Property industry welcomes Scottish business rates reforms

By Kasmira Jefford - Wednesday, September 13, 2017 11:52

The Scottish property industry has welcomed key reforms to the business rates system that pledge to make the country “the most competitive place in the UK for businesses to invest in”.

Responding to the Barclay Review, finance secretary Derek Mackay told parliament yesterday that the Scottish government would go further than the proposals by not applying business rates to new properties until they are occupied, in what he described as a UK first.

Mackay also committed to implementing a wide range of other measures recommended in the review, including three yearly valuations from 2022, 100% relief for day nurseries, and extending the current 12.5% business rates cap for hospitality properties and offices in Aberdeen City and Aberdeenshire for another year.

Mackay said: “The Barclay Review presented us with the opportunity to evaluate how we handle business rates and improve methods to make Scotland the most competitive place in the UK for businesses to invest and grow. I committed to respond quickly and three weeks after receiving the report, I am delighted today to put our response into action.

Former RBS head of Scottish operations Ken Barclay was commissioned by the Scottish government in March last year to conduct a review into non-domestic rates. The report, published last month, made 30 recommendations, with Mackay yesterday confirming he would seek to implement the majority of them. 

Other measures include a review of plant and machinery valuations and a 60% new relief for hydro schemes from 1 April 2018 until that review is carried out. This comes after fears among renewable energy sector that a considerable hike in rates bills could threaten future investment in smaller hydro, wind and solar projects.

Commenting on Mackay's announcement, Scottish Property Federation director, David Melhuish, said the decision not apply rates for speculative scheme until the tenant moves in as “a major shot in the arm” for developers vying for wider UK and international investment for Scottish commercial property.

“Removing the risk of vacant rates for new development, added to the incentives under the Barclay business growth accelerator proposals, provides certainty for investors of nil rates liabilities until they have an income stream from the development, therefore providing a much-need boost for the competitiveness of the Scottish development sector,” he said.

However the industry body did express concerns with proposals from the Barclay review on listed buildings and further tax penalties on long term empty properties. “The loss of rates relief after two years for complex listed building projects may make investors think twice about re-developing such buildings and this is something that we will continue to raise with Ministers as the Barclay review is implemented,” it added.

Hugh Aitken, CBI Scotland Director, said: “The Scottish Government’s swift response to the Barclay Review is welcome, as is the intention to put in place a concrete plan for implementing recommendations before the end of 2017.

“In addition to making rates better reflect economic realities, more regular revaluations of properties and the creation of the Business Growth Accelerator, CBI Scotland has called for a separate review of plant and machinery valuations and we are pleased to see that this will be put into action.

Aitken said to truly go “beyond Barclay” business rates rises should be linked to CPU rather than RPI: “This remains an ongoing priority for many companies and would help deliver a business rates regime that really is simpler, fairer and more competitive.”

Louise Daly, associate director of rating at Colliers International in Scotland, said: “When the Barclay Review was published last month, we backed it strongly and said the Government must implement it swiftly, not simply focusing on revenue raising aspects or miss a golden opportunity to create a significantly fairer Business Rates system. Although ministers are understandably and rightly wary of implementing some measures designed to raise revenues lost elsewhere, the indication seems to be that all the core measures, designed to make for a fairer business environment in Scotland, will be adopted, and we wholeheartedly welcome that.”

“The remit of the Barclay Review was that it had to be revenue neutral, but from a point of view of enhancing and reforming the business rates system to support economic growth and long-term investment and reflect changing marketplaces. That should never have been of prime importance and we therefore urge the Scottish Parliament to back the measures being put forward by the Minister.”

John Webber, head of rating at Colliers International, added: “The Scottish Government is to be commended for reacting to the Barclay Review so quickly. While English businesses and landlords are still waiting for news on the length or revaluation cycles following recommendations made over a year ago, Scotland has seized the momentum. These measures, especially the move to a three-year revaluation cycle, could have a significant effect in terms of making Scotland more business friendly and encouraging companies to settle north of the Border.

“However, most of these measures will not help businesses in the short term and with continued uncertainty over Brexit, the Scottish Government should be encouraged to implement these changes before 2022.”

Brian Rogan, Head of Rating at leading property consultancy CBRE Scotland: “Whilst the Barclay Review was set up by the Scottish Government with the long term aim of improving business growth and investment through a reform of the ratings system, it was given no remit to look at the problems currently faced by businesses due to the 2017 revaluation.

“Although the Finance Minister’s proposals to move forward with legislation for three year revaluations are a welcome step in the right direction, the proposed implementation date of 2022 offers no support to businesses that are currently struggling with their rates liabilities, particularly those in the north east which have been impacted by the recent downturn in the oil and gas sector.

“For businesses which have received their new 2017 Revaluation Rateable Values but struggle to easily see how they have been set, the only option is to appeal. The Barclay Review recognised flaws in the appeal system, and the lack of transparency behind setting rates that leads to a high volume of appeals. It highlighted the requirement for improvements in these areas, however, with the appeal deadline looming, it remains to be seen whether these will be delivered quickly enough to benefit businesses currently affected.

“Without the Assessors providing specific details of how the values have been arrived at, businesses have little choice but to appeal in order to properly audit their rates. With the strict 30th September deadline little over a fortnight away, I would urge all businesses in this position to take immediate professional advice to ensure they are not stuck with unappraised assessments for the next few years.”

Graham Howarth, partner and business rates expert at Gerald Eve’s Glasgow office, said: “The Scottish Government’s moves to implement the majority of the Barclay Review’s recommendations will be welcomed by ratepayers throughout Scotland, who have been seeking reform for some time now.

“Particularly noteworthy is the shift to more frequent revaluations, a move which will make the system fairer and more reflective of changing economic conditions. This is a move that companies across the UK have been pushing for, and to see Scotland at the vanguard of this shift will be very heartening for companies north of the border.

“The Government should also be congratulated on the speed with which it has moved to act on these recommendations. Too often, especially in Westminster, such reviews and little more than methods of kicking issues into the long grass, whereas the Barclay Review is eliciting genuine reform, and Scottish businesses will be the winners.”

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