Changes to the business rates system – with “rateable value” or RV based on likely annual rental values paid by Scottish businesses – have hit the headlines in 2017 and again most recently with news that Edinburgh Castle’s rateable value has gone from just over £300,000 to almost £1.8 million and Edinburgh Zoo is up to £1.3m from around £500,000.
A number of the city’s well-known eateries are facing RVs for the first time or are, like some of the capital’s main visitor attractions, up hundreds of per cent.
While the overall RV picture across the Scottish business scene has been less drastic and some sectors like retail, office and industrial have actually benefited, there remains a great deal of uncertainty, real cash flow concerns for thousands of businesses and much confusion about a fast-changing regulatory regime.
The revaluation of the business rates regime from 1 April replaced the previous rateable values which came into force in April 2010 and is two years overdue following the cancellation by the Scottish Government of the 2015 revaluation.
Rental evidence adopted by the Scottish Assessors’ Association, which sets the rateable value, is guided by statute and analyses data from two years prior to the effective date of the new values. So, the 2017 revaluation is based on 2015 rents while the 2010 revaluation was based on 2008 rents – two very different market periods.
Commentators agree that hotels and pubs which were flying quite high in April 2015 are now facing more difficult conditions, while in the retail sector large out-of-town retailers are struggling against the increasing number of discount retailers. None of this makes the job of the assessor any easier.
There are other moving parts at play too. Former Royal Bank of Scotland chairman Ken Barclay is overseeing a review of the Scottish Rating system, although the findings will not be announced until July. We have made a number of submissions to the Barclay Review on behalf of Scotland’s hospitality sector.
So things are far from clear and we are dealing with hundreds of business owners every week who are unsure of their next move. It can be serious stuff, impacting on the viability of businesses going forward.
Short term good news from the Scottish Government last month came in the form of a 12.5 per cent cap in business rate rises and initial confusion around who qualifies was clarified with the release of the Non Domestic (Transitional Relief) (Scotland) Regulations 2017.
However, due the short timescale local authority finance departments have not automatically applied the relief on the rates bill and ratepayers will have to obtain the required application form as initial direct debits are collected. To compound the situation, the relief is only available for one year and there has been no confirmation of the position for next year.
During these times of uncertainty, appeals against the rateable values – which each ratepayer receives in the form of a Valuation Notice – can appeal the new value prior to the end of September. It’s reasonable to challenge the rateable value regime to ensure it’s fair and reasonable and particularly because it will remain in place to as far out as 2022.
It is also vital that the ratepayer seeks expert advice in appealing their rateable value as this is the only element of the rates liability that is open to challenge.
• Tim Bunker is a rating consultant with commercial property specialist Graham + Sibbald