Scottish Government urged to take radical approach to rates review

Chris Smith, Property and Construction expert at Grant Thornton in Scotland

A leading financial and business advisor is urging the Scottish Government to deliver a radical overhaul of Scotland’s business rates system, warning failure to act could jeopardise future economic growth plans.

Grant Thornton has welcomed the recent Barclay Review, which the Scottish Government commissioned to explore changes to the system. However, the firm is cautioning that, while the report is a step in the right direction, it doesn’t go far enough.

The Barclay Review was launched following growing concerns from the business community that new rates, planned for April 2018, could result in a dramatic rise in costs for many companies during a period of increasing political and economic uncertainty.

The firm believes a number of recommendations, if implemented urgently, could ease the strain on businesses, including increasing the frequency of revaluations to every three years, which would minimise the impact of market fluctuations, and applying a 12-month delay on rates to new builds, reducing the risk to developers.

More than 230,000 premises across Scotland are liable for rates bills, including 54,000 shops, prompting fears that a rate hike could cause further damage to the country’s struggling high streets.  Meanwhile, many larger businesses are calling for regulatory changes that currently penalise them for expanding or refurbishing their existing premises.

Chris Smith, Property and Construction expert at Grant Thornton in Scotland, said:

“The Scottish Government’s Programme for Government was bold and proactive, and many of its plans have been broadly welcomed. Sadly, there was little detail about what action it intends to take to tackle the business rates issue, beyond studying the Barclay Review recommendations.

“Companies of all sizes, and across all sectors, are waiting to hear what can be done to limit the impact of potentially damaging rate rises. Political leaders at Holyrood deserve credit for recognising that something needs to be done. But, we’re calling for them to go further and explore a complete overhaul of the system. Such an overhaul cannot be achieved with tax neutral reforms as such confines will always inhibit the innovative thinking required.

“A number of significant concerns remain unaddressed, including a 10% surcharge for properties vacant for 5 years. Landlords are driven by rents, so will not be voluntarily sitting on empty properties. Meanwhile, delaying the application of rates for new developments is positive, but we believe risk could be minimised further by not starting rates until the first tenant takes occupation.

“It’s heartening to see political and business leaders recognising the challenges ahead and exploring what action to take. Now is the time to explore a more radical, progressive model that is transparent, less bureaucratic and focused on encouraging a sustainable, vibrant economy in Scotland.”