A PANEL of judges have been criticised following an appeal court ruling that means Scots businesses should not receive a business rates cut because of the fall in oil prices.

Lady Dorrian, Lord Malcolm and Lord Doherty have ruled that the oil price collapse did not cause enough of a downturn in the north east of Scotland to undermine the value of commercial property.

A number of businesses won a ruling at the Valuation Appeal Committee in January 2017 which should have led to a reduction in business rates, after arguing that the downturn in the greater Aberdeen area had been so severe it amounted to a "material change of circumstances."

The group had initially sought a cut of 20 per cent for the year from 1 April 2015 and a reduction from 1 April 2016 of 40 per cent. The committee, however decided rates could be cut by 16.5 per cent only in 2016/17.

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The amount shops, offices, pubs, hotels, warehouses and factories pay in rates is based on a "rateable value",This valuation of a property is broadly based on an analysis of what annual rental values would be.

The VAC had said there was weak evidence to show a “dip in rental values” during 2015, but that the evidence was “sufficiently robust” to conclude that there had then been a significant reduction in rental value from 2016.

But the Assessor for Grampian has won an appeal against that decision, with the judges concluding that the rent drops did not amount to a material change of circumstances.

James Bream, director of research and policy at Aberdeen & Grampian Chamber of Commerce, said: “This is an extremely disappointing ruling and one which organisations in the north east will struggle to comprehend given the very real and devastating impact the oil and gas downturn had on their businesses.

“It is hard to understand how what we have faced is not a material change in circumstances and frustrating that many of the issues raised have been left unanswered.

"There needs to be serious consideration given to legislative changes if the law does not see these circumstances as exceptional. We’ll consider the announcement further and are now formally calling for the revaluation to be brought forward to 2021, in line with the Chancellor’s Spring statement.”

The new judgment agreed that there was a fall in the general levels of office rents between 2014 and 2016, but the resultant levels were not lower than what was described as "tone levels". Concerns over business rates across Scotland arose last year after assessors used property rental values that prevailed two years previously, the so-called “tone”, to set rateable values for 2017. But in those two years there was an oil slump.

Lady Dorrian, Scotland's second most senior judge, stated that there was no evidence to prove that the VAC were correct to make the ruling forcing reduction.

Lord Malcolm who agreed added: "It can be noted that the counsel for the ratepayers was unable to point to any precedent for a successful material change of circumstances appeal based on an economic downturn when current rental values were not lower than the net annual values entered in the [valuation] roll."

The VAC considered there was "weak evidence" to show a dip in rental values during the earlier part of the decade. But the committee concluded that the evidence was "sufficiently robust" to conclude there had been a significant reduction in rental value from 2016.

Lawyers for the assessor, however, argued that the VAC had incorrectly interpreted available data and had made the wrong conclusion.

They argued that current rents had not dipped to a level lower than the net annual ones which had been entered in the valuation rolls which are used to calculate rates.

The lawyers argued that this was the correct test to use when deciding whether there had been a "material change of circumstances" which would allow business rates to be cut.

Lord Doherty added: "A significant drop in general rental levels from their 2014 peak was not in itself a material change of circumstances affecting value.

"In fact, it is plain that even by 2016 general rental levels for offices had not fallen below tone levels.

"On the face of things therefore, there was no material change of circumstances affecting value."