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4.1 As indicated in Part 2 to this paper, the Scottish Executive has a policy of encouraging farmers and their immediate families to establish ways of ensuring a sustainable future for themselves and for the rural communities in which they live. In addition, the Executive encourages farmers to provide more services to other farm businesses and to make the most efficient use of the resources available to them.
4.2 Some aspects of rating law inhibit this process in relation to certain methods of agricultural business, such as machinery rings, contract farming and share farming, where farm businesses pool their resources and provide services to one another to generate cost efficiencies. In some cases these sorts of enterprises can also offer the opportunity for diversification into alternative sources of income.
Current Rating of farm buildings used for Machinery Ring, Contract Farming and Share Farming Enterprises
4.3 Subject to certain conditions, agricultural land and buildings are exempt from non-domestic rates. Two important conditions are that:
4.4 In many cases the activities of machinery ring, contract farming and share farming enterprises may not be able to meet these conditions. For example, with a machinery ring a building may house agricultural machinery which is also used to farm the land of another farmer; or a contract farmer may occupy a building on land that he farms but is not the occupier of. In both cases the buildings in question are used in connection with an agricultural activity, for example for storing machinery or other supplies. In neither case, however, would the buildings be designated as agricultural and so eligible for exemption from rates, as both fail to meet the occupancy and usage criteria.
The need for change
4.5 Current rating law can inhibit the efficient use of agricultural resources. The agricultural exemption from non-domestic rates does not extend to certain non-traditional business structures and arrangements that remain entirely agricultural and are based on farms. Views are invited therefore on whether existing rating legislation should be adjusted to encompass these structures and arrangements. The Scottish Executive considers that these structures and arrangements will largely comprise of machinery ring, contract farming and (although practised to limited extent in Scotland) share farming enterprises. Consultees may be aware of other arrangements which might be suitable for inclusion. Views are also sought on whether non-agricultural activities, such as the supply of agricultural inputs or machinery, or activities which are not based on farms should be included.
4.6 In developing these considerations it will be important to strike the right balance between the need to encourage modern business methods while retaining the integrity of agriculture’s exemption from non-domestic rates. On the one hand, the Executive wishes to establish conditions which will provide a level playing field among agricultural operators so permitting maximum and effective use of agricultural resources. On the other hand, it does not want to create new exemptions from rates that undermine other business arrangements where the property used remains rateable.
Proposals
4.7 It is proposed that the law be changed to exempt from non-domestic rates, property used by a single agricultural business (whether sole owner/tenants/joint partners or companies) which operates over a number of separate agricultural holdings. This would cover a number of both contract and share farming arrangements.
4.8 It is also proposed that where buildings are used jointly by a number of agricultural businesses (for example to house machinery used on more than one farm) then these buildings should also be exempt. This would cover a number of farm machinery ring arrangements. This is already possible under existing law when, for example, a machinery ring is organised as a co-operative.
4.9 The Scottish Executive proposes to exclude from the rating exemption businesses which are not used solely in connection with agricultural land and businesses, ie:
Your views are sought on this proposal.
4.10 The Executive also proposes to exclude property which is mainly used for non-agricultural purposes, such as housing machinery for landscaping, verge or hedge cutting.
4.11 Views are also sought on whether there are other flexible farming business arrangements which should be considered. For example, one common practice is that of an agricultural business who may hold all machinery in one place, not necessarily on a farm, but uses it to produce crops from land which is rented for only one season. This helps to extend the rotation of crops in order to prevent the build up of diseases, pests and weeds which survive shorter rotations in, for example, potatoes.
Legislative position and timing
4.12 These proposals will require new Primary legislation in Scotland. Following consultation the intention would be to include suitable legislative provisions in a future Local Government Bill.
EXTENSION TO RURAL RATES RELIEF SCHEME: POINTS FOR CONSULTATION
The Scottish Executive seeks views on:
SCOTTISH EXECUTIVE
February 2001
The Scottish Executive may wish to publish responses to this consultation exercise in due course or deposit them in its libraries. If so, all responses received will be published or deposited, unless a respondent specifically asks the Executive to treat their response as confidential. Confidential responses will, nevertheless be included in any statistical summary of the numbers of comments received and views expressed.
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