Business New Deal for Business Non-Domestic Rates sub-group minutes - May 2024

Attendees and apologies

• Ivan McKee, Minister for Public Finance (chair)
• Colin Wilkinson, Scottish Licensed Trade Association
• David Lonsdale, Scottish Retail Consortium
• David Melhuish, Scottish Property Federation
• Gavin Stevenson, Night Time Industries Association
• Graham Howarth, Gerald Eve
• Jonathan Sharma, COSLA
• Leon Thompson, UKHospitality Scotland
• Les Robertson, Institute of Revenues, Rating and Valuation  
• Mike Grieve, Night Time Industries Association
• Pete Cheema, Scottish Grocers’ Federation
• Stacey Dingwall, Federation of Small Businesses Scotland
• Stephen Montgomery, Scottish Hospitality Group
• Peter Wildman, Scottish Assessors Association
• Heather Honeyman, Scottish Assessors Association
• Robert Nicol, Scottish Assessors Association
• Scottish Government Officials

Apologies

• Alan Puckrin, Inverclyde Council
• Marc Crothall, Scottish Tourism Association
• Liz Cameron, Scottish Chambers of Commerce
• Jim Doig, Scottish Assessors Association

Items and actions

Welcome and update

The Minister welcomed members to the meeting and noted the apologies received. The minutes of the previous meeting on 31 January 2024 were agreed. David Lonsdale asked for an update on the Public Health Supplement and the Minister noted there was no update as it was still under consideration.

Climate Change Statement - The Minister noted Ms McAllan’s statement on 18 April had referred to a recommendation by the Green Heat Taskforce that the Scottish Government explore how Non-Domestic Rates (NDR) can better support Net Zero. He invited task team 4 on impact of reliefs to consider this matter in keeping with the New Deal for Business, and invited members to put forward any external members, or to indicate if they have an interest and were not currently involved in that task team 4. There were none.

Proposal-lodging deadline - The Minister referred to the draft survey on the extension to the proposal-lodging deadline for the 2023 revaluation which had been circulated to members and invited comments, noting this would be issued shortly. No comments were offered. 

Fees on appeal – The Minister noted the transfer of valuation appeal committees’ function to Scottish Tribunals on 1 April 2023, and that fees currently apply for rating appeals England. He suggested having fees in Scotland may lead to a fairer system and clarified that there is no suggestion this be applied at the proposal stage. He invited members to set up a short-life task team to consider the design of any fees. Stephen Montgomery stated that any SME appealing their rates would be doing so because they believe their rateable value is unfair and that it would be unfair to charge them even if the fee were refundable. Les Robertson stated that in England the fees were £150 for smaller businesses and £300 for larger businesses and queried whether the Minister would think that is excessive. The Minister noted this needed to be explored, including any evidence in England of the impact of fees in England. He invited task team 1 on improvements to the transparency of valuations and information flows to consider this and for any members with an interest but not currently involved in that task team to let officials know.

Fair Work – The Minister noted the support for a society where workers are well paid and that there had been a decrease in the number of people being paid less than the real Living Wage. He noted the challenges around considering conditionality for NDR relief and noted that he was considering advice from officials on this matter currently.

David Lonsdale noted his support for people earning more as this meant more capacity to spend. He referred to the Fair Work Action Plan and the commitment to extend Fair Work conditionality to NDR reliefs as well as licensing conditions, noting that this was applied to public grants already. He noted these matters were of a completely different order of magnitude to grants with many more businesses requiring a license to operate. David Lonsdale queried the timescale for an update and noted the debate was often binary, with businesses paying the real Living Wage considered good and those who did not, bad. He noted the importance of bonuses, staff discounts and other measures that can bring take home pay for employees above the statutory minimum wage.

Leon Thompson noted the Fair Work Commission had just finished its inquiry into hospitality and that a report would be published in the coming weeks. He noted that Fair Work is more than payment of the real Living Wage and includes work security, etc. and that we should focus on businesses that carry out good practice even if they cannot currently pay the real Living Wage. He stated that he agreed with the comments made by David Lonsdale and echoed the point on other financial advantages for employees e.g. tips, noting forthcoming UK Government legislation which will require tips to be put through the payroll. He called for the matter of pay to be considered in the round.

Stephen Montgomery echoed Leon Thompson’s comments and stated there should be little issue with showing that hospitality businesses are already paying above the minimum wage. He suggested there may be a step back if businesses remove other benefits such as free meals, etc. and that consideration should also be given to how fair work impacts on owners and employers. He also noted that Scottish Hospitality Group are currently working with Strathclyde Business School on the matter of Fair Work.

Les Robertson referred to the administration of NDR and awarding of reliefs, noting this would need to be factored in, and also to keeping the NDR system as simple as possible. He stated that the number of businesses paying the real Living Wage has risen in Fife including in supply chains. He suggested that the UK Government benefits from increases in wage via a higher tax take and if benefit payments reduce. He noted that fair work conditionality already exists in procurement, and queried how conditionality on NDR reliefs could be policed, noting that this would place a burden on councils.

Pete Cheema echoed points made by other members, and noted that he had written a joint letter with the Scottish Retail Consortium and the Association of Convenience Stores to the Minister on the matter of Fair Work and the link to the Small Business Bonus Scheme. He noted there was no relief for the sector in Scotland, while retail, hospitality and leisure relief had been offered in England for the past four years, and that this really needed to be looked at.

Gavin Stevenson noted this was a critical time for small business owners and that there was a high percentage of owners of hospitality businesses earning less than minimum wage themselves, including because of COVID and the lack of NDR relief in the past few years. He called for no further cost burdens.

