Rates burden: Cost of trading in Edinburgh doubles for some businesses

Some firms in the city will see their annual bill double when new rates are introduced in April following the first review of levels in five years, while hundreds more are set to see double-digit percentage increases.

Every business in the city – from bars, restaurants and shops to hotels, offices and even Tynecastle and Easter Road will be affected by the rates change – though some will benefit from a cut.

While the Scottish Government insists that fewer than half of all businesses in the country will see their rates rise, research by the Evening News shows that the vast majority of a sample of firms in Edinburgh will see charges surge ahead of previous years.

The latest rises have also led to renewed calls to keep more of Edinburgh's business rates in the city.

Ron Hewitt, chief executive of the Edinburgh Chamber of Commerce, said: "We have severe difficulties with this. All businesses are vulnerable to overheads and when an agency outwith your control increases an overhead by 45-50 per cent you are going to struggle to cope.

"If your rates are going up by 7,000 you will need to be finding extra income every day. How are you supposed to do that in this climate?"

Every year, the city council collects business rates on behalf of the Scottish Government, which is responsible for redistributing them.

In an average year, more than a third of the rates recovered in Edinburgh are redistributed elsewhere in Scotland instead of being spent in the Capital.

"In the last ten years, more than 1 billion of Edinburgh business rates have gone into other parts of the country," said Mr Hewitt. "These businesses are paying taxation of which they get no benefit at all.

"If Edinburgh had the benefit of this rate to itself, there would not need to be any government funding for the tram, lock gates at the harbour or road paving work."

The rates are all based on estimations of the rental value of each property by assessors.

However, the estimations were carried out in April 2008 – before many firms were hit by the sharp downturn in the economy.

Many of the businesses affected worst are those in prime city centre streets – several of which have been badly affected by tram work.

Michael Apter, chairman of the West End Association, said: "The city was a very different place to do business in 2008 so it is unfortunate that the assessment took place at a time the city was doing well.

"I do not have a shadow of doubt that a lot of smaller businesses will go under because of this. There will be businesses in the area that will not be able to sustain this additional tax on their business, together with everything else happening at the minute."

He added: "I've never been aware of such massive increases. We've had the biggest recession since the 1930s and we have specific Edinburgh issues around the tram work so it sits at odds with what is happening in the city."

Tim Bunker, a partner at property firm Ryden, said: "The people who will see the biggest increases include schools and colleges – which are valued on a cost basis – and public houses, which are done on turnover. Since the assessment, turnover at a lot of these bars has fallen so they will be paying a higher assessment on a reduced income.

"This is the basis for the rates bill for the next five years but many businesses cannot even see this year or next year being a time of significant improvement. A number of them are saying they will struggle.

"We are going to be appealing (rates) on behalf a lot of hotel chains. I think there are going to be a lot more appeals this time than normal."

Businesses will only be able to appeal the valuation after April 1, when the new rates come into force.

They can appeal against the valuation or because of the effect work like tram construction is having on their business.

But Mr Bunker pointed out that many will not be able to appeal. "They have to take professional advice, which results in costs, and that can eat into any benefit they will get," he said.

The Scottish Government said it cannot yet estimate what the total income from business rates in Edinburgh during 2010-11 will be – or what this year's figure will be.

But it insists that 60 per cent of firms will see rates levels fall, with the average Edinburgh small or medium-sized firm likely to save around 900. It also said that 3,600 properties in Edinburgh did not need to pay any rates last year because of its small business bonus scheme – available to firms with rateable values less than 10,000 – while 1,100 with rateable values below 18,000 received a discount.

A spokesman for the Scottish Government said: "The Scottish Government will not raise a penny more as a result of business rates revaluation. The purpose is to ensure the burden of taxation on business is distributed fairly, according to the relative changes in property values over a five-year period.

"By doing nothing we would be failing to pass on savings to the many businesses which stand to benefit from a tax cut."

Hike during trams 'scandalous'

GETTING a spot near Edinburgh's prime thoroughfares like George Street and Princes Street seemed like a dream location for Wannaburger boss Jon Clemence.

But instead he has found Queensferry Street to be one of the worst possible spots in the city recently – right in the heart of a tram construction nightmare.

So the Wannaburger managing director found it beyond belief that assessors are to increase his business rates.

From 1 April, his rates will go up slightly to 26,330 after 10,000 was added on to the property's rateable value.

"That there should be an increase in rateable values on this street is nothing short of scandalous," said Mr Clemence. "We are paying to be on this prestigious street in the west end of Edinburgh and yet it's full of roadworks and you can barely cross the street to get here."

He also runs the Cambridge Bar, which is to see its rates bill more than double, to 20,286.

"Any added costs to a business now will cause problems," he said. "It's a tough time for everyone, this industry in particular.

"These levels are just staggering given the economic conditions and I'd be interested to know what basis they are coming from."