ON APRIL Fools’ Day, the recalculation of a key business tax will take effect – but few within Scotland’s business community will be laughing at the terrible financial uncertainty that this will bring. I have already had calls from clients who are having to halt expansion and investment plans in the face of eyewatering increases in the Rateable Value (RV) of their properties.
One Perthshire hotel and leisure firm has told me they are so nervous about the future that they cannot proceed with their plans to expand. Tourism, one of our nation’s main income streams supplying more than 200,000 jobs and injecting £5billion into our economy annually, is being hit particularly hard.
At the top end, the RV of Perthshire’s Crieff Hydro hotel is up nearly £700,000 a year from £1.15million to £1.85million. The region’s Gleneagles Hotel will have its RV jump from £2.3million to £3.66million. Smaller hotels are suffering equally.
The Royal George in Perth will face an RV leap from £92,000 to £130,000. Over five years, that is an extra £93,500 the hotel must find from its budget. It is hardly surprising that many hoteliers fear for their futures. Faced with rates rises, their options are limited. Either reduce investment in the property – by shelving maintenance and refurbishment plans or laying off staff – or increase prices.
Whichever path they choose makes them less attractive to customers. And when a hotelier stops investing in his property, it is not only the customer who suffers but also the local economy, local decorators, roofers, joiners and electricians. Freezing wages, laying off staff and not employing local trades all takes money out of people’s pockets and out of the local economy. What you end up with is a self-propelling race to the bottom.
Not all sectors are faring so badly – retail, office and industrial properties are paying less in the main – but the pain is not being spread evenly. Yesterday, for example, it emerged that the SNP’s own Edinburgh HQ’s RV has been cut from £38,100 to £27,700. Quartermile, on the former site of the Edinburgh Royal Infirmary, is arguably the city’s prime office development. The RV for one occupant, Investec Wealth & Investment, has dropped from a little under £210,000 to just below £188,000. In PERTH, transport giant Stagecoach’s RV bill is going down from £320,500 to £245,500, while energy firm SSE’s RV has gone from a little less than £1.4million to £1million – a drop of almost a third. M&S in Perth city centre is down from £594,000 to £473,000 and New Look is dropping from £249,500 to £199,500.
Some people say this is a crazy system – these big guys can afford to pay more. So, why is this happening? The RV is an independent assessor’s estimate of what the property could be rented out for, based on size, quality of facilities and the turnover of any trade based there. This recalculation normally takes places every five years and should have happened in 2015 but was postponed by the Scottish Government for two years, supposedly because they did not want to hit anyone with an increase while we were still in recession. But the delay has not helped everyone. The last revaluation was in 2010 but assessors always base their calculations on what the likely rental value would have been two years previously. On April 1, 2008, the property market was riding high, unfettered by the repercussions of the financial crash which did not register until later that year.
In effect, then, for the past seven years businesses have been hit with rates based on the very crest of a property boom at a time when the market has actually gone through the floor. Businesses are now being told to stump up more. Much more in some cases. The Scottish Government appears to suggest this is not its problem as the revaluation is carried out by the Scottish Assessors Association on behalf of local authorities and is market-driven analysis. But it is a devolved policy which is having a very material impact on many livelihoods and ministers could put a fairer, more tailored, system in place if they really wanted to help more people. Until this happens, what can businesses do legally to minimise their exposure to huge RV increases? They have a six-month window from April 1 to appeal against their revaluation figure and I would urge all of them to do so. Even if your RV is set to come down, there is nothing to say it should not come down further.
The appeal process can take up to three years, during which time you will have to keep paying that increased rates bill. You might ultimately receive a refund, which could come too late for some. Make no mistake, paying an extra £30,000 or more in rates every year could be the end of some businesses.
Nevertheless, the first thing to do is take professional advice from a rating surveyor regulated by the Royal Institution of Chartered Surveyors, who can advise whether it is worth taking an appeal forward. Most operate on a no-win, no-fee basis, so you have nothing to lose.
Our company is already planning to take forward a significant number of appeals and would be happy to talk to anybody who has concerns. It is a chance to challenge an unfair tax – you should take it.
For more information, email firstname.lastname@example.org or call 01764 670 335