Minister to boost relief on tax

Mackay extends rates reform ‘beyond Barclay’

Derek Mackay: new scheme to boost growth (photo by Terry Murden)

The Scottish Government has announced a wider-than-expected reform of business rates by adopting most of the measures proposed by the Barclay review.

In a UK first it will mean businesses being free of rates for empty new premises – a big boost for development of speculative buildings – while nurseries, the hospitality sector and small businesses will also benefit from extra relief.

In a statement to parliament Finance Secretary Derek Mackay has also announced a new Business Growth Accelerator to ensure all improved premises are freed from increases in their bills for the first 12 months. It gives firms who invest in their property a two-year grace period before they face a bigger rates bill.

The new day nursery relief will be set at 100% and transitional relief for hospitality will continue. 

Mr Mackay said: “The Barclay Review presented us with the opportunity to evaluate how we handle business rates and improve methods to make Scotland the most competitive place in the UK for businesses to invest and grow. I committed to respond quickly and three weeks after receiving the report, I am delighted today to put our response into action.

“These new measures will help stimulate the economy and create jobs, which is key to readdressing the inequality that still exists in our society, as well as strengthening Scotland’s business appeal and generating new growth avenues.”

Business groups welcomed the changes as a boost for business growth.

David Melhuish

David Melhuish: a major shot in the arm (photo by Terry Murden)

David Melhuish, director of the Scottish Property Federation, said: “The decision to not apply business rates for speculative development until the point of first occupation by a new business, is a major shot in the arm for Scottish developers vying for wider UK and international investment for Scottish commercial property. 

“This measure gives developers a real advantage in vying for wider UK or international capital to support investment in Scottish jobs and the wider economy.

“Removing the risk of vacant rates for new development, added to the incentives under the Barclay business growth accelerator proposals, provides certainty for investors of nil rates liabilities until they have an income stream from the development, therefore providing a much-need boost for the competitiveness of the Scottish development sector.”

SPF also welcomed the extension by a year of the cap on business rates rises for the hospitality sector and offices hit by the downturn in the north-east economy.

Andy Willox, the FSB’s Scottish policy convener, said: “The Scottish Government has committed to a mostly sensible programme of rates reform that’s a product of the art of the possible.

“Growing firms should now be able to recoup some of their costs before being hit with a bigger rates bill. A three-year revaluation cycle should mean that businesses’ bills better reflect economic conditions. New relief for Scottish nurseries should give these important local businesses a much needed shot in the arm. These are all sensible measures which FSB is pleased to back.” 

The Cabinet Secretary also promised a dramatic improvement in the user-friendliness of the system – charging Scottish councils and assessors to deliver substantial reforms. 

Ministers have also promised to measure the economic and social impact of the Small Business Bonus scheme at the end of this parliament.

Mr Willox said: “The review of the Small Business Bonus scheme must be focussed on designing the best rates help for smaller firms. It can’t be an excuse to withdraw help for businesses so vital to our local communities.”

David Lonsdale

David Lonsdale: welcome steps (photo by Terry Murden)

David Lonsdale, director of the Scottish Retail Consortium, said: “The SRC was at the vanguard of those calling for a review of rates, and therefore we’re pleased to see Scottish Ministers take forward a number of welcome steps to modernise the creaking rates system not least with plans for more frequent revaluations and reducing by half the time between valuations and them coming into force.

“The commitment to bring the Large Business Rates Supplement back into parity with the rest of the UK is most welcome, albeit the timetable appears less ambitious than that put forward by Barclay who said it should happen by 2020 rather than the end of the Parliament.

“Swifter action to level the playing field on the Supplement is important in the context of continuing to attract investment, as otherwise 5,077 retail premises – and 21,000 commercial premises in general in Scotland – will continue to pay higher rates than their counterparts or competitors down south for the next three years.

“Other measures, including greater standardisation of bills and the Business Growth Accelerator will be welcomed by the industry, and demonstrate just how important a modern rates system is which encourages economic growth. 

“That said, we are concerned that the overall rates burden will remain onerous, at a time when retailers are already having to grapple with profound changes in shopping habits and other growing costs including the new apprenticeship levy and higher statutory employer’ pension contributions.”

SNP MSP Kenneth Gibson said: “These measures are extremely good news for small businesses across Scotland – and show that the only party that is prepared to step in and support our local economy is the SNP.

“The opposition parties were keen to make a lot of noise over revaluations earlier this year – but this wide-ranging package proves it is the SNP Scottish Government that will work constructively to take action to support our economy.

“Measures such as setting the new day nursery relief at 100% and continuing transitional relief for the hospitality sector, will help grow our economy and support jobs in our communities.

 “And the new Business Growth Accelerator is very welcome news – supporting new businesses and encouraging improvements to business premises by freeing them from rates rises for 12 months, as well as freeing new premises from rates altogether until they are occupied, and for a year afterwards.

“This is strong, decisive action from the SNP Scottish Government – and we will continue to work to support our local economy and ensure that Scotland remains the best place in the UK to do business.”

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