By Stuart Mackinnon is external affairs manager for the FSB in Scotland
PROPOSED legal changes to the Scottish business rates system could deliver a smarter tax. But new laws alone won’t deliver a tax fit for modern Scotland.
This spring, VAT-registered Scottish businesses will need to get used to doing more tax online as HMRC’s Making Tax Digital service becomes mandatory. As firms grapple with this change, the Scottish Parliament is set to consider new business rates laws aimed at developing a more user-friendly and responsive system.
The non-domestic rates system has been in place in one form or another since the 16th century. You can tell. The property tax is old-fashioned, bureaucratic and often paper-based.
As HMRC embarks on a hugely ambitious digitisation programme, in Scotland we’re still waiting for a single website where firms can interact with all the different elements of the rates system.
But every journey starts with a single step, and the road towards a more modern Scottish business tax system could start with the legislative reforms being proposed by the Scottish Government.
The headline measure in the Non Domestic Rates (Scotland) Bill, excluding the controversial changes to charitable rates relief for independent schools, is the introduction of more frequent rates revaluations. Broadly, this change – starting from 2022 – should mean that your rates bill valuation better reflects the current property market.
Meanwhile, those in charge of valuing properties in the rates system – the Assessors – are to be given new powers to gather relevant property value information from a wider range of organisations. To sweeten the deal for the business community, ministers are proposing incentives to upgrade and renovate properties.
In addition, ministers want to change the rates appeals system. They’re promising a more modern, fast-moving and transparent system, but they also want to cut the number of appeals. Worryingly, this could lead to a debate about fees to appeal, which at the very least should be tapered to zero for the smallest firms.
The Scottish Government – in summary – is proposing legal changes to the property tax system which should make it more nimble. However, in addition to changes in the law, this agenda requires ministers to push for a system with which it is easy for the taxpayer to interact.
Federation of Small Businesses (FSB) survey work reveals only a minority of independent businesses understand how their rateable value is calculated or have ever submitted valuation data.
At the last revaluation, The Herald reported on the widespread anxiety and distress caused when business owners received their new bill and not only had little idea on what it was based, but hadn’t planned for an increase in overheads. Poor relationships between the rates authorities and firms also leads to less precise valuations, as assessors make valuation judgements on only a small sample of properties.
This communications problem is partly due to the multitude of bodies involved in the Scottish rates system – including 32 local authorities, 14 assessors and the Scottish Government. But individual business owners shouldn’t need to know the ins and outs of public sector structures to get to grips with their bill.
That’s why, in addition to their outlined proposals, Derek Mackay and Kate Forbes should set out bold plans for a national interface for the rates system in Scotland that would interact with both councils and the assessor network. This move should yield savings for councils and assessors – whose IT systems are creaking under their own weight – but would also make it much easier for businesses to lodge appeals, apply for reliefs, submit rental data or even just pay their bill.
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