We recently sent the following communication to the Scottish Government First Minister on the issue of the new Commercial Rateable Values. The SLTA are also members of the Scottish Tourism Alliance who have requested an urgent meeting with First Minister and Cabinet Secretaries to discuss crippling business rates increases (click here to view).
First Minister,
The SLTA has for many years complained of the punitive commercial rating system singularly imposed upon the Licensed On-trade in Scotland and the lack of any commitment from the Scottish Government to end the current commercial rating system, which singularly penalises Scotland’s Pubs and Bars.
Our primary grievance with the current system is that commercial rates for pubs and bars are calculated on a completely different basis from any other commercial businesses – they are calculated on turnover rather than square footage. The rates burden on such premises equates to around 8.5% – 9% of turnover. In comparison, the rates burden on premises such as supermarkets, the licensed On-Trade’s main competitors, equates to about 2% of turnover. The current scheme leads to unacceptably high valuations, an unfair burden of rates being imposed upon small businesses; and doubly penalises those businesses by almost automatically excluding them from the small business relief scheme in stark comparison to most other small businesses with a similar or even higher profitability. After all, we are part of the retail sector and our premises are generally located alongside other retailers.
Along with our colleagues at the Scottish Tourism Alliance and the British Hospitality Association (Scotland) we have raised this issue on numerous occasions with the Scottish Government and the Scottish Assessors Association. To our dismay very little has been done to rectify the discriminatory imposition of commercial rates on Scotland’s On-trade sector. The Scottish Government’s lack of consideration to introduce a replacement system where rates calculations are equally applied to all business sectors or, preferably, are based on “business profitability” is deplorable and neglectful to our sector of industry.
The SLTA was pleased to hear the Deputy First Minister announce in December 2015 that the Scottish Government would review business rates and that the Government wanted to “ensure that the system is as fair and effective as possible”.
Our organisation also welcomed the news that the group tasked with recommending changes to Scotland’s commercial rating system would consider how business rates could support business growth; respond to wider economic conditions and change marketplaces; and support long-term growth and investment. We also noted that one of the group’s three guiding principles would be the intention “to make recommendations which, overall, are revenue neutral. This is not an exercise in increasing overall tax revenue, it is about ensuring taxation is fair”. The last four words were resoundingly important to the Scottish Licensed Trade Association and Scotland’s On-trade in general “ensuring taxation is fair”.
Despite these commitments and promises, Scotland’s Pubs and Bars, in general, have been hit again with exorbitant increases in their Rateable Values for 2017 and our Association has been inundated with complaints and concerns from our members throughout the country.
From the information coming into our offices the level of increases and in some cases decreases, vary from area to area. This is of course not surprising with there being 14 Valuation Joint Boards in Scotland which deal with business rates.
We have included some examples to give you a flavour of the reports we are receiving, particularly in the Dundee area which at present has the severest increases.
Dundee Area:-
| Company | Current RV | Proposed RV |
| Duke’s Corner | £20,000 | £68,000 |
| Globe Bar | £27,400 | £42,500 |
| Old Bank Bar | £28,500 | £80,700 |
| Brae’s | £26,300 | £69,000 |
| Double Tree by Hilton at Kingsway West | £225,000 | £336,000 |
In Edinburgh a premises RV increased from £9,600 RV to £15,500 RV, an increase of 62%. The fact that this increase takes this business just over the 100% small business rate relief level questions if the setting of this particular premises rating level is deliberately to the detriment of the business. In comparison Asda/Walmart at The Jewel, Edinburgh, has had an increase in their rateable value of only 2.75%.
In Hamilton a premises RV reduced from £41,000 to £38,500, -6% and in Baillieston a premises RV increased from £27,600 to £32,400, +17.4%. Both premises are owned by the same proprietor who is at a loss to how the Assessor reached different conclusions from virtually identical figures.
In Stirling a hotel has gone from £119,000 RV to £191,000 RV, an increase of just over 60%, yet the closest Walmart/Asda store has had an increase of just 0.4% in its RV.
As a random check, we looked at Walmart/Asda at Livingston, one of their largest stores, and were confounded as to the reduction in the stores RV by just over 5%. Looking at the supermarket sector further, in general such premises have had extremely modest increases or reductions in their rateable value.
Quite frankly it is our opinion now that the Assessors methodology of calculating commercial rates for licensed premises is not based on any transparent method and is simply “let’s make up a number”. Information has been sought from the Scottish Assessors Association on the exact methodology used to calculate Rateable Values for our sector of industry, however no clear response has been received.
Scotland’s Licensed On-trade has had a very difficult few years for numerous reasons, both legislative and commercial, and the now significant increases in Rateable Values for many of our members is the last straw.
Scotland’s pubs, bars and hospitality sector are integral to the Scottish economy with the sector contributing £1.5 billion to the economy and generating in excess of £900 million in tax revenues. Scotland’s On-trade sector alone directly employs over 43,000 people in Scotland of which 40% are under 25 years of age. 58% of all visitors and 71% of all international visitors visit one of the country’s 4937 pubs.
The Licensed Trade is part of one of Scotland’s major industries, tourism, an industry the Government wants to see continued growth in. Yet the same Government allows the Scottish Assessors Association to set Rateable Values based on a method which is flawed, unfair and non-transparent compared to other types of business property and will do nothing to help Scotland’s Pubs and bars to continue to operate. Whilst we recognise there is a new level for the small business rate relief, the majority of our members fall outwith that category.
Until there is an equally applied commercial rating system for all types of businesses, Scotland’s pubs and bars are bearing an over-proportionate share of the commercial rates burden and this can no longer continue. How can any Government allow a system to continue which is so flawed that the overwhelming majority of pubs, bars and hotels are encouraged to lodge appeals, which can take up to three years to be heard? During this period businesses have to pay the full amount imposed by the Assessors and the exact final revenue to the Government is unclear until the appeal is completed.
The Scottish Licensed Trade Association seeks your assurance that the Government will urgently review this situation and live up to its promise that Scotland’s commercial rating system “is as fair and effective as possible”.