Business rates experts at commercial property firm Colliers International have welcomed Scottish Finance Secretary Derek Mackay’s adoption of the Barclay Review but say details and dates are urgently needed to help landlords and occupiers make decisions.
With 100% rates relief potentially available for a year on both new and improved premises, knowing the start date and the rules for qualifying is essential for businesses to make commercial decisions. This could either significantly reduce their occupational costs or stimulate investment and redevelopment by landlords.
Louise Daly, Associate Director – Rating of Colliers International in Scotland, said: “Mr Mackay has gone above and beyond the Barclay Review by adopting its additional suggestion – which fell outside of the cost neutral remit of the report – to move annual poundage increases from the RPI to the CPI inflation measure. This was essential in order to match England and ensure businesses aren’t disadvantaged by choosing to locate north of the Border. This still means that ratepayers will see a 3% increase next year, which is in excess of the levels capped at 2% in previous years, in an effort to remain consistent with England. While, on the face of it, a positive step and one that industry has called for, it would be better for ratepayers to receive a set uniform business rate across the term of the Revaluation when the rateable values come into effect. This would enable businesses to budget more accurately and with certainty over their liability.
“Of course, the promised adoption of the Barclay Review’s key recommendations on rates relief are also welcome, but landlords and businesses need to see a fully detailed implementation plan, with specific information on how these reliefs will apply and, crucially, dates.
“Proposed empty property relief for new commercial buildings, for example, is expected to start on April 1. But what happens to businesses signing leases or moving in before that date? The difference between paying full rates and getting 100% relief for a year is simply too significant for any potential occupier to ignore.
“In today’s speech, Mr Mackay also seemed to go beyond the recommendations of the Barclay Review, when he suggested this relief should also apply to improved premises. While this chimes with the Government’s drive to encourage investment and development, creating better quality stock onto the market, landlords will naturally be very curious to see what level of improvement or refurbishment is required in order to qualify for this relief.”
The Scottish Government had promised details of its changes to rates as a result of the Barclay Review by the end of this year. Ms Daly said that while reliefs encouraging new and improved property should eventually have a positive effect by making much needed premium business accommodation available, it remained to be seen what effect it would have on older stock which will become even less attractive to tenants.
She added: “On the face of it this has been a very positive statement. One final issue that remains to be seen is just how consistently the rules on relief will be applied across Scotland. Hopefully we will see a country-wide approach that gives clarity to landlords and tenants, rather than a situation where some billing authorities are less eager to grant relief than others. This could be a problem when it comes to refurbishments, in particular, as it seems inevitable that a judgement will have to be made as regards what level of improvement qualifies for relief – for both landlord and tenant.”