dating back to 1956 - meant that it did not actually give councils the legal authority to levy the rates.

Public Finance Minister Ivan McKee says the government will be "fully transparent" about the legislative error

Ministers said affected property owners who had paid the rates since the legislation came into force in April 2023 would have to be refunded if a new bill was not passed.

They estimated that between 24,000 and 34,000 properties could have been affected, with a refund bill of up to £400m.

Ministers warned that local authorities could also have faced £370,000 in administrative costs to process repayment claims.

McKee said government officials first learned of the mistake in June, but that they did not realise the full "implications" of it until August, when they informed ministers.

The blunder came to light when a query was raised by a local authority.

Ministers 'must face consequences'

The Scottish Conservatives called for the government to provide more detail about how the legislative error occurred, and what ministers did when they became aware of it.

Conservative MSP Stephen Kerr told the parliament that there had been "virtually no scrutiny" of the emergency bill and accused the government of showing "utter disregard for the authority of this parliament".

He added: "When ministers make a mistake of this magnitude they must face the consequences."

Conservative finance spokesman Craig Hoy claimed that the emergency bill "makes the prospect of a legal challenge much more likely".

McKee vowed that the government would be "fully transparent" about the circumstances of the error.

The bill to fix the mistake was passed by 84 votes to 24.

Emergency bills can be used to counter anticipated legal action following the discovery of a loophole or problem of interpretation in an existing piece of legislation.

Both the use of emergency bills, and bills that makes retrospective changes, are unusual but not unprecedented.