Some of the ingredients in last week’s Scottish Draft Budget will be easier for the licensed and hospitality sector to swallow than other aspects which are already creating a stir according to Martin Clarkson, Partner at rating specialists Gerald Eve LLP and advisor to many Scottish based clients as well as industry advisor to the SLTA and SBPA.
Clarkson comments “Whilst technically still a draft Budget, at least now we have some clarity from the Scottish Government on most aspects of how commercial properties, among them pubs, hotels and licensed leisure premises, will be levied for business rates for the 5 years from 1st April next year. Some of it is welcome, some of it most certainly is not”.
Martin Clarkson, Partner at Gerald Eve LLP
For example yesterday’s announcement confirmed that the Uniform Business Rate in Scotland for most properties will be the same as for England & Wales however any properties in Scotland with rateable value £51,000 and higher will pay an extra 1.3 pence per £ of RV compared to the English equivalent. One other point of the detail emerging is the Scottish Government’s intention for 100% rates relief to apply to properties with RV up to £15,000, an increase over the existing £10,000 RV threshold in Scotland, and the £12,000 limit applying in England. Other relief will be possible for assessments up to £35,000 RV. According to Clarkson, this will be potentially good news for many sole traders in smaller licensed premises around the country, who could see their rates bills reduced to zero compared with the previous 7 years under the 2010 Revaluation. Larger premises will have to take the strain.
However, other breaking news following the statement yesterday has left many operators in the licensed and hospitality sector in various states of bemusement, anger and despair. Clarkson explains “The draft Rateable Values which have been assessed on all non-domestic properties in Scotland are now being released, some 10 weeks later than for the rest of the UK. Based on our initial straw poll of clients’ properties there are some potentially crippling increases on the horizon, particularly as these assessments will set rates bills until at least 2022”. Hotels appear to be at particular risk from significant increases in rates liability from proposed rateable values which, in some cases, are trebling. Larger public houses also seem to be braced for large hikes.
“The issues are complex” says Clarkson. “There has been discussion and differences of opinion with the Scottish Assessors whose role it is to set rateable values. We disagree with many of their fundamental approaches to their valuations of hotels and public houses for rating purposes, but to date there appears to be little appetite to reflect not only the technical aspects we have presented, but also points of principle from established operators and the licensed sector bodies.” As Clarkson further explains “Whilst there is a right of appeal against all new RVs from next April, the process can be slow and ratepayers have to pay in full meantime, possibly up to 3 years. There are also stringent timetables for appeals and our recent experience from working with the SLTA is that there is still remarkable ignorance amongst ratepayers of their rights of appeal.”
Clarkson notes “From data we have been able to source, which is not as openly available as it should be, the overall picture appears to be that rateable values in Scotland are set to rise by approximately 10% from next April, so when I see RVs for some hotels and public houses rising by 100% or 200% I have sympathy with clients’ views that there is a disconnect with their experience since rateable values were last set, based on property values in 2008.”
Also confirmed in yesterday’s Scottish Budget statement is there is no proposal for transitional relief to apply in Scotland to phase in large increases in rates bills over a number of years, a measure which is being implemented in England and Wales. This could place Scottish businesses at a disadvantage to English counterparts. As one of Clarkson’s Glasgow clients commented “There are more people working in the hospitality sector in Glasgow today than worked in Clyde shipbuilding at its peak. These rates increases will place an unbearable burden on some businesses, and some could face closure as there are simply no other ways for us to cut costs to compensate”.
Clarkson concludes “Businesses and industry bodies can continue to engage with Assessors, MSPs and MPs prior to the new rateable values being formalised and coming into effect from 1st April 2017 after which the only recourse may be lengthy and painful appeals.”