Institute report

‘Impossible’ to prove rates scheme helps small firms

Andrew McRae
Andrew McRae: a need to adapt scheme

Research into the Scottish government’s rates relief scheme has found it is “almost impossible” to assess whether it helps small firms who receive it.

An investigation into the small business bonus scheme (SBBS) by the Fraser of Allander Institute concludes that “it is exceptionally difficult” to reach any definitive conclusions about the impact of the scheme on the business base in Scotland.

Its report says: “Challenges around data quality, identification of businesses and policy implementation (the bunching of businesses around policy thresholds) make it almost impossible for any systematic assessment of the impact of the SBBS to be undertaken on key issues such as employment, investment or business growth.”

It says the government’s statisticians need to build more “robust” data collection and evaluation into business support policy.

“What is required to undertake a more conclusive evaluation of the SBBS is an accurate database of businesses (as opposed to a database of properties) and associated business outcomes,” say the report’s authors.

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The scheme offers business rates relief to non-domestic properties in Scotland under a certain size, as measured by their rateable value. It was launched in 2008, when businesses received £93m, rising to £279m in 2020.

The FAI cals for the creation of a digital registry of businesses, providing contact details and detailing all properties the business owns, rents or has use of, both within and outside Scotland.

It also recommends maintaining a database of business outcomes of interest, such as turnover, employment, investment, for the business base in Scotland (including micro, small and large businesses), updated annually.

The Federation of Small Businesses (FSB) in Scotland urged Minister to retain rates relief for small businesses but supports moves to modernise Scotland’s business rates system. 

Andrew McRae, FSB Scotland’s policy chair, said: “Trading conditions have changed dramatically since this review was commissioned in 2019. Scottish local and independent businesses – loaded with debt from the covid crisis – now face huge supply-chain disruption and spiralling energy bills.

“There’s no doubt that the small business bonus has been a lifeline for many firms. Scrapping this relief would lead to the average small business in Scotland paying an additional £2,000 more in tax and some paying more than £7,000.


“This would undermine struggling high streets and make it more difficult for firms to survive cash flow difficulties. That’s why Ministers should stick by their manifesto commitment and keep this relief, the cornerstone of their small business support policies.

“However, we would accept the need to adapt the small business bonus and the wider Scottish rates system.

“We’d love to see more independent and local firms benefit from the help, especially if we could do so by excluding people who aren’t the intended recipients for the property tax break. And we’ve long made the case for a more modern and user-friendly rates system.

“There’s cross-party support to support our small business community get back on its feet after the covid crisis. MSPs must back ongoing rates help for small firms.”  

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