BUSINESS leaders have warned that looming increases in rates bills in Scotland could place a massive burden on firms amid uncertain times and renewed calls for reform of a system they say is not fit for purpose.
Long running concerns about the business rates system have escalated in recent weeks as it has become clear many firms will see their bills soar from April following the first revaluation of properties for seven years.
“It is becoming increasingly apparent that many businesses are being faced with substantial increases in their business rates bills this year, as a result of the revaluation,” said Liz Cameron, chief executive of Scottish Chambers of Commerce.
“Whilst any revaluation will produce winners and losers, it is the scale of the increase facing a large number of businesses, and the lack of logical reasoning behind it, that frustrates and angers businesses.”
The bills of many firms will be based on estimates of what the property they occupy would have cost to rent in 2015.
Hugh Aitken director of CBI Scotland said increases in bills could mean firms shelve vital investment. “Some of the unsustainable increases in business rates bills highlight how the current system hampers productive investment, a key driver of prosperity,” he noted.
The problems have been compounded by fact the fact firms have had little time to prepare. Many are already facing increases in other costs.
“With the revaluation taking effect on 1 April, businesses have only had a few weeks’ notice on, in some cases, substantial hikes in their business rates bills,” said Ms Cameron.
“This is impossible to plan for effectively and will impact businesses at the same time as the likes of the Apprenticeship Levy, increases to the National Living Wage and workplace pension obligations.
While many small firms will be spared the impact because of the reliefs they enjoy, the Federation of Small Businesses said the revaluation will pose fresh challenges for some that are carrying an unfair share of the rates burden.
“We’ve regularly highlighted our issues with the current system for firms that operate from high value premises, but who are not necessarily high profit,” said a spokesman for FSB in Scotland, Stuart Mackinnon. “These sorts of firms – like petrol stations and nurseries – feel that the system unfairly penalises them.
He added: “The two year gap between when rental data, and equivalent information, is collected and when rateable values are issued is a key problem for the current system.”
Recent changes in conditions in different areas are unlikely to be reflected in the valuation.
Ms Cameron said: “This tax is unfit for purpose and in urgent need for reform. The independent Barclay Review of business rates is ongoing and we have proposed a package of reforms aimed at making business rates fairer, more consistent, more accountable and more affordable.”
CBI Scotland wants more regular revaluations so rates bills don't increase so dramatically and remain responsive to local economic conditions.
It says the Scottish Government should also consider removing productive investments in plant and machinery out of rates altogether.
Mr Mackinnon said the wider rates system needs a revolution in customer services and to adapt to the digital economy. He noted: “The tax is difficult to understand and cumbersome to administer – this is an especial problem for firms without the resources to seek professional advice.”
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