By Kristy Dorsey
Business owners who have paid to upgrade or extend their premises to meet Government safety guidelines face a potential double-whammy of higher taxes because of these adaptations, a leading industry group has warned.
The concern is that such enhancements will lead to higher property valuations, which form the basis for calculating non-domestic rates bills. The Federation of Small Businesses (FSB) is calling on Ministers to explain how they will address this problem when the Scottish Government outlines its forthcoming legislative agenda in next week’s Programme for Government.
The FSB is also asking for an adjustment to the timetable of the next rates revaluation to avoid future tax bills being based on property values prior to the recession triggered by the Covid-19 pandemic. There has been widespread deliberation about the extent of the impact the crisis will have on both residential and high street property prices going forward.
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“It is our understanding that some businesses that have adapted their properties to allow them to re-open or keep trading during the pandemic may eventually have to pay higher rates bills as a consequence, owing to expanded or upgraded trading space,” said Andrew McRae, policy chair at FSB Scotland.
“Needless to say, we do not believe that firms that have developed solutions to comply with public health advice should be penalised.
“While there are a variety of valuable reliefs in place for smaller firms, we want to hear from Ministers next week how they intend to address this problem. We also want the Scottish Government to outline a new timetable for the next revaluation, because we can’t have future rates bills based on pre-crisis property values.”
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The next business rates revaluation in Scotland is due in 2022. There has been speculation this could change following the UK Government’s decision to postpone the 2021 revaluation in England, even though the Scottish Government’s Barclay Review has recommended more frequent revaluations.
Assuming the Scottish revaluation goes ahead as planned, the “tone date” that fixes the rental levels adopted at revaluation would be set at April 1, 2020, in accordance with current statutory provisions.
Retail, hospitality and leisure businesses are currently receiving 100 per cent relief on non-domestic rates as part of the raft of measures introduced by the UK and Scottish governments to help firms through the economic crisis. Rates relief is due to come to an end after March of next year.
In addition to its concerns about the impact of property changes as a result of the pandemic, the FSB also wants the Scottish Government to explain how it intends to increase the proportion of public sector contracts awarded to small local businesses. The FSB is pressing for the devolved public sector to increase the share it spends with micro business – those with less than 10 employees – by 1% annually.
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According to the FSB, Scotland’s micro firms currently receive just 7% of the £12 billion spent annually by the public sector on goods and services in this country, but account for 93% of all businesses. That figure has remained relatively unchanged for the last decade.
However, the number of smaller firms that supply their local authority fell from 51,312 in 2008 to 29,910 in 2017.
“Years of public procurement reforms haven’t delivered for Scotland’s small business community,” Mr McRae said. “In fact, it is a scandal that the number of businesses winning work from their council has declined dramatically over the last 15 years.
“While we welcome the Scottish Government’s commitment to addressing this problem, we now need to understand their plan of action.
“If we’re going to rebuild our economy after this crisis, there’s no room for warm words and fuzzy commitments. Ministers should start with targets for all public bodies to increase their share of spending with the smallest local businesses.”
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