Ahead of the Chancellor’s Autumn Budget on November 22, the British Chambers of Commerce (BCC) is urging the government to take immediate action to halt the expected 3.9% increase in business rates valuations next year, as part of a bold Budget that seeks to boost the UK’s productivity.
The UK’s leading business group, which represents almost 75,000 companies employing almost six million people in every region and nation of the UK, calls on the Chancellor to take action now to get the UK economy ready for when the country leaves the European Union.
The BCC proposes pausing the Corporation Tax roadmap, with the tax remaining at 19% until after Brexit – with the resulting revenue ring-fenced to help ease the burden of up-front taxes and costs that hit business cash flow and undermine investment.
The BCC calls on the government to take bold action across three key areas, to help businesses deal with the challenges and opportunities that Brexit provides, kickstart a productivity surge, and ensure that the domestic economy is in the best possible position on day one of leaving the EU:
• Tackling the upfront cost of doing business – pledging not to introduce any more input taxes and other significant costs, abandoning the annual uprating of business rates for the next two years, and removing plant and machinery from business rates valuations.
• Incentivise business investment during the Brexit process – through the introduction of a ‘Brexit Special’ Annual Investment Allowance, temporarily increasing the limit to £1 million.
• Fixing the fundamentals – committing to ensuring complete voice coverage on mobiles by 2020, and kickstarting infrastructure projects vital to our economic future, from Northern Powerhouse rail and Crossrail 2, to bringing forward investment in the road network.
Dr Adam Marshall, Director General of the British Chambers of Commerce (BCC), said:
“At a critical moment for the UK economy, the Chancellor must be bold – and deliver a big budget that prioritises economic confidence and investment.
“The best possible Brexit deal won’t be worth the paper it’s written on if conditions for growth aren’t right here at home. The Chancellor has a unique chance to move the dial on growth and productivity now, leaving the UK in a position to succeed over the long term. Action to slash the up-front costs faced by business, to incentivise investment, and to improve mobile coverage and infrastructure would lead to a real boost to productivity, wages and trade.
“A Budget that prioritises goodies and giveaways rather than future-proofing the economy would be a dereliction of duty by the government as a whole.”
On business rates:
“It would be unconscionable for the government to use September’s inflation figures to slam businesses with a huge rise in rates, particularly when they already face spiralling up-front costs. A failure to act would hit the high street, manufacturers and others hard – and undermine the sort of investment we need to boost productivity.”
On investment:
“Too many companies are playing a wait-and-see game at the moment. We need a big, bold incentive to get more firms investing – particularly ahead of the Brexit transition.”
On infrastructure:
“A sugar hit for voters would quickly fade, but the protein boost provided by increased investment in infrastructure and digital connectivity would be felt for decades. Ramping up infrastructure investment across all regions and nations of the UK, and getting long-planned projects off the drawing board, gives a huge boost to business confidence and creates both jobs and business opportunities.”
Colliers International has welcomed assurances by ministers that the Scottish Government intends to implement the vast majority of the recommendations of the Barclay Review on Business Rates.
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.”
Scottish landlords and businesses are being warned not to miss the boat to secure fair rateable values, as the appeals deadline looms at the end of September.
Rating experts at Colliers International, the global commercial real estate agency and consultancy, say that following a revaluation that saw double-digit rate hikes in some areas and sectors, it has never been more important for landlords and tenants in Scotland to ensure that the rateable value placed on their property is accurate from the outset.
Louise Daly, associate director of Rating at Colliers International in Scotland, said: “Given the extremely restrictive nature of mid-valuation roll appeals in Scotland, ratepayers have a relatively short opportunity to submit a revaluation appeal and dispute any or all aspects of the valuation that were set from 1st April 2017. They now have less than a month remaining to do so.
“Ratepayers can of course submit their own revaluation appeals within the deadline of 30th September 2017, or they can seek representation to ensure that they are not put at any disadvantage given the complexities of complying with the current appeal system.”
John Webber, Head of Rating at Colliers, added: “Reform of some aspects of the business rates system in Scotland is expected to be soon, including a separate move from Valuation Appeal Committees to a Tribunal system. Ratepayers, therefore, need to stay alert to changes as they happen and ensure that their interests are protected. Lodging appeals now will ensure that any potential validity issues can be resolved- but only just in time. Businesses really cannot afford to delay further.”
Following the Rating Revaluation of 1st April 2017 many businesses have suffered large increases in their business rates. Unlike the rest of the UK, they were given just six months to appeal.
