Scots businesses struggle to meet steep rise in rates

HUNDREDS of Scottish firms are struggling to meet hikes of as much as 99 per cent in their business rates this month, Scotland on Sunday has learned.

Inner-city hoteliers in particular have seen their non-domestic business rates rocket "out of all proportion" since 1 April after the Scottish Government undertook a five-year revaluation of the taxes. Taxation levels are calculated according to the rateable value of a firm's premises except for hotels, cinemas and theatres, where they are based on turnover.

Firms are complaining that the re-assessment was undertaken in April 2008, prior to the banking crisis, when many city centre rents were at an all-time high and when most firms were enjoying profits that they are unlikely to see again for several years following the recession.

In one of the most extreme examples, Edinburgh's prestigious Prestonfield House Hotel, owned by restaurateur and hotelier James Thomson, has been told that its rates will double this year. According to Thomson, this will mean he will have to find 17,386 for each of the hotel's 23 rooms and suites every year until the rates are recalculated in 2015. This represents a 202,078 per year increase on his previous bill.

Thomson said: "On the one side, the Scottish Government wants to support tourism and on the other they appear to be penalising those that are successful."

Scots firms say they are being unfairly disadvantaged compared to their competitors south of the Border, where the Government operates a scheme – called transitional relief – that limits annual rises to a certain percentage, for example 12.5 per cent, so that no single business faces a disproportionate rise.

Lobby groups say that although the Scottish Government operates a scheme to assist small firms, many businesses are still facing massive rises at a time when they are fighting to recover from the worst recession since the Second World War. They are now calling for the introduction of transitional relief in order to "level the playing field".

Graham Birse, deputy chief executive of the Edinburgh Chamber of Commerce, said: "The number of businesses that are looking at a significant increase in their non- domestic rates troubles us. We understand there had to be a revaluation but we are very worried the potential for recovery will be impeded.

"If this was an increase that was UK-wide and consistently applied then it would be difficult to argue against but if we don't offer transitional relief then we are returning to a playing field that is tilted against Scotland and adversely affects business costs in Scotland compared against England."

Michael Laing, owner of Laing the Jeweller in Edinburgh, who has seen his rates rise by more than 40 per cent, said: "The date of the revaluation is scandalous, just three months before the world collapsed. There have not been (rental] deals done at those levels over the past two years."

But a spokesman for the Scottish Government said that those firms that have seen their non-domestic rates increase this month are in the minority. He said 60 per cent of businesses north of the Border have in fact enjoyed a dip in their fees from 1 April this year and that the introduction of transitional relief would lead to other firms having to subsidise the scheme.

He added: "Introducing a transitional relief scheme similar to England would effectively be taking money off the majority of firms in Scotland that should legitimately see savings. This would increase bills for high street businesses and small and medium enterprises by 70 million – including many retailers, pubs and offices. The retail sector alone would have been 25m worse off."

The Edinburgh Chamber of Commerce has contested this assertion, however, saying that although 60 per cent of businesses have enjoyed a decrease, the reduced rate in many cases is marginal.