Part 4 – Anti-avoidance regulations
161.Part 4 gives the Scottish Ministers a power to make provision, by regulations, with a view to preventing or minimising the avoidance of non-domestic rates.
Section 37 – Anti-avoidance regulations (and section 41 – Procedure for anti-avoidance regulations)
162.Section 37(1) enables the Scottish Ministers to make “anti-avoidance regulations”. These are regulations making provision with a view to preventing or minimising advantages arising from non-domestic rates avoidance arrangements that are artificial. Sections 38, 39 and 40 explain what is meant by an “advantage”, “non-domestic rates avoidance arrangements” and “artificial” respectively.
163.Section 37(2) provides that the Scottish Ministers can make anti-avoidance regulations only if they consider it appropriate to do so. Ministers require to state in proposing regulations why they consider making them to be appropriate (see section 41(6)(a)).
164.Section 37(3) allows the regulations to modify enactments other than Part 4, to make different provision for different purposes and to make ancillary provision.
165.Section 41 makes provision about the procedure for the regulations, including consultation requirements, as follows.
166.Subsection (1) provides that the regulations are subject to the affirmative procedure.
167.Subsection (2) requires the Scottish Ministers to consult persons appearing to them to represent the interests of either local authorities or of assessors (or both), as they consider appropriate, before laying a draft of the regulations before the Scottish Parliament. They may also consult such payers (or potential payers) of non-domestic rates and other persons as they consider appropriate.
168.Subsection (3) requires that consultation to include a copy of the draft regulations, and subsection (4) requires the Scottish Ministers to notify the Scottish Parliament about the consultation (as soon as reasonably practicable after the consultation begins). The Scottish Ministers must have regard to any representations made about the draft regulations as a result of the consultation (subsection (5)).
169.Subsection (6) requires the Scottish Ministers to lay a document before the Scottish Parliament which explains why they consider it to be appropriate to make the regulations, and giving details of the consultation, representations received and any changes made to the proposed regulations by them as a result of the representations. The document is to be laid when the draft regulations are laid.
Section 38 – Meaning of “advantage”
170.Section 38 explains what is meant by an “
171.Subsection (2) provides that, when determining whether there is an advantage in relation to rates, the amount of rates that would have been payable in the absence of avoidance arrangements may be relevant.
Section 39 – Non-domestic rates avoidance arrangements
172.Section 39 explains what is meant by “non-domestic rates avoidance arrangements”. Arrangements includes agreements, transactions, undertakings, actions and events, and may include several different arrangements which form a series. The arrangements are “non-domestic rates avoidance arrangements” if it is reasonable to conclude their main purpose, or one of their main purposes, is obtaining an advantage (i.e. reducing or delaying payment of rates, or obtaining a repayment of them).
Section 40 – Meaning of “artificial”
173.Section 40 sets out two different cases in which non-domestic rates avoidance arrangements are “artificial”.
174.The first case (set out in subsection (2)) is where entering into, or carrying out, the arrangement is not a reasonable course of action in relation to the non-domestic rates provisions, in the circumstances. Factors to take into account include whether the substantive results of the arrangement are consistent with express or implied principles on which the provisions are based and the policy underpinning the provisions, and whether the arrangement is intended to exploit shortcomings (or loopholes) in them.
175.The second case (set out in subsection (3)) is that the arrangement lacks economic or commercial substance. Subsection (4) gives an indicative list of things that might indicate a lack of economic or commercial substance. These include where the arrangement is carried out in a manner which is not normal in reasonable business conduct, the legal characterisation of things done under the arrangement is inconsistent with the legal substance of the arrangements as a whole, the arrangements includes elements which offset or cancel each other, the arrangement includes circular transactions, or the advantage resulting from the arrangements is not reflected in the business risks associated with it.
176.Subsection (6) requires arrangements which include more than one transaction, event etc. to be looked at as a whole for the purpose of determining whether they are artificial.