Warning over Scotland’s ‘uncompetitive’ business rates

Scotlands finance secretary Derek Mackay is set to reveal provisional business rate levels in January
Scotlands finance secretary Derek Mackay is set to reveal provisional business rate levels in January
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Scottish businesses are in limbo and putting investment plans on hold as they nervously await possible tax hikes in 2017, property experts have warned.

Scotland’s finance secretary Derek Mackay is set to reveal provisional business rate levels in January following a review launched by his predecessor John Swinney after calls from business groups for a fairer and more competitive system.

The new rateable values are due to come into force from April 2017 and although levels are not yet known, experts from property consultancy JLL fear they could extend what they argue is a competitive disadvantage between businesses in Scotland and the rest of the UK.They argue that businesses north of the border are at a disadvantage on business rates as unlike England and Wales, Scotland does not benefit from a “London cash cow” to offset depressed prices elsewhere in the country.

Draft figures for rateable values in England and Wales have already been published and have upgraded the overall average rateable value (RV) of non-domestic properties by 9.1 per cent.

Rates which businesses pay are calculated by multiplying the RV with the Uniform Business Rate (UBR) and following the publication of draft RVs for England and Wales – which JLL argue have been skewed by eye-watering property prices in London – Chancellor Philip Hammond’s Autumn Statement revealed that the UBR will fall to 46.6p in the pound for smaller properties, rising by 1.3p in the pound for larger properties to 47.9p in the pound.

Scottish businesses currently pay more than those in England under the rate poundage – the Scottish equivalent to UBR. The rate for 2016/17 is 51p in the pound for large businesses and 48.4p in the pound for smaller organisations.

David Burke, director of rating at JLL, pointed out there has been a history of harmonising rating law and practice both north and south of the border. “If Scotland wants to restore a competitive position it must at least match England and Wales by cutting the poundage,” he said.

“At a time when Brexit looms large and Scotland’s public finances are under considerable pressure, the £2.8 billion or so collected from business rates is crucial.

“However, the Scottish Government must realise that there is a fine balancing act and Scotland cannot afford to be uncompetitive for business.”

Burke said the issue is compounded by the ongoing challenges faced by Scotland’s oil and gas industry.

JLL has previously warned that businesses in Scotland’s three biggest cities could face tax hikes of up to 25 per cent following the revaluation of business rates.