David Melhuish also noted concerns around policing and pointed to the rising number of duties and requirements arguably without the resource to back them up. He stated that NDR teams tend to be on the smaller side in councils and noted the risk they may struggle to administer this. The Minister noted that the Scottish Government was looking to consider how to streamline processes and efficient public spending.

Colin Wilkinson stated that many of their members already struggle and were earning less than minimum wage despite taking the risk of running a business. He noted that the sector wants to pay its staff well and pointed to the differential between the lowest and highest paid individuals and that those paid at the higher levels sought for that differential to be maintained. The Minister called for hard data on business owners’ pay and queried whether the forthcoming UK Government legislation on tips would change worker’s pay. Colin Wilkinson called for support to mitigate these extra costs. Stephen Montgomery echoed the point regarding the differential between low and high paid staff within a business, and suggested that additional costs would be passed onto the consumer.

Stephen Montgomery stated in the chat that there is a need to understand that there is a big differential in regards to essential spend against discretionary spend (e.g. hospitality). He added that while for a plumber/joiner, etc. the hourly rate is in many ways essential spend to get the job done, hospitality depends on discretionary spend and he suggested there is a big gap in the consumer understanding in this, because increased costs to hospitality mean an increase to pricing.

The Minister thanked everyone for the very valid points they had raised and noted these would be considered alongside the advice he had received from officials.

Scottish Assessors Association (SAA) Update

Pete Wildman noted ongoing dialogue with the hospitality sector and league football grounds, and work with the Association of Scotland's Self Caterers to develop an online information-gathering form which is now live. He stated that a national schedule of proposal determination dates is published on the SAA Portal and this could be shared with the sub-group. He also noted significant discussion around the Schools Practice Note.

Pete stated that the next meeting of the Scottish Ratepayers Forum and Scottish Rating Surveyors’ Forum would be scheduled shortly, and noted the Scottish Business Ratepayers’ Group had met earlier in the year. He stated that the information collection forms were being updated for the 2026 revaluation and that these would start being issued later in the year.

Graham Howarth suggested that pre-agreements should start earlier than the tone date of 1 April 2025 and stated he thought there was scope for earlier discussion given how busy Assessors would be between the tone date and revaluation. Pete Wildman highlighted this was the first three yearly revaluation cycle and agreed that early conversation was good, noting the importance of agents’ having authority to act on behalf of their clients. Anouk Berthier noted that a letter to councils would be issued shortly regarding this.

The Minister thanked Pete Wildman for this update and noting his forthcoming retirement, offered his thanks to Pete for his overall contribution to the of the sub-group.

Tax Strategy update

Scottish Government (SG) officials provided an update on the Tax Strategy, noting that this would be consulted on and thanking external stakeholders for their engagement so far. SG officials also noted that while the Tax Advisory Group (TAG) should have met on 15 May, this meeting had been postponed but the group will meet again before the draft Tax Strategy launches. SG officials summarised the main themes in the strategy and noted plenty of opportunities to feed into this work over the coming months.

Les Robertson asked for the slides to be circulated. Jonathan Sharma asked when the tax strategy would be launched and SG officials stated that would be confirmed in the next week and should be before summer recess. David Lonsdale stated that the tax strategy was critical, mentioning the letter he had sent to ministers on this work which pointed to the Higher Property Rate and the Public Health Supplement.

Update on task teams

The Minister noted that minutes of the recent task team meetings had been shared and invited officials to provide an update.

SG officials stated that task team 4 had met on 5 March. Awareness of relief entitlement had continued to be raised and she noted that a short summary guide had been issued to members and more widely including a reference in the Economy and Business Bulletin. SG officials also noted a link to the annual relief guide published as a Local Government Finance Circular had been circulated. She stated the NDR Team was happy to consider invitations to events where members thought this could help raise awareness around NDR, and called for further real-life examples of Business Growth Accelerator relief award refusals.

On task team 1 on Improvements to the transparency of valuations and information flows, which met on 20 March, SG officials stated that the SAA had provided an update and that members had called for a clear timeline of the valuation process which SG officials were now developing. SG officials also stated members had called for a period of stability given this was the first three yearly cycle, and that members had stated the importance of two-way information flows for valuation including timeous sharing of information. SG officials also noted that task team 5 on the Review of the Devolution of Empty Property Relief had its second meeting scheduled for 28 May.

Les Robertson stated that he had collated individual council local empty property relief policies for the sub-group but noted issues with the Western Isles. He highlighted that each council seemed to have slightly different policies. SG officials confirmed this list had been circulated with the papers for today’s meeting and thanked Les for pulling that together.

Next steps

The Minister noted that quarterly meetings for rest of year would now be scheduled and stating his preference for in person or hybrid meetings invited views.

David Lonsdale called for in person meetings or hybrid meetings, and general consensus on this was indicated amongst members present. He also asked whether there should be a RAG rating on the ten recommendations made by the NDR sub-group. The Minister agreed, and asked officials to take this forward.

Les Robertson noted that local government is of the view rates should be localised and returned to local government. He stated councils’ official position was to call for a return of local NDR-setting and retention, but COSLA clarified that there is currently no COSLA position on devolving NDR but that they were interested in a discussion on this matter. David Lonsdale stated that he was not supportive of local rate-setting.

Stephen Montgomery stated he had met with assessors and that they were going to work with them to dig down into the different elements of hospitality to see where cost pressures were for businesses. 

Actions

• SAA to share hyperlink of Proposal Determination Dates
• Scottish Government to share slides on the tax strategy
• Scottish Government to produce RAG rating for NDR sub-group recommendations