The Scottish Parliament has passed emergency legislation to correct a significant drafting error in business rates law that inadvertently removed councils’ legal authority to charge non-domestic rates on unoccupied commercial properties. Without it, the Scottish Government would face potential refund liabilities of up to £400 million to an estimated 34,000 property owners who paid rates on vacant premises over the past three years.
The Non-Domestic Rates (Liability for Unoccupied Properties) (Scotland) Bill was introduced on 24 November 2025 and passed on 27 November 2025, with the legislation applying retrospectively from 1 April 2023 – the date when the original flawed provisions came into force.
Legislative Error
The root of the problem lies in the Non-Domestic Rates (Scotland) Act 2020, which was intended to devolve empty property relief powers to Scotland’s 32 local councils. The legislation, passed by the Scottish Parliament in February 2020 under then-Finance Minister Kate Forbes, sought to give councils greater fiscal autonomy to set their own policies on vacant business properties.
However, government lawyers subsequently discovered that while Section 19(2) of the 2020 Act repealed Section 24 of the Local Government (Scotland) Act 1966 – which had stated no rates were payable for unoccupied non-domestic property – the drafters failed to account for Section 16(1) of the Valuation and Rating (Scotland) Act 1956. This older provision stipulates that rates shall be payable by occupiers only.
The oversight meant that from 1 April 2023, when the new arrangements came into effect, councils lacked the legal basis to levy non-domestic rates on the owners of empty properties. Parliamentary research noted that the legislation’s technical complexity led to the error being “overlooked by government lawyers, parliament, councils, and tax specialists alike.”
Scottish Government officials first identified the error in June 2025 following a routine enquiry from a local authority. However, ministers stated they did not fully grasp the “implications” until August 2025, when officials formally alerted ministers. Public Finance Minister Ivan McKee expressed regret over the oversight, stating that such an error “should not have occurred.”
The government estimated that without corrective legislation, refunds for rates paid between April 2023 and September 2025 would amount to approximately £300 million to £350 million, including interest of £20 million to £25 million. Extending the calculation across the three full financial years from 2023-24 to 2025-26 brings the total potential liability to between £350 million and £400 million.
Local councils would also have faced administrative costs of approximately £370,000 to process repayment claims.
Opposition criticism
The emergency measure drew sharp criticism from opposition parties, who accused the SNP-led government of incompetence and demanded greater scrutiny of the corrective legislation.
Scottish Conservative finance spokesperson Craig Hoy described the original drafting as “incompetent” and accused ministers of managing a “fiasco.” Speaking in the Scottish Parliament, he stated: “I have seen my fair share of SNP incompetence but this latest fiasco possibly tops it all.”
Hoy emphasised the scale of the error: “To use plain English, the SNP Government simply cocked up. Its legislation provided no legal basis for companies to be paying business rates on unoccupied properties over three budgetary years. As the minister said, the money that is involved amounts to £400 million.
He added that businesses across Scotland had “in good faith, been paying non-domestic rates on unoccupied properties that they should not have been paying. That is not a trivial amount of money, and this is not a trivial issue. That £400 million could have been used, in the interim, to support businesses to invest in jobs and growth.”
Conservative MSP Stephen Kerr criticised the Parliament for affording “virtually no scrutiny” to the emergency legislation, accusing the government of displaying “complete disregard for the authority of this parliament.” He asserted: “When ministers make a blunder of this scale, they must face the consequences.”
Hoy further warned that ministers were “trying to fix rushed legislation with rushed legislation.”
In Case You Missed It:
Implications for Property Owners
For property owners who have paid rates on empty commercial premises since April 2023, the passage of the emergency bill means no refunds will be issued. The legislation maintains the status quo that had been operating in practice, despite the absence of proper legal foundation.
Individual councils had already been administering empty property relief policies under devolved powers. For example, Aberdeen City Council offers 50% relief for the first three months of vacancy, reducing to 10% thereafter. Edinburgh’s policy, updated in April 2024, provides 50% relief for three months before full charges apply.
Property owners and their advisers will likely scrutinise the legislation for potential grounds of challenge, though the government maintains the bill introduces no additional costs beyond what Parliament originally intended in 2020.
