Businesses ‘face £180m Scotland-only rates surcharge over three years’

Scottish businesses face a £180m rates surcharge over the next three years, according to the Scottish Retail Consortium (SRC).

The Scotland-only higher business rates on firms occupying medium-sized and larger commercial premises will enter its eighth year of operation next week.

The Large Business Rates Supplement in Scotland was doubled to 2.6p in the pound, but remains 1.2p in the pound lower in England.

It was subsequently rebranded as the Higher Property Rate (HPR), and was described as “damaging perceptions” of Scotland’s competitiveness by the Barclay Rates Review, which called for parity with England to be restored by 2020.

The Scottish Government’s 2021 Framework for Tax has pledged to restore parity with England by the end of the current parliamentary term, in 2026.

The SRC is now calling for that timeline to be accelerated.

The surcharge currently applies to 11,570 commercial and industrial premises, of which 2,390 are shops, 580 are hotels, and 1,760 are offices.

The retail sector alone is liable for £9.1M of this surcharge each year.

According to the SRC, one in six retail premises in Scotland is lying vacant and shopper footfall, while improving, has yet to climb back to pre-pandemic levels.

The SRC argues the surcharge makes life tougher for firms in Scotland who are already grappling with a growing cumulative burden of public policy-imposed costs.

Although changes have been made, such as the one-year freeze in the headline business rate and more regular revaluations which come into effect next week, the rates burden remains onerous, it says.

Meanwhile, shops and hospitality businesses in Scotland will miss out on the enhanced temporary rates relief which is being made available to counterparts in Wales and England during 2023-24.

Commenting ahead of the new business rates financial year which begins on April 1, David Lonsdale, director of the SRC, said: “Scottish Ministers have made some headway on business rates including freezing the headline poundage rate for the coming year and introducing more regular commercial property revaluations.

“However, this makes it all the more striking that restoring parity with England on the higher property rate surtax isn’t being sped up.

“Indeed, with over 2,000 medium-sized and larger shops – and 11,000 commercial premises overall – continuing to pay a higher business rate than counterparts or competitors down south, this Scotland-only surcharge increasingly sticks out like a sore thumb.

“The surcharge only serves to make life tougher for retailers by making it more expensive to maintain a shop presence on Scotland’s high streets. As such, we need to see a more ambitious approach and a faster pace towards restoring the level playing field with England on the higher property rate.”

Public finance minister Tom Arthur said: “We understand the pressures facing businesses at the moment and will continue to take a progressive approach to tax.

“The Budget for the new financial year will reduce the number of properties liable for the Higher Property Rate, by increasing the rateable value threshold from £95,000 to £100,000.

“Combined with the lowest poundage in the UK for the fifth year in a row, these reforms mean that over 95% of non-domestic properties are already liable for a lower property tax rate than anywhere else in the UK.”