Long-awaited rates review has arrived

No overhaul but some welcome changes for retailers

The Scottish Government will review the recommendations made by Barclay

THE long-awaited results of the Scottish Government review on business rates have been delivered by review chair Ken Barclay, with no signs of a significant overhaul of the current system, but some changes that could benefit retailers.

Barclay, who was appointed to lead the review in March 2016, has set out a number of recommendations for consideration by Scottish Government ministers to improve the non-domestic rates systems.

Recommendations made by the Barclay Commission include more frequent assessments of property rateable values, the figure on which business rates are based, suggesting Scottish Assessors carry out revaluations every three years, with the new values coming into effect one year later.

Under the current system, changes to business rates should take place every five years, but there was a seven-year gap following the 2010 revaluation as the Scottish Government opted  to match the UK Government’s decision to delay the revaluation in England.

Barclay also recognised industry concerns that the current rates system can hinder growth by increasing rates bills following the improvement or expansion of a business property.

To combat this, the commission suggested the Scottish Government introduce a ‘Business Growth Accelerator’, which would delay rate hikes for 12 months following any upgrades. This would also apply to newly-built property.

Far more frequent revaluations is what we have been calling for and is encouraging – David Lonsdale, SRC

The Barclay Commission also recommended reducing the Large Business Supplement currently applied to businesses with a rateable value over £51,000. The commission recommended reducing the poundage rate on which the supplement is calculated from 2.6p to 1.3p, bringing it in line with the rate set in England.

Other recommendations from the commission report include reassessing the Small Business Bonus Scheme, taking into consideration recent developments in Northern Ireland where there have been suggestions of replacing the scheme with relief more targeted at town centres. 

The full report makes a total of 30 recommendations ranging from calls for more widespread adoption of online billing for business rates, to the introduction of financial penalties for businesses failing to provide assessors with the necessary information to carry out a revaluation, all of which are subject to approval by Scottish Government ministers.

Polmont retailer Alan McGonigle welcomed the introduction of a 12 month freeze on rates following improvements or expansion, having been hit with a four-figure rate hike earlier this year after renovating his store.

“Obviously it would help, and would save me the best part of £7K,” he said.

“Certainly if I’m being honest I think it’s ludicrous you can be penalised for upgrading your shop.”

David Lonsdale, director of the Scottish Retail Consortium, welcomed a number of the recommendations put forward by the commission.

He said: “Far more frequent revaluations and reducing from two years to one the period between the valuation and implementation of the new valuation roll is what we have been calling for and is encouraging.”

Barclay’s proposed Business Growth Accelerator would delay rates hikes by 12 months for retailers like Alan McGonigle who was hit with a large bill after installing air conditioning units at his Polmont store

Lonsdale praised a number of Barclay’s recommendations, including the reduction in the Large Business Rates Supplement, but warned the SRC still holds reservations over business rates in Scotland.

“We remain concerned that the overall rates burden will remain onerous, at a time when Scottish firms are already having to grapple with a growing cumulative burden of government-imposed costs including the new apprenticeship levy and higher statutory employer pension contributions,” he said.

In a joint statement, the Scottish Grocers’ Federation and Association of Convenience Stores said: “We have welcomed recommendations on making the business rates system fairer for retailers, especially those looking to invest or expand their property.”

Commenting on the release of the Barclay Report, chair Ken Barclay said despite industry voicing a number of common concerns, “there was no strong appetite for a significant overhaul of the current property-based tax system”.

Finance Secretary Derek Mackay said the Scottish Government will “respond swiftly” to recommendations made in the report.