"Unfair taxation" condemns Scottish businesses to "vicious cycle of failure"
Commercial property specialist Colliers International is calling on the Scottish Government for more flexibility in mid-revaluation business rates appeals.
At revaluation, the government adjusts business rates to reflect changes in the property market. The next revaluations will be this year in England, Scotland and Wales.
The company's rating experts say a growing number of businesses, particularly in the licensed trade, will be forced to close because of the burden of rates during the current valuation period.
Licensed premises rates in Scotland have been based upon hypothetical achievable turnovers as opposed to fair maintainable trade based on rents, turnovers, as it is in England and Wales, meaning businesses have the same rates for five years with no way for the system to react to marketplace changes.
In Scotland, appeals may only be made within six months of the new valuation list taking effect, a new rateable value being set for the property, or the property gaining a new owner, tenant or occupier. This also means Scottish businesses have far less chance of successfully appealing and reducing their rates should their circumstances change for the worse during a revaluation. Therefore, it is practically impossible for Scottish businesses to successfully appeal their valuations beyond the six-month window.
Louise Daly, a Glasgow-based senior surveyor in Colliers International's rating team, said: "It has never been more important to exercise the right to appeal at this point, for the 2017 revaluation.
"More detailed information should be sought in terms of profitability, as opposed to simply utilising the blunt and abstract turnover figures relating to rent, in order to establish the practice note and determine a rental value.
"During the last valuation period, a number of retailers went out of business under the heavy burden of business rates set at the height of the economic cycle. The recession has made many locations far less profitable than before, but the latest revaluation is simply shifting the pain onto other sectors and is doomed to repeat the mistakes of the past by being far too inflexible.
"The Scottish Government must urgently introduce measures to reflect market changes, which would allow businesses to appeal during the valuation cycle.
"As the values set at 2017 are currently proposed to last for the next five years, it is crucial to ensure the rateable values are correct, which can help reduce the adverse impact of an incorrect RV on an operator's business. Failure to act could result in publicans paying too much in respect of rates and reducing the profitability of the business.
"The Scottish government has today announced a tailored relief package and the hospitality sector is one of the areas identified to be eligible for this relief. This caps any increase to bills at 12.5% in 2017/2018, which is proposed to aid 8,500 hotels, pubs, restaurants, cafes and accommodation. It is refreshing to see the government listen to industry concerns but a temporary relief simply does not go far enough and the valuation methodology should be reviewed. "
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