Scottish Government

Circular 36/1997

The Chief Executive Local Authorities
Our ref: PGB/2/1
Copy to: The Directory of Planning 17 October 1997

Dear Sir/Madam

COMPULSORY ACQUISITION OF LAND

LAND COMPENSATION RATE OF INTEREST

1. This Circular provides revised advice on the determination of the rate of interest payable on compensation in respect of land acquired compulsorily by public authorities and other organisations, or land affected by public works. It expands and replaces the advice given in SODD Circular24/1995 which is cancelled.

Background

2. The rate of interest payable is prescribed by Regulations made by HMTreasury under Section40 of the Land Compensation (Scotland) Act 1963.

The Regulations

3. Until the end of 1995 the interest rate payable was specifically prescribed in a series of Statutory Instruments. With effect from 31December 1995 a new method of determination was prescribed by the Acquisition of Land (Rate of Interest After Entry) (Scotland) Regulations 1995 (SI1995 No.2791). This does not set a specific rate but instead sets out a formula by which authorities may calculate the payable rate for any period or periods after the new Regulations came into force.

The Payable Rate

4. The payable rate for any period is set at bank base rate less 0.5% on the appropriate reference day. The base rate is defined as the rate quoted by the seven largest banking institutions which quote a base rate in sterling on a reference date and are authorised by the Bank of England under the Banking Act 1987 (the reference banks).

5. Normally the reference banks will quote the same base rate but, if different rates are quoted, the rates quoted by the reference banks must be ranked in descending order and the fourth in that sequence, used to obtain the standard rate. Where one or more reference banks quote more than one base rate on a reference day, the rate used is the last quoted on that day.

6. Each prescribed rate of interest applies for the relevant period(s) following entry on the land (or the date of claim or disturbance, as appropriate) during which compensation remains unpaid. Where interest is due over two or more periods in which different interest rates apply, each payable rate will be applied in the appropriate period. Interest is not compounded.

7. Details of the prescribed rates in recent years, and the periods over which they are relevant, are set out in the table at the end of this Circular.

The Reference Days

8. The payable rate takes effect on each reference day and applies until the next reference day. Where the base rate is the same on consecutive reference days the payable rate will remain the same. The Regulations define the reference days as:

31December - for the period 31December to 30March

31March - for the period 31March to 29June

30June - for the period 30June to 29September

30September - for the period 30September to 30December.

9. Where an authority enters the land on a reference day, the standard rate to be used is the rate that will apply at the end of that reference day. Where the relevant reference day is not a business day, for example because it is a weekend or a public holiday, the payable rate will continue to apply until the next business day, at which time the payable rate will be redetermined.

General

10. Acquiring authorities and others responsible for calculating the interest rate(s) payable on compensation should make suitable arrangements to enable them to calculate the appropriate rates. Details of base rates are published in a number of economic and financial journals. Where, exceptionally, authorities or claimants are unsure of the prescribed rate for any particular period the Department may be able to confirm the correct payable rate. However, it is not the function of the Department to provide this information as a matter of course.

Enquiries

11. Further copies of this Circular and confirmation of the payable rate applying in any period may be obtained from MissKelly Wood, The Scottish Office Development Department, Planning Division, Room2-H, Victoria Quay, Edinburgh (Telephone0131-244-7066).

12. General questions about the substance of the Regulations or the manner in which the rate is prescribed should be addressed to HM Treasury, Room102/1, Parliament Street, London, SW1P3AG, Telephone0171-270-4764.

Yours faithfully
M T AFFOLTER

Acquisition of Land (Rate of Interest after Entry) Regulations

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