At the end of 2016 the draft rateable values for the postponed Non-Domestic Rates (NDR) revaluation were released. These new rateable values will take effect from 1 April 2017 and official notices advising owners, tenants and occupiers of premises will be sent out in March.
The new rateable values have caused a lot of unrest with many due to see a large increase in what the rates they will be paying. This climate of uncertainty, anxiety, and anger in some cases, has led to some business people calling for boycotts of the new rates when they come into force later this year.
Members from The Scottish Tourism Alliance (STA), Scottish Licensed Trade Association (SLTA) and British Hospitality Association (BHA) met with the finance secretary, Derek Mackay, on 22nd February to argue for any increase in rates to be delayed until a review is presented to the Scottish Government in July by the Barclay group (the body set up to review the rates system). Other trade and business groups have also lobbied the Government to prevent the new valuations.
The result of these efforts was an announcement by the finance secretary that the rates increases will be capped at 12.5% for hospitality businesses for a year. The cap will also apply to office premises in Aberdeen and Aberdeenshire to reflect the impact of downturn in the North Sea economy. However outwith Aberdeen and Aberdeenshire this cap will only benefit hospitality business leaving a substantial amount of licensed premises and other commercial properties at risk of an uncapped increase.
Rates are always an important factor when buying or renting any type of commercial property. When acquiring a new property, whether at the outset of a new business venture or as part of an expansion of an existing business, rates are an important outlay to take into account. Now with the planned increases, rates look set to be at the top of the agenda for many. Landlords and sellers may struggle to rent or sell properties with high rates, just as tenants and purchasers may find it difficult to find properties with rates they can afford.
The revaluation is also likely to affect businesses which are planning on refurbishing or extending their current business premises, as these kinds of changes will have an impact on their rateable value and therefore the rates they are due to pay. Some operators are seeing this as a penalty for wanting to develop and grow their businesses.
In addition those operating licensed premises will need to bear in mind that their annual fees are calculated with reference to their rateable value. So some premises may see their annual fee jump if their premises’ new rateable value puts them in a higher annual fee bracket.
Although many are concerned with a potential large increase in their rates, some will see a drop in what they are paying and the Government are arguing that most businesses will pay no or less rates than they have previously. As well as a drop in rateable value for some, the small business bonus scheme being extended to give 100% relief to premises with an RV under £15,000. In addition If those who have more than one business property, with a combined rateable value of between £18,001 and £35,000, will get 25% relief on each individual property with a rateable value of under £18,000.
While the valuations are in the draft stage they cannot be appealed. Only once the notices are released this March can appeals be lodged. The notices will include information on how to appeal and appeals can be lodged by those with an interest in the property until 30th September 2017. Surveyors and property consultants are recommending that those who do see an increase in their rates come April 1 lodge an appeal as quickly as possible. The appeals process is not expected to be quick with many not likely to receive results until well into next year, all that time paying the higher rates due and only receiving a rebate if their appeal is successful.
So where does this leave businesses in Scotland? Our advice would be to check the draft valuations now before the official notices are issued and take advice from a surveyor or property consultant on preparing an appeal if there is concern about any potential increase. An important point to note is that even if your business will benefit from the 12.5% cap you can still lodge an appeal and our advice is to take full advantage of the appeals window.
In addition, those who are thinking about engaging in any kind of property transaction should check the projected rateable value of the property/properties concerned and carefully consider what impact, if any, this may have on their transaction. Furthermore business owners who are looking to carry out renovations or similar projects which could result in an increase in their rateable value should also take advice on what this increase may be, and how it may affect their business.
At the beginning of this year the licensed industry in Scotland received the good news that exports of whisky, gin and beer were increasing. The economy as a whole is growing, albeit slowly, but there is a chance that any growth may be adversely affected by these developments in relation to NDR. However for businesses struggling to pay NDR, their concerns will understandably be for their own viability, rather than of the growth of the Scottish economy.
Contact Miller Samuel Hill Brown Solicitors
If you have a legal matter related to anything discussed in this blog, please contact our solicitors.
