According to STV News, Scottish Grocer and Scottish Local Retailer, the Scottish government plans to abolish the commercial property tax exemption for e-cigarette stores starting from April 1, 2027. If this policy is implemented, e-cigarette stores will be excluded from the partial non-residential property tax exemption mechanism, further increasing the operational cost pressure for offline e-cigarette retailers.
E-cigarette stores will be excluded from the tax reduction benefits.
The Deputy First Minister of Scotland, Jenny Gilruth, announced that the government intends to cease applying the relevant tax exemptions to e-cigarette businesses as of April 1, 2027. She stated that the ministers have taken into account the concerns raised by businesses and industry organizations regarding potential anomalies in the revaluation of non-residential properties in 2026, and therefore will take urgent action.
Gilruth stated that this involves ensuring that e-cigarette stores contribute to the commercial street, acknowledging the growth of the industry in recent years, and ensuring that the commercial property tax relief policies are in line with the government’s public health commitments.
The Scottish commercial property tax, also known as the non-residential property tax, is set by the Scottish government and collected by local councils. It is used to fund public services. The tax amount is usually based on the rental value of the property and multiplied by a nationally set rate.
Under the current system, mechanisms such as Fresh Start and Small Business Bonus Scheme can enable some enterprises to receive up to 100% tax relief. Currently, payday loan institutions, parking lots and gambling shops are no longer eligible to apply for such tax relief. If e-cigarette stores are added to the exclusion list, they will become another type of high street business that cannot enjoy the relevant tax relief.
The impact of convenience stores remains unclear.
Scottish Grocer reported that the Scottish government has not yet confirmed how this policy will affect convenience stores that sell e-cigarettes, nor has it specified whether convenience stores will lose the commercial property tax discount for operating the e-cigarette category.
This has a practical impact on the retail sector in Scotland. E-cigarette products are not only sold in specialized stores but are also widely available in convenience stores, independent retailers, and small community stores. If the policy only targets specialized e-cigarette stores, the impact will be concentrated on the specialized business model; if the policy extends to mixed retail stores that sell e-cigarette products, the scope of the impact will be significantly expanded.
From a business perspective, the key issue with this policy lies in how “e-cigarette stores” are defined. The regulatory authorities may need to clarify whether the determination is based on business licenses, main business operations, sales proportion, store display, or whether the sale of e-cigarette products is considered.
For convenience stores and comprehensive retailers, policy uncertainty may affect their decisions regarding the display, inventory, and long-term operation of the e-cigarette category. If selling e-cigarette products may entail tax reduction risks, some retailers may reevaluate the profit contribution and compliance costs of this category.
Tax burden becomes a new regulatory pressure
This policy adjustment is also related to the reform of the non-residential property tax system in Scotland. The Scottish government stated that it will appoint an independent team to review the alleged valuation inconsistencies identified during the revaluation of non-residential properties in 2026. The team will identify any anomalies and submit the review results to the parliament.
Gilruth stated that the government will also study comprehensive improvements and reforms that can be made to the non-residential property tax system, and seek independent advice while closely collaborating with the business community to enhance the clarity, confidence, incentives and transparency of the system.
For the e-cigarette industry, this policy indicates that regulatory pressure is expanding from the product side to the retail side and the taxation side. Previously, the e-cigarette markets in the UK and Scotland have already faced regulatory changes such as the ban on disposable e-cigarettes, restrictions on product sales, requirements for advertising and protection of minors. If e-cigarette stores lose the commercial property tax reduction again, the profitability of their offline stores will be further tested.
This measure also indicates that the Scottish government is incorporating public health goals into the commercial property tax relief policy. E-cigarette retailers were previously more affected by product safety, age verification, illegal product enforcement, and environmental policies; in the future, store tax burdens, commercial street contributions, and industry growth scale may also become factors for policy evaluation.
The following three issues need to be paid attention to: Firstly, whether the Scottish government has clearly defined the scope of “e-cigarette stores”; Secondly, whether convenience stores and mixed retailers are excluded from the scope; Thirdly, whether industry organizations will raise objections or seek transitional arrangements to the government regarding tax reduction cancellations, property revaluation, and retail cost pressures.