Experts say it highlights flaws in business rates system

Glasgow, 17 March 2020 – Experts believe the Scottish Government’s £320 million package of support for businesses, to help them deal with the impact of coronavirus, will have a limited impact and amounts to little more than ‘tinkering’ with the system. Global real estate services provider Colliers International warned the package, which included different forms of rate relief, will have limited impact if a property is over a certain value, is in an affected sector without targeted reliefs applied or faces longer-term issues, as the new measures currently only apply for one financial year.

Louise Daly, associate director and head of rating at Colliers International in Scotland, said the current situation highlights shortcomings of the system as a result of the Non-Domestic Rates (Scotland) Act 2020.  She said the Scottish Government’s alterations to the ‘material change in circumstance’ (MCC) clause means it can no longer react quickly to take account of economic downturns.

“The relief measures being implemented by north of the border, as part of the Covid-19 package, are tinkering with a system that should be able to react through the valuation when matters such as this occur.

“The reliefs should apply short term to help, but the valuation should also be able to react through the appeals process as it did in 2009 in response to the global financial crisis.”

The package announced last week to help the economy mitigate the effects of Covid-19 included:

• a 75% rates relief for retail, hospitality and leisure sectors with a rateable value (RV) of less than £69,000
• an £80 million fund to provide grants of at least £3,000 to small businesses in sectors facing the worst economic impact
• 1.6% rates relief for all properties across Scotland
• a fixed rates relief of up to £5,000 for all pubs with a RV of less than £100,000

Ms Daly explained: “Perhaps it can be seen as an unintended consequence based upon the flawed advice provided to the Government by the Scottish Assessors. Covid-19 is a case in point of why this provision within the MCC appeal right was so important.

Ms Daly warned, when Holyrood debated the non-domestic rates legislation, that the alterations to MCC would mean the system would be less able to react quickly to changing circumstances.

She said: “The Scottish Government simply did not engage or listen to business on this matter. We now call upon the Government to revoke section 8B of the Act, before this damaging measure comes into effect, in support of Scottish business and the Scottish economy, which are facing a critical and challenging time ahead.”

She added that the reliefs included in the Government’s recently launched package should be subject to state aid apart from the 1.6% inflationary relief which applies to everyone. She warned that the reliefs may therefore not be as helpful to retailers as they appear at first glance.