Tim Bunker: Barclay rates review proves to be curate's egg

Last week, finance secretary Derek Mackay committed to implementing the 'vast majority' of the findings of a recently published review into Scotland's business rates system while it was indicated that some of the proposals will need 'further consideration and engagement'.

Tim Bunker says it 'would have seemed prudent' for a chartered surveyor to be included on the rates review panel. Picture: Contributed
Tim Bunker says it 'would have seemed prudent' for a chartered surveyor to be included on the rates review panel. Picture: Contributed

The Barclay review group was set up in 2016 by the Scottish Government to make recommendations that would “enhance and reform the business rates system in Scotland to better support business growth, long-term investment and reflect changing marketplaces”.

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Recommendations were published last month and we’re now getting a sense of how the business and advisory communities are responding to the findings.

For some time now, the business scene has complained about the lack of flexibility in adjusting values between revaluations, the sudden jump in rates liability brought about by a revaluation and the adverse impact on business. With the Government cancelling the business rates revaluation in 2015, the chance was lost to reflect the downward effect on values brought about by recessionary times. A stark example is the Aberdeen market where the fall in rental values due to the oil price decline has been overlooked due to the timetable of the current revaluation.

Many say the Barclay review was introduced to pacify rate payers when the main problem was cancelling the 2015 revaluation in the first place. This has led to costly legal challenges on what are termed “material change of circumstance” appeals, with hundreds of these appeals still ongoing.

One of the central recommendations of the Barclay review is for rateable values to be in better keeping with more recent rental information and revaluations to take place at three-yearly intervals, specifically based on data from the previous year rather than every five years; a recommendation that was given the green light by Mr Mackay last week.

Our house view at Graham + Sibbald is that because of how the market has changed since the last revaluation, three-year revaluations will better allow the Assessor and agents to arrive at an accurate rateable value of the rate payer’s property. We welcome this recommendation and believe it will be the best way to ensure greater accuracy going forward.

Confirmation of the introduction of a 12-month delay before tax liability is increased on an existing property, if expanded or improved, has been well received. The introduction of a year’s delay in paying rates from date of occupation of new build non-residential properties is another positive and will greatly assist speculative development.

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Although the Assessor and private surveyors had the opportunity to provide input to the review, it was disappointing that neither group was represented on the review panel itself – it would have seemed prudent for a chartered surveyor experienced in rating valuation and the appeal process to be included.

A strong case is building in favour of the liabilities of certain charities, private schools and universities being adjusted in the interim and this is one of the areas the Government says will require further consideration. Our client base includes organisations across the eduction and not-for-profit sectors and we will continue to lobby on their behalf.

Clients are telling us the timeframe allows little to no room for the review of their business plans, fees and charges which have already been set for the current school and university years. However, it has been confirmed that nurseries will be fully exempt from business rates from April next year which has been greatly welcomed in that sector.

While some uncertainty remains around the implementation of the Barclay proposals, the general consensus appears to be one of glass half full rather than half empty.

Tim Bunker is a rating consultant with chartered surveyor and commercial property specialist Graham + Sibbald