Moreover, despite the recent recommendations made by the Barclay Review panel to move towards a three-yearly revaluation cycle with a ‘tone date’ one year prior to the beginning of the revaluation, nothing has been agreed by the Government to date. Colliers believes that businesses are likely to face another five-yearly valuation cycle at present.
The situation in Scotland is even more precarious because the Barclay Review panel disappointingly did not make any recommendations in respect of the Material Change of Circumstance (MCC) issue north of the border. In Scotland MCC appeals are extremely limited in their scope – a result of High Court decisions made during the period of the 2010 Scottish revaluation cycle. This has made the present appeal system in Scotland much less competitive for ratepayers than in England.
Mr Webber concluded: “Even three-yearly valuation cycles would not go far enough to address specific, localised issues, which in England would have scope for reduction through an MCC appeal. Businesses therefore must not delay. Missing the boat now would be both lengthy and costly.”
Scotland, August 22, 2017 – Following today’s publication of the Barclay Review of Business Rates in Scotland, leading commercial property firm Colliers International is calling on the Scottish Government to implement its recommendations at the earliest opportunity.
Louise Daly, associate director, Rating, at Colliers International in Scotland, said: “The Barclay Review recommendations are clearly an attempt to spread the rates burden more evenly, which would be very welcome to thousands of businesses currently struggling to pay high rates when, at times, their competitors are paying none. We hope the recommendations of the report will be implemented without delay.
“In implementing the recommendations, it is important that the Scottish Government resists the temptation to only focus on any potential revenue raising aspects of this report. It must also give effect to aspects that increase fairness within the system and which help to make it revenue neutral overall. If the Government refuses to give effect to the report fully it will result in a similar outcome to the weak implementation of the Lyons Inquiry of 2007, where certain elements were selected and other ignored. If the Government was to adopt a similar approach it would represent a huge missed opportunity to review the restrictive, outdated and unresponsive rates system.”
Ms Daly said positive aspects of the review include the introduction of a three-year revaluation cycle, with a ‘tone’ date a year prior to be used as a reference for values.
“This provision should be welcomed by all ratepayers, as it instantly makes the system more responsive to changing markets,” she said. “It would be a welcome move from the Scottish Government to exert its devolved powers and lead the way for fundamental changes to the business rates system north of the border. If the Scottish Parliament made changes such as this prior to Westminster, this would be a breath of fresh air, demonstrating that independent decisions can provide a progressive springboard for the rest of the UK to potentially follow the lead of Scotland.”
“From the perspective of responding to changes in the market, more frequent Revaluations are a welcome recommendation. However, it is arguable whether this does go far enough, as the Material Change of Circumstance appeals are now so limited in their scope. As a consequence, Scotland is a less competitive place to do business.
This particular point was put forward by the industry but has not been included within the recommendations. Such omissions are clearly the issue with the scope of the report, as any changes would have to remain revenue neutral.
Another aspect where Scotland currently is less competitive than in England is in respect of the large supplement on the Uniform Business rate. Ms Daly added: “Currently the large uniform business rate is higher in Scotland than in England. It should be reduced and that would be a welcome change to larger property occupiers and investors, but will have to be paid for by other points considered within the report, such as empty property relief applications and potentially large scale commercial processing on agricultural land. Some of these measures will put more pressure on landlords with vacant stock.”
According to Ms Daly, the implications of implementing some of the recommendations with only the view of revenue neutrality could have a significant negative impact on the built and natural environment.
Ms Daly explained: “Removing the 42 days reset period in respect of empty property relief does not encourage landlords to bring their properties back into economic use through means such as short term tenancies. This will actively encourage demolitions to take place, diminishing the property stock.
“Restricting the relief on listed buildings to a maximum of two years and stating that the rates liability for property that has been empty for significant periods should increase is quite dangerous. Listed buildings come with additional costs, due to the nature of the property and any alterations or works that may be required to be carried out. Landlords do not deliberately retain empty property and would much rather have a tenant in place providing an income stream. Limiting relief on such properties could cause them to fall into an uneconomic state of repair. The proposed measures will do little to raise revenue and in the long terms actually work against the incentive of better supporting business growth and long term investment.
“In terms of large scale commercial processing on agricultural land, the distinction needs to be clearly drawn and exactly what type of processing activity specified. It is proposed to do this through consultation and that this will be a long term measure. However, implementing measures such as this with Brexit negotiations taking place should not happen. “
