Businesses in the north east of Scotland have been dealt a low blow in the recently announced rates revaluation, with some facing a rise in annual rates bill of more than 100%.
Ratings expert Sandy Roy said Grampian businesses have been hit with an average rateable value increase of 25% – compared to average increases of 13-15% for businesses located in the Central Belt.
Mr Roy, Head of Rating Consultancy at FG Burnett, said: “To make matters worse, unlike in previous revaluations, there will be no phasing in of the increase as Transitional Relief has been abolished. Businesses already struggling to find a way out of the deepest recession for decades, have the added burden of heavily increased rates which come in to force on April 1.”
Rateable values are reassessed every five years and the amount of rates payable is the rateable value multiplied by the rate in the pound set by the Scottish Government (40.7p or 41.4p for larger assessments RV over £35k).
Mr Roy added: “The new rateable values are based on property rental values at April 2008. Unfortunately this means many Aberdeen businesses have been assessed during a period of high property values, when the north-east economy was performing much better than other regions in Scotland, and takes no account of the UK financial meltdown and subsequent drop in property values.
“It is true the rate in the pound has been reduced by about 16 per cent, which is fine if you are located in the Central Belt, and with typical rateable value increases of 13-15%, many businesses there will pay less in 2010/11 than this current year.
“It’s a grimmer picture in areas like Grampian where the average increase is 25 per cent. When you factor in specific categories like the office sector in Aberdeen’s West End, oil company HQs and NHS properties, the uplift in business rates payable for some companies shoots up to nearer 40 per cent.”
In both 2000 and 2005, the Government introduced Transitional Relief, which gave businesses three years to phase in large increases but this time there is no such cushion. In addition, the thresholds for Business Rate Relief for small businesses and Rural Rate Relief have been raised. It means some businesses which previously benefited will no longer qualify for relief, hitting people who need the most support.
Mr Roy said: “The Scottish Government seems to take the view that because it has dropped the rate in the pound, businesses don’t need transitional relief, but that is to ignore the unique oil and gas based economy in Aberdeen which inflates property prices and rentals, even when other sectors have been struggling.”
A couple of examples clearly illustrate the unfairness of the system and how Aberdeen companies will have to dig deep to fund the new business rates. An office in Albyn Place has had its rateable value (RV) increased from £210,000 to £351,000 meaning the rates payable has risen 42.6% – from £101,850 to £145,314.
The Holiday Inn Express in Aberdeen’s Chapel Street will now have to pay £267,030, a jump of £160,331 (150%) while its sister hotel at Bridge of Don will pay £134,550 compared to £72,022 (86% rise).
Even the local authorities are not exempt. Aberdeenshire Council’s Woodhill House headquarters faces a 25.4% rise, from £848,750 to £1,063,980 and will need to meet this increase at the same time as they are being asked to freeze council tax.
“It is accepted that a business should pay increased rates as the value of its property increases, but it is not acceptable to have such a sudden and dramatic increase in business rates payable. These huge increases, with no time to prepare for them, means north east companies are shackled by being less competitive when compared to similar companies in the Central Belt,” said Mr Roy.
“Surely the axing of Transitional Relief for the first time in 15 years is a step too far and the very least the Scottish Government should be doing is reviewing this harsh decision? I expect First Minister Alex Salmond, whose constituency is home to many of the types of businesses which will be harder hit, can expect busier than normal surgeries, once this situation truly hits home.
“I would urge all business owners to lobby their MSPs and Government Ministers to
seek the reinstatement of Transitional Relief which will give hard pressed companies sufficient time to absorb higher rates bills and offer some respite in what are still very challenging times.
“If the Scottish Government fails to act, I envisage the Assessors’ Offