MSPs back bill proposing major reform of business rates

The Scottish Parliament’s Local Government and Communities Committee has given its backing to a bill which proposes the first major reform of business rates in Scotland for decades.

The committee says a clear majority of organisations from local government, to business and the third sector support the bill, describing it as a move towards a “more modern and fair ratings system”.

The Non-Domestic Rates Bill was introduced following the Barclay review which made a series of recommendations seeking to reform non-domestic rates, or ‘business rates’, in Scotland.

A majority of the committee also concludes that independent schools should no longer be able to claim charitable relief from business rates; Conservative members Graham Simpson MSP and Alexander Stewart MSP did not agree with this conclusion. The committee said the move would help ‘level the playing field’ with state schools and generate important revenues for councils.

Other key findings in the stage one report include:

  • Welcoming the move to change revaluations from every five to three years, reform a “clogged” revaluation appeals system, and speed up the process of debt recovery by councils
  • Supporting reforms to close a known tax avoidance tactic for those who own holiday homes which can be used to avoid paying any local tax on the property
  • Support for the introduction of the ‘Business Growth Accelerator’, which would reduce the rates bills of growing firms
  • Concerns that the small business bonus scheme currently contains a ‘cliff edge’ which stops small businesses expanding because they can’t afford the much higher rates
  • A qualified welcome for proposals to make those conducting commercial activity in parks liable to pay business rates.
  • The need for practical steps to reverse town centre decline and bring back shoppers and businesses to high streets

Committee convener James Dornan MSP said: “This is the first bill for many years to make large scale changes to the rates system in Scotland and there is no doubt that it will help provide a more modern and equitable ratings system.

“We recognise the strength of feeling from the independent school sector about the bill’s proposal to remove charitable rates relief from them. However, we believe this will level the playing field with state schools and generate vital funds for local authorities at a time of increasing demand on their services. And it is important to note that this bill is not just about this single issue.

“We welcome much needed proposals to bring revaluations up to date with current market conditions and to reform an appeals system that has become almost an automatic part of the process for some ratepayers.

“We also welcome moves to close tax loopholes around holiday homes. But we want more to be done to crack down on ‘phoenix companies’ who hide behind company law to avoid paying rates. 

“Despite our support for the general principles of the bill, it should not be considered a silver bullet. More must be done to tackle the issue of town centre decline, and work must be ongoing to ensure the rates system does not block organic business growth and encourages the wider societal benefits we all want to see.”

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