Business rates have existed, in one form or another, since the late 16th century. But, even with 400-odd years of practice, we still haven’t quite got them right.
2017 sees the first business rate revaluation for seven years. As this week’s in-depth coverage in the Herald has explored, this sees all commercial premises assigned a national value based, in theory, on 2015 rental levels. This is then multiplied by a “poundage rate” – set by the Scottish Government annually – to give businesses their bills. There are also a range of reliefs to make the tax more progressive and to assist those doing business in the harder-pressed communities of Scotland. Most notably, the Small Business Bonus scheme excludes most Scottish FSB members from the brunt of the rates system.
The whole process, I scarcely need point out, is highly controversial. Indeed, some might ask whether this tax, conceived when the Stuarts were on the throne, is about to be usurped by something far more radical and reflective of how we do business today.
Personally, I doubt it.
Controversial and imperfect as it is, removing the property element from business taxation is never going to find favour with an exchequer that needs guaranteed income throughout the economic cycle – especially during downturns when income taxes and VAT fall. And it helps combat tax leakage – big businesses with exotic accountants can’t offshore their high street branches.
So what is the future?
If your business is outside the scope of the help offered by the Small Business Bonus, the first thing you need to do is understand the system and what you need to do now. Look up your proposed rateable values on the Scottish Assessors’ Association website. If this proposed value doesn’t look right – i.e. it doesn’t represent your 2015 rental levels – then contact your assessor as quickly as possible.
If you’re the government, you need to think about how this outdated, opaque and hard to navigate set-up can be modernised to meet your customers’ needs.
Why, for example, should your bill for the next five, or even seven, years be based on 2015 rental data? The gap is too wide and revaluations should be carried out more frequently, so that businesses’ bills reflect real-world trading conditions.
We absolutely believe that smaller firms should pay proportionally less than their larger counterparts – that’s why we’ve fought for the Small Business Bonus scheme and why it needs to stay. Indeed, one in five recipients say they’d have to close if this vital help was lost.
The Scottish Government still has the option to introduce a Transitional Relief scheme to limit bill increases and decreases, but this would disproportionally benefit bigger firms. Publishing the data to support this decision is exactly the sort of transparency that we need.
In our talks with the independent review of business rates, chaired by former RBS chief Ken Barclay, we have pressed for a more comprehensible and transparent system. That must be the minimum we can expect if we are to drag business rates into the 21st century.
Colin Borland is Head of Devolved Nations for the Federation of Small Businesses
This piece first appeared in The Herald on 17/02/17
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