Comment: Navigating the shifting business rates landscape

Bunker says a lack of clarity does not help ratepayers looking to increase their staff levels. Picture: contributed.
Bunker says a lack of clarity does not help ratepayers looking to increase their staff levels. Picture: contributed.
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Valuation appeals as part of Scotland’s 2017 rating revaluation are well under way.

Graham + Sibbald has now dealt with approximately 15 per cent of the appeals lodged throughout Scotland. Given the number of appeals, it’s unsurprising that issues have occurred, but generally the process is running fairly smoothly and the timetable is being met. This compares favourably with the English situation where a so-called “check and challenge” appeal system is in place, which is confusing to both agents and rate-payers.

The benefit of the Scottish system is that we have a timetable for appeals and the Valuation Appeal Committee process is communicated in a fairly clear manner. There have been numerous meetings between rate-payers, agents and the Assessors to discuss the valuation basis on specific property types before implementation of the appeal process, which has been extremely helpful to all concerned.

We have found rate-payers are concerned with the business rates relief packages where governments north and south of the Border adjust liability on an ad-hoc basis. An example is the recent Budget where £1.5 billion was set aside to boost high-street UK retailers, a package that included £900 million in business rates relief. To qualify, a retailer must have premises with a rateable value of £51,000 or less.

This does not include Scottish business rates relief – business rates being devolved to the Scottish Government and assumed to be provided as part of the Scottish Government’s increased overall funding of £950 million. This could cause further divergence between Scotland and England as relief packages could differ.

The Small Business Rates Relief scheme is a prime example, where in Scotland a business with a rateable value of up to £15,000 can receive 100 per cent relief. However, should the business extend the existing property or move to larger premises the full relief could be lost. The Scottish Government’s decision to cancel business rates relief on vacant industrial properties in 2016 caused a reduction in development as developers and landlords were responsible for 90 per cent of the rates burden until the building was let or sold.

To part rectify this effect, the Scottish Government has introduced Business Growth Accelerator Relief on new and improved properties from 1 April 2018 for a year, to the landlord, and a further year to the new tenant. Although this has been well received by developers in the round, the rates position for two similar adjoining buildings can be totally different.

Confusion is particularly felt by those businesses where the valuation to arrive at rateable value is turnover-related, which takes in public houses, restaurants and hotels. The increase in rateable values at the time of the revaluation directly affected this classification of businesses and subsequently Transitional Relief was introduced.

This lack of clarity does not help ratepayers who are looking to increase their staff levels or properties. This start-stop approach on business rates relief is not helpful. Rates relief clearly outlined for the full five-year period of the revaluation would provide more clarity.

There is a plethora of rates relief packages including the small business bonus scheme, fresh start, rural rate relief, day nursery relief, transitional relief and business growth accelerator relief. It is hardly surprising that the business ratepayer is totally confused and, in many cases, unaware of relief packages for which he or she may qualify. The Barclay Review proposed useful amendments to the rating system but by the time it reported the 2017 revaluation was well under way. While more frequent evaluations have been welcomed by some, this recommendation is seen by agents and Assessors as likely to hamper preparing valuations and fulfilling the appeal process in a much shorter timescale.

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