New Deal for Business Non-Domestic Rates Sub-Group minutes: May 2023

Attendees and apologies

• Liz Cameron, Scottish Chambers of Commerce (Business Lead)
• Colin Borland, Federation of Small Business Scotland
• Fiona Campbell, Association of Scotland’s Self-Caterers
• Martin Clarkson, Gerald Eve
• Marc Crothall, Scottish Tourism Alliance
• Heather Honeyman, Scottish Assessors Association
• David Lonsdale, Scottish Retail Consortium
• David Melhuish, Scottish Property Federation
• Stephen Montgomery, Scottish Hospitality Group
• Alan Puckrin, Local Authority Directors of Finance
• Les Robertson, Institute of Revenues, Rating and Valuation
• Brian Rogan, CBRE
• Jonathan Sharma, Convention of Scottish Local Authorities (COSLA)
• Leon Thompson, UK Hospitality Scotland
• Paul Togneri, Scottish Beer and Pub Association
• Colin Wilkinson, Scottish Licensed Trade Association

Scottish Government

• Tom Arthur, Minister for Community Wealth and Public Finance (Chair)
• Ellen Leaver, Deputy Director, Local Government and Analytical Services Division
• Scottish Government Officials

Items and actions

Welcome and introductions

The Minister welcomed members to the meeting noting that this sub-group would regularly feed back to the wider New Deal for Business Group (NDBG), with the intention to report on the initial findings and outputs by the end of June 2023. He noted that Liz Cameron of the Scottish Chambers of Commerce would be the NDBG Business Lead for the sub-group.

The Minister also noted that the Scottish Government had recently undertaken a consultation on the disposal deadline for appeals lodged between 1 January 2020 and 31 March 2022 and that members would be updated on the outcome of this consultation shortly.

Terms of reference and membership

The group were invited to agree the terms of reference which had been shared ahead of the meeting. The group indicated they were content with the remit as set out.

It was stated that the discussion around competitiveness and the level of rates should not be lost amongst discussion on the administration and operation of the Non-Domestic Rates (NDR) system.

It was noted that non-domestic rates are a large topic and within the timescales available, it is important to consider both short-term recommendations which could improve the NDR system, and also issues which would take a longer time to consider. The group should keep in mind the financial implications of any reforms and ideas to increase revenue.

The Minister noted that the current membership covered a range of interests, and asked if there are other organisations which should be invited to join.

Heather Honeyman asked if there was a limit on the number of attendees from one organisation. The Minister clarified that it was more important to ensure continuity and flexibility where needed.

David Lonsdale advised he would cascade information to the other retail trade bodies.

Liz Cameron stated the group had a responsibility to identify experts for particular issues that may be raised.

David Melhuish asked if the utilities or renewables sectors should be included. The Scottish Chambers of Commerce agreed to represent the sector on the sub-group given their membership includes these sectors.

Members indicated they were content with the membership.

Discussion

The Minister invited Liz Cameron to open the discussion to identify the main issues for business with the current operation and administration of non-domestic rates which the group should explore further. 

Liz Cameron noted that the recommendations of the Barclay Review of non-domestic rates were now implemented and suggested these could be put to one side, but that the group may also wish to consider the recommendations which were not taken forward.

Brian Rogan stated there was a need for further reform. He advised that non-domestic rates act as a barrier to capital investment in in Scotland. He also asked about the SNP manifesto commitment to bring the Higher Property Rate (HPR) in line with England, and what success would look like following the devolution of Empty Property Relief to local authorities. The Minister noted the commitment to bring the HPR in line with England is over the lifetime of the current parliamentary session.

Jonathan Sharma noted that COSLA negotiated with the Scottish Government on the devolution of Empty Property Relief. He advised that some local authorities have already made changes and more may follow but that this will be down to local decision-making. To review the outcome now would be too early.

Alan Puckrin explained that the primary driver for any policies being considered by councils around empty property rates is focused on the economic regeneration of long-term empty properties. Councils are taking decisions on Empty Property Relief at different times, and it will take time to see the impact of these policies.

David Melhuish raised the NDR appeals system and cited the example of a landlord of serviced offices looking to appeal their rateable values, and required to submit a separate appeal for every property they wish to appeal. He stated this is a barrier to appealing, and while acknowledging concerns regarding the number of appeals, he stressed the system should be fair.

Colin Borland cited transparency and consistency as key areas to look at, including the previous Barclay Review recommendation regarding setting up a statutory body for assessors. He also noted that longer term, the Federation of Small Business is broadly content with a property-based tax but that it may be unfair to pay tax before a business is open for trading.

Leon Thompson suggested that the Valuation Office Agency in England is more transparent than Assessors, and that transparency is crucial to build faith in the valuation process. He noted the recent revaluation did not provide certainty for UKHospitality members and suggested the group should look at this.

Martin Clarkson indicated the hospitality industry wanted an overhaul of the valuation methodology for the sector and noted that a commitment to look at this would be welcomed. It was noted that there were different views across the sector on this issue.

Heather Honeyman explained that some of the matters required further discussion and clarified that assessors work to deliver a consistent service through a single SAA (Scottish Assessors Association) portal, along with standardised forms and valuation notices. The system is dependent on return of information to assessors to enable accurate valuations. She also clarified that the valuation of licensed premises was discussed with the sector ahead of the 2023 revaluation, and changes had been made to the Practice Note as a result. She advised that the door is open to engage with assessors on this issue further.

David Lonsdale noted positive reforms to NDR in recent years including the move to more frequent revaluations, a one-year tone date, and the rates freeze this year. He suggested a recommitment to a Uniform Business Rate would be welcomed. He said that Scottish Retail Consortium members would also like the delivery of the commitment on the Higher Property Rate to be accelerated, and asked if this should also be reaffirmed by Ministers. He referenced the recent Scottish Fiscal Commission report indicating a £1 billion spending gap in the budget and asked that NDR not be used to plug that. He also called for no ad hoc NDR levies or supplements to be introduced over the lifetime of this parliament.

The Minister noted that the Deputy First Minister is convening a group on tax over the summer and that there will also be the usual rounds of engagement ahead of the Scottish Budget. He invited members’ views on the principle of a property tax system in the long-term.

Brian noted that a property tax provides certainty over revenues but is inflexible for changing circumstances. He also highlighted that some businesses received only 3 weeks’ notice on changes to Empty Property Relief and that some councils had as yet been unable to issue bills which include some reliefs for 2023-24 due to software system still being updated. 

Martin Clarkson noted that a property tax ticks a lot of boxes, but questioned whether the value of a property is an appropriate way to raise money for public services, and also advised that affordability for the ratepayer can also be an issue.

Les Robertson stated there was an imbalance between bricks and mortar businesses and online businesses and asked whether an Online Sales Tax should be considered to supplement NDR income.

David Lonsdale noted there were a range of alternative taxes that could be considered including a Land Value Tax, shifting the balance of tax more to households, or to taxes based on profits, on number of employees, etc. He stated that it could be helpful if the group was kept advised on the discussions regarding any changes to Council Tax.

Next steps

The Minister thanked everyone for their contributions and discussed future meetings. The group agreed to meet once per week for the next three weeks. He also advised that a note of this meeting would be shared and that invites would be issued for the next meetings.

Liz Cameron advised that many issues had been raised in the meeting, but it would be helpful for ideas on how these issues could be addressed to be suggested as this approach would drive a framework for looking at these issues. She noted that she was also interested to hear from the assessors to find out what changes they would like to see and invited Heather to draft an ‘ideas’ paper with her colleagues and bring forward to the group.