The Barclay Review, published last month, contained thirty recommendations that could significantly alter the business rates system. A statement issued by the Cabinet Secretary for Finance and the Constitution, Derek Mackay, on the 12th September has illustrated exactly how the Scottish Government planned to act upon these recommendations.
Business rates are calculated by multiplying the rateable value of the (non-domestic) property, based on a notional annual rent, by a multiplier (or poundage rate) set annually by the Scottish Government. This multiplier is currently set at 46.6p for the 2017-2018 tax year.
Revaluation Cycles
The most recent revaluation cycle in Scotland lasted seven years and was described by several non-domestic rate payers as a “shock to the system” as their rates escalated, seemingly out of proportion with the market climate.
From 2022 revaluations will occur every three years with the value being based on the market values the year before. This is intended to create consistency for ratepayers while bringing the revaluations more in line with market trends.
Business Growth Accelerator
One of the more significant proposals within the Barclay Review is to be adopted by the Government and will be included in the 2018/2019 Budget. The business growth accelerator proposes a twelve month grace period before rates are applied to new build properties, and also before rates are increased for properties that are expanded and improved. This will be of particular benefit to those making environmental improvements, including the installation of solar panels, or investment in plant and machinery.
The Scottish Government intends to go further than proposed in the review, stating that no new build property will pay rates until it is occupied for the first time, with the tenant benefitting from the twelve month rates-free period.
Large Business Supplement
If the proposal is implemented, business owners across Scotland could see a fall in the ‘large business supplement’ payable on properties with a rateable value of over £51,000. Halving the supplement would bring Scottish business rates into line with the English system. The Scottish Government have made no firm commitment to implementing this recommendation except to say that the business supplement will be reduced if it is deemed to be affordable.
Agricultural Land
For the time being the Scottish Government have opted to not take forward recommendations made by the Barclay Review that would have imposed business rates on commercial agricultural processing and the requirement for farms to be registered on the valuation roll.
Renewable Energy
Renewables have been facing significant rate rises in the early 2017 revaluations with, according to Niall Stuart of Scottish Renewables, many smaller hydro and solar businesses reportedly being hit by substantial increases of up to 650%. This is in part influenced by the current cost-based approach to the valuation of plant and machinery.
The Barclay Review of plant and machinery, which the Review recommends should be concluded by 2022, will focus in particular on the renewable energy sector, aiming to bridge the gap from the 1999 Wood Committee recommendations by determining whether this method of valuation properly captures and values technological advancement and new emerging industries.
Within this sector hydro-schemes are set to benefit from a fast-tracked valuation which is expected to encourage inward investment. Until this valuation is complete all new hydro-schemes from 1st April 2018 will be offered a new 60% relief.
Sports Reliefs
The Barclay Review recommended that sports relief should be primarily focused on affordable community based facilities and a review should be undertaken as to whether the clubs currently claiming relief, particularly golf clubs and private members clubs, should continue to be entitled to do so.
This area is one that the Scottish Government believes requires further consideration to gauge the impact and wider implications.
Administrative
The Scottish Government has invited stakeholders to form an advisory group to discuss and direct administrative reform. The recommendations in the Barclay Report included a suggestion that Scottish Councils move towards a system of online and standardised billing.
The Review also called for overpayments to be refunded within 30 days. They have historically taken up to six months.