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Business rates reforms revealed

15th September 2017

This week Finance Secretary Derek Mackay confirmed he would implement the vast majority of recommendations made in the Barclay Review of Scotland’s business rates, with the aim of modernising the system and giving the country a much needed competitive edge.

Crucially the period between revaluations will be reduced to every three years from 2022. This will produce a more flexible business rates system capable of responding to the fluctuations within the commercial property market and a fairer more equitable taxation system.  The tone date will be set one year before the new assessment of rateable value.

The flagship recommendation of the Review, the business growth accelerator, will also be implemented. This is designed to attract investment as all new build commercial properties will not have to pay rates until occupied for the first time.  Thereafter the new tenant will benefit from a one year holiday from rates payments. This is a welcome boost for Scotland’s development sector and hopefully the full recommendations of the Review will be adhered to with improvements and additions to existing buildings also being afforded the same special measures.

The expansion of the Fresh Start relief scheme will also have a positive impact by stimulating reoccupation of commercial properties.  From 1st April next year relief will increase from 50% to 100% relief for the first year of new occupation of a property that has been empty for over six months. The scheme will be further extended to include industrial properties from 2018.

The large business supplement is to be brought in line with England and reduced to 1.3p if it should become affordable during this season of the parliament. If affordable, it will also be considered for future years. This is good news for all businesses with a rateable value over £51,000 as they currently pay double that amount.

In terms of a targeted relief children’s day nurseries are to receive 100% relief from 1st April 2018. The government confirming that access to affordable childcare is a priority and its aim to bring skilled labour back into the workforce in Scotland.

The rates bills cap for offices in Aberdeen city and Aberdeenshire and for all but the largest hospitality properties throughout Scotland will continue next year, with an additional 12.5% cap in real terms.

In terms of those recommendations from the Review that were causing concern for certain sectors, Mr Mackay has stated the need for further government thought and engagement. This includes the proposal for removing charity relief for arm’s length external organisations, independent schools and university accommodation. The door has been left open for these organisations to put forward their case to the government to retain the status quo.

Additionally, no decision was made on the reform of relief for sports clubs, empty listed properties and properties in active occupation and on the levying of rates on parks.  In addition there will be a review of the small business bonus scheme. The government plans to consider each individually with announcements expected later this year.

Overall the business rates reforms to be implemented by the government will have a positive impact on the commercial property market. It is also encouraging that Mr Mackay is open to further consultation with those sectors negatively impacted by the proposed changes such as independent schools, university accommodation, sports clubs and empty listed properties. The reassurance that full consideration will be given by the Government into the implications of such reform is welcomed.

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Moira Walker

Moira Joined Ryden in June 2013, bringing a wealth of experience gained over 18 years in both the public and private sectors.

She has specialised in Business Rates having spent seven years in the public sector as a valuer within the Renfrewshire Assessors Office and as a Business Rates Specialist in the private sector where she has achieved substantial savings for clients. She is an Honours member of the Institute of Revenue, Rating and Valuation and is also a member of the Rating Surveyors Association.

In additon to Rating, Moira is a Registerd Valuer and has dealt with commercial property valuations for secure lending purposes and in regard to public sector asset valuations. She has also provided advice in respect of rent reviews and lease renewals over large commercial portfolios.

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