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The business rate revaluation - fair or foul

The extraordinary change in the north east’s economic circumstances over the last three years means the impact of the business rate revaluation will likely be felt disproportionately badly across the area.

It’s a fast evolving picture though, and while the Scottish Government and local authorities have moved to offer succor to some ratepayers, for many the best course of action remains to lodge an appeal.

With a relatively short timescale to work with, those unhappy with their proposed new rates have until the end of September to appeal: a move that, if successful, could mean considerable savings.

Fast changing picture

Reflecting a property’s general rental value, not an occupying business’s profitability, the new rates take effect from 1 April and, importantly, will be frozen at the new level until the next assessment, likely 2022.

While the government says nationally more than half will pay no rates, and seven out of 10 will pay the same or less, many businesses across the north east are set to see large increases at a time when turnover and rental values are likely to be considerably lower than they were back at the tone date, the date used for the property value assessment, in April 2015.

However, proving former Labour prime minister Harold Wilson’s assertion that a week is a long time in politics, this is a fast changing picture.

In a move seen simultaneously as a lifeline; an addition of more complexity into an already complicated system; or merely a 12 month sticking plaster; the Scottish Government announced in February a one-year 12.5% cap on rises for those in the hospitality industry, such as pubs, restaurants, and hotels, as well as office premises in Aberdeen and Aberdeenshire.

Earlier this month, councillors in Aberdeen voted to provide £3million relief to businesses hit by the rise, if the Scottish Government matched the pledge; in Aberdeenshire, councillors agreed a £3million rates relief scheme to support firms worst affected.

So what can businesses do?

At a recent FG Burnett event in Aberdeen, the overwhelming message from surveyors was not to miss the opportunity to lodge an appeal.

The audience heard that in the region of 67,000 properties — representing around 70% of the total rateable value of all properties on the valuation roll — had been appealed in Scotland in 2010.

And it was suggested that half of these appeals resulted in some kind of saving, with the average reduction being 5%.

More recently, the CBRE Scottish rating team succeeded in a landmark material change of circumstance (MCC) business rates appeal case at the Grampian Valuation Appeal Committee, which — although being appealed — presents an immediate opportunity for many north east business ratepayers to secure substantial savings.

The committee determined CBRE’s appeal at 16.5% below the assessor’s rateable values for office premises in Aberdeen.

Perhaps, in light of this debate, the questions we need to ask are whether the current system is fit for purpose; and whether it’s reactive enough to reflect changing economic circumstances.

On that note, all eyes will likely be on the Barclay Review when it’s presented to ministers in July. The review considers recommendations to enhance and reform the business rates system in Scotland.

Meantime, the message is clear: with a deadline of 30 September, ratepayers should waste no time in appealing against their new valuation if they feel it’s incorrect, or excessive.

David Scott

David Scott is a partner at Ledingham Chalmers. He is based in the Aberdeen office.

Posted, 21 March 2017 by David Scott
Categories: Commercial property