Savills : Current shortfalls in Government budgets may mean rates for all properties will be closely scrutinised

As the rural sector becomes increasingly diversified, rates have become an important factor for land and rural business owners and business occupiers. Current shortfalls in Government budgets are likely to mean that the rating potential of all properties will be closely scrutinised says Jonathan Guest Director of Savills rural.

Most owners and occupiers of Scottish rural property are being faced with Return of Information forms issued by assessors for shooting and deer stalking rights. Many will be wondering how best to answer the detailed and sometimes intrusive requests for information and be pondering the implications of the information provided.

Few will welcome yet more bureaucratic form filling to satisfy the puritanical zeal of the metropolitan Scottish Government. Many commentators consider the reintroduction of sporting rates to present a significant threat to the viability of economically fragile enterprises supporting highly valued employment in rural areas.

However a thought should be spared for the assessors whose lot is to implement the regime. With no database of sporting occupiers to hand, some 22,000 Return of Information forms have been issued to all owners and occupiers of land registered with SGRPID. The assessors face a huge initial task in creating a database of the owners and occupiers of all the sporting rights in Scotland. The assessors are then faced with forming a valuation method to derive rateable values which can be applied to all the identified sportings. The subject to be valued is the right, however exercised, to shoot game and deer on or over the land and or forest. The object of the valuation method is to arrive at 'the rent at which the lands and heritages might reasonably be expected to let from year to year if no grassum or premium other than rent were payable in respect of the lease and if the tenant undertook to pay all rates and to bear the cost of repairs, insurance and other expenses, if any, necessary to maintain the lands and heritages in a state to command that rent'. The method must be fair, supported by the evidence and readily defensible against appeals for which there is a large and very time consuming potential.

From the above it is evident that the rateable value cannot be directly linked to the bag. Also deer culled for management purposes are to be excluded.

The attention of uninformed observers of field sports has been caught by the high cost per bird/stag paid by sportsmen for quality sport. The simple conclusion drawn has been that high cost means high value and therefore significant taxation potential. There is a perception that businesses providing field sports must be very profitable and therefore support high rateable values on which tax can be levied. It is vital that the Return of Information forms are fully completed to show the high cost of running sportings which typically leave a breakeven return at best.

Prior to the suspension of sporting rates in 1995 there was limited open market arms length rental evidence, as the majority of sportings were operated 'in hand' by the proprietor of the land. The rating valuation method was therefore based on a 'receipts and expenditure' approach to determine a surplus from which rental values could be deduced. By contrast the current norm is for sporting to be let to a sporting tenant for a simple rent with the tenant meeting all the running costs. A common alternative is for the owner to retain some sporting in lieu of rent. The assessor therefore will have sufficient rental evidence to support the preferred valuation approach which is based on rental evidence alone.

To those without direct experience of running sportings, the modest level of arms length sporting rents might seem inconsistent or even suspicious when compared with the high prices paid by customers for a days sport. The request to supply detailed information of running costs provided by the Return of Information forms, provides an opportunity to explain the differential between the low level of ground rent and the high day rate for serviced sport.

It seems likely that the assessors' approach will be use the cost information to analyse and adjust the rental evidence to determine rental values for the different types and grades of land over which sporting rights are exercised. Once this is done, it would be a relatively simple mechanical exercise the apply the rents to the different types and grades of land within each assessment to determine rateable values.

The grading and valuing of all rural land will result in a formidable database. Concerns over the effect on the rural economy of the reintroduction of sporting rates would pale into insignificance, if the availability of a rural land value database should ever trigger the rating of agricultural land as some land reformers have proposed.

The scale and complexity of the task makes it seem very unlikely that valuation notices for sportings will be issued before April 1st this year. There is however strong political pressure for progress and it is expected that valuation notices will be issued during the summer and backdated to the April 1st revaluation date.

After all this effort it seems ironic that the majority of sporting rateable values will be eligible for small business rates relief. The relief is however a political instrument and therefore can be reviewed at short notice. The relief also relates to the value of all the business premises occupied an individual. The sporting rateable value must be therefore considered together with other business property in the same occupation to determine the relief available.