Firms face £125m Scotland-only business rate surcharge over next 2 years
A Scotland-only business rates surcharge on all firms occupying medium-sized and larger premises and which enters its ninth year of operation next month is set to cost firms a cumulative £125 million over the next two years, according to the Scottish Retail Consortium (SRC).
In April 2016 the Large Business Rates Supplement in Scotland was doubled to 2.6p in the pound and in the coming financial year it will be 1.3p in the pound above the equivalent rate down south. Subsequently rebranded as the Higher Property Rate (HPR) in 2020, this Scotland-only slab tax was described as “damaging perceptions” of Scotland’s competitiveness by the Barclay Rates Review, which called for parity with England to be restored by Spring 2020.
In response to a new written parliamentary question (see below) from Mid Scotland & Fife MSP Liz Smith, Scottish Ministers have confirmed that the differential between Scotland and England will cost Scots ratepayers £62.75 million in 2024-25.
The Scottish Government’s 2021 Framework for Tax pledged to restore parity with England by the end of the current parliamentary term, in 2026. The SRC wants that timeline accelerated.
Recent responses to parliamentary questions revealed the surcharge applies to 11,670 commercial and industrial premises in Scotland. Of this some 2,410 are shops, 590 are hotels, 1,770 are offices, and 190 are pubs. The retail sector alone is liable for £9.7 million of this annual surcharge.
The Higher Property Rate is liable on commercial properties with a rateable value of £100,000. It is a slab tax and so the higher tax rate applies to each pound of rateable value.
Despite welcome Ministerial decisions of late including a freeze in the Basic Property Rate, the rates burden remains onerous. The business rate for medium-sized and larger commercial premises will soar to a 25-year high from April. Meanwhile, shops and hospitality businesses in Scotland are missing out on the temporary rates relief which is being made available to counterparts in Wales and England. Scottish Ministers are also mulling a business rate public health surtax on larger grocery stores.
Retail trading conditions remain challenging. Scottish retail sales are flatlining, one in six stores is lying vacant, and footfall remains below pre-pandemic levels. The SRC argues the surcharge makes life tougher for retailers grappling with a growing cumulative burden of public policy-imposed costs.
David Lonsdale, Director of the Scottish Retail Consortium, said:
“Shops and other businesses liable for the Higher Property Rate in Scotland continue to pay more than their counterparts in England, to the tune of £63 million annually. This discrepancy is set to continue for a ninth consecutive year from April, four years past the timeline recommended by the government’s own Barclay Rates Review.
“Medium-sized and larger stores across Scotland underpin the vitality of our town and city centres and employ the majority of retail workers. This higher business rate makes it more expensive to operate a shop on our high streets and retail destinations. It holds back commercial investment and hampers retailers’ ability to become more productive.
“We remain baffled as to why Scottish Ministers think stores and other businesses operating in Scotland are better placed to be stumping up more in rates than firms in England. We need to see Ministers commit to restoring the level playing field with England and delivering it at a faster pace.”
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Note:
SCOTTISH PARLIAMENT WRITTEN ANSWER
1 March 2024
Liz Smith (Mid Scotland and Fife) (Scottish Conservative and Unionist Party): To ask the Scottish Government, in light of the Scottish National Party manifesto commitment, what the cost would be in 2024-25 of bringing the Higher Property Rate into line with that in England, broken down by industry sector.
S6W-25588
Tom Arthur: Table 1 presents the estimated cost of setting the Higher Property Rate at 54.6p (the rate at which in England, the Standard multiplier applying to properties with a rateable value equal to or over £51,000, will be set in 2024-2025), compared to 55.9p, after General Revaluation Transitional Relief is applied, in 2024-2025. The figures are not adjusted for any other relief. This is broken down by property class, as the Scottish Government does not hold property-level data on industry sectors. Property class is a classification used by Scottish Assessors to describe the type of property, and does not necessarily accurately reflect the use of a property.
This table is based on the valuation roll as at 30 March 2023, 1 April 2023, and 1 January 2024.
Figures in this table are rounded to the nearest £1,000, and may not sum due to rounding.
Table 1: Estimated cost of reducing the Higher Property Rate to 54.6p (£), adjusted for General Revaluation Transitional Relief, 2024-2025
|
Property class |
Estimated additional gross revenue (£) |
|
Shops |
9,722,000 |
|
Public houses and restaurants |
408,000 |
|
Offices |
7,195,000 |
|
Hotels |
2,581,000 |
|
Industrial subjects |
9,898,000 |
|
Leisure and entertainment |
2,199,000 |
|
Garages and petrol stations |
403,000 |
|
Cultural |
447,000 |
|
Sporting subjects |
181,000 |
|
Education and training |
6,935,000 |
|
Public service subjects |
3,011,000 |
|
Communications |
331,000 |
|
Quarries, mines, etc. |
121,000 |
|
Petrochemical |
1,718,000 |
|
Religious |
76,000 |
|
Health and medical |
2,348,000 |
|
Other |
1,219,000 |
|
Care facilities |
764,000 |
|
Advertising |
55,000 |
|
Statutory undertaking |
13,141,000 |
|
All |
62,750,000 |
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