Barclay report findings on business rates published

The external Barclay review group has today published their 130+ page report on non-domestic business rates, proposing 30 recommendations for the Scottish Government to consider including: measures to support economic growth; modernise the rates system; and increase fairness.

Among the specific recommendations made were: more frequent revaluations; reduction of large business supplement from 2.6p to 1.3p, and the institution of a ‘Business Growth Accelerator’ to encourage investment with a ‘one-year holiday’ on new items, e.g. plant and machinery or business expansion.

Speaking on behalf of the review group, the Chair, Ken Barclay said: “We received input from hundreds of stakeholders across Scotland and further afield and are grateful for their invaluable insight.

“Although the feedback indicated a number of common themes and concerns, there was no strong appetite for a significant overhaul of the current property-based tax system.

“Many wished to remove barriers to investment and our Business Growth Accelerator would do just that. By removing the burden of rates for 13 months for anyone who improves their property, we hope to stimulate growth and bring forward investment that may have otherwise been marginal.

“New build property will also benefit from a tax break of one year, creating some breathing space for both developers and occupiers and providing a better environment for new ventures to get off the ground.

“More frequent revaluations will help reduce shocks to the system and we also believe that the large business supplement should be reduced.

“A workforce must be inclusive and diverse: childcare provision is crucial to that. So we recommend that nurseries no longer pay rates.

“It is also important to recognise that – alongside the ‘headline measures’ to incentivise investment – administrative improvements can have a hugely positive effect. A better system will reduce the burden for business and allow them to focus on growing their business rather than navigating the rates system.

“Finally, and crucially, any well-functioning tax needs to rely on principles of fairness.

Increasing fairness and transparency will increase credibility from ratepayers.

“Ratepayers providing the same goods or services should not be treated any differently because of their location, or by virtue of them operating in the public or private sector.

“We have also highlighted unfair advantages gained by anomalies within the system, and of those who deliberately avoid payment of tax. Neither is fair.

“These measures are essential for the rates system to remain credible for ratepayers and to ensure revenues are not undermined by avoidance tactics.

“We are clear, this is not about penalising certain sectors, it is about compliance, fairness and transparency.

“Our review group has used all the information and expertise available to us to produce this report, and are confident that the measures proposed can create tangible improvements.”

Brian Rogan, Chair of the Scottish Chambers of Commerce Business Rates Advisory Group and head of rating in Scotland for CBRE Ltd, broadly welcomed the findings of the review.

He said: “Scottish Chambers of Commerce Network has long called for an urgent reform of the business rates system in Scotland and it is positive to see a number of our recommendations feature in this report which will encourage business investment.

“Stimulating growth and boosting investment is SCC’s guiding principle in reforming business rates and the ‘Business Growth Accelerator’ which will provide a ‘one-year holiday’ on investment in new machinery or business expansion, is good for Scottish business.

“The remit of the Review Group included reforming the system so it could reflect changing economic and trading conditions which is what our members have been calling for. We are disappointed that there was no mention of reviewing the legislation around material change of circumstance appeal rights which are more restrictive in Scotland than south of the border.

“Business wants to see the rating system changed and one that responds effectively to economic conditions but at least the move to more frequent revaluations as recommended in the Barclay Report will help somewhat to achieve this.

“It’s now critical for the Scottish Government to urgently consider and scrutinise these recommendations, and where implemented, they should be reviewed regularly to ensure the theory is achieved in practice.”

However, Scottish Conservative shadow finance secretary Murdo Fraser warned that while there were “many welcome proposals within this report” it was still “tinkering round the edges of a broken system, rather than the fundamental overhaul that’s required”.

He said: “The hospitality sector, whose safeguard of a 14.9 per cent cap runs out in March, will be worried that history will repeat itself next year.

“If that industry is hit with the kind of increases suggested last time around, it would almost certainly mean the closure of businesses and job losses.

“Proposals around independent schools and sports clubs will also have alarm bells ringing in those sectors.

“But there are also many welcome additions, and I hope the Scottish Government prioritises recommendations to bring the large business supplement in line with the rest of the UK, and the measures to boost town centres and business growth more generally.”

But Andy Willox, the Federation of Small Businesses’ Scottish policy convenor, also welcomed the findings.

He said: “A year and a half ago, the First Minister announced a long overdue review into business rates at FSB’s conference in Glasgow. This year’s revaluation further underlined the importance of addressing flaws in the system. We are very pleased that the Barclay review group have accepted a number of FSB’s recommendations to make the system more user-friendly for small businesses.”