PLANS to levy business rates on vacant listed buildings could lead to an increase in “illegal demolitions”, the Scottish Government has admitted.

Owners who face paying more in rates than the £20,000 maximum fine for demolition may be tempted to break the law as the cheaper option, it said.

The Scottish Civic Trust said the “extremely worrying” move could encourage demolitions, and failed to take account of the lengthy process needed to revive listed buildings.

Director Dr Susan O’Connor said it would be a “major deterrent” to community groups trying to revitalise town centres by taking over local assets.

The unintended consequence emerged as SNP ministers announced a public consultation on overhauling the rates in line with last year’s Barclay Review.

Finance Secretary Derek Mackay said a Holyrood Bill in 2019 was needed to implement half the review’s 30 recommendations, including a move to three-yearly revaluations, out-of-town surcharges to help town centres, and ending rates relief for private schools.

The government also published an impact assessment setting out the pros and cons of each reform.

One measure is aimed at empty property relief, making it less generous to encourage the redevelopment of vacant sites and raising an extra £15m a year.

At present, vacant listed buildings are exempt from business rates indefinitely, but from 2020 they will have to pay 90 per cent of their rates bill after two years of lying empty.

The assessment admits one of the downsides of the policy may be demolitions.

Abolishing a listed building without consent from councils and heritage bodies is a criminal offence, but the maximum fine, dating from a 1997 law, is a relatively minor £20,000.

“If owners of vacant buildings would benefit (through avoiding rates) by a value greater than the fine, then there may be an increase in illegal demolitions,” the assessment said.

“Any increase in the number applications for permission to demolish a listed building and/or increase in the number of illegal demolitions of listed buildings is likely to increase administrative costs for both councils and Historic Environment Scotland.”

Dr O’Connor said two years of rates relief was not enough for listed buildings, as most community-led regenerations took three to five years of preparation before they could carry out a refurbishment and make the property economically viable.

She said: “They need time to come up with and test ideas, get funders on board, and develop their capacity to manage a building. By limiting the rate-free period in this way, the Government is effectively ignoring the potential for communities to revitalise their high street.

“The fine of £20,000 to demolish a listed building is likely to operate as a strong incentive to demolition. It is highly unlikely local authorities will take advantage of their discretionary power to apply a larger fine.

“Both these ideas are extremely worrying for the future of Scotland's towns. They show a deep lack of understanding of the historic built environment."

A spokesperson for Historic Environment Scotland said: “It is a criminal offence to demolish a listed building without listed building consent, and instances of illegal demolition of listed buildings are thankfully rare. We are keen to support the reuse of empty buildings, and welcome positive efforts to bring empty buildings, both listed and unlisted, back in to use.”

A Government spokesman said: “This is a partial Business and Regulatory Impact Assessment (BRIA) intended to identify any possible beneficial or adverse effects of change. It does not mean that we expect any identified action to take place. We welcome views and comments on it which will inform Government thinking and the drafting of future reforms.”

Running until September 17, the 12-week consultation asks businesses and stakeholders how the changes should be implemented, including the size of the fine for withholding information from councils and valuers.

With around 280,000 premises paying £2.8bn a year, non-domestic rates are the second more lucrative levy set by the Scottish Government after income tax.

The Barclay reforms followed a backlash from businesses last year after the first revaluation since 2010 led to some businesses facing an increase in bills of up 400 per cent.

The Barclay Review, led by former RBS chair Ken Barclay, was intended to modernise the system to support growth and long-term investment.

Launching the consultation, Mr Mackay said the legislative changes would “maintain a competitive advantage for Scottish ratepayers”.

He said: “I would encourage all stakeholders to engage fully with this consultation process.

“The recommendations of Barclay, alongside others in the Budget strike the right balance between offering a competitive and sustainable taxation environment while delivering sufficient resources to fund the public services which we all rely.

“I am confident that these measures will not only attract new investment into Scotland, but also incentivise new developments and support employment.”

Business groups criticised plans to let councils charge out-of-town premises extra rates.

Councils can lower rates, but the Barclay Review suggested a new power for them to charge out-of-town and online premises, such as Amazon centres, a supplement.

This would start with a three-council pilot in 2020, possibly with “safeguards” such as a cap set by ministers, local consultation and local ideas on how to spend the income raised.

David Lonsdale, director of the Scottish Retailers Consortium, said the new levy was “alarming”.

He said: “Despite the Barclay reforms, the overall rates burden remains onerous. Over and above the headline poundage rate many retailers also already pay the large firms’ business rates supplement and often a Business Improvement District levy on top.

“This new business rates surcharge is at odds with the Scottish Government’s ambition of delivering a competitive rates regime, and introduces a fresh element of unpredictability into the system. It will do little to aid town centres since it is not an answer to the high cost of operating on our high streets, nor to the profound shift in consumers shopping habits. The Finance Secretary should firmly knock this new tax on the head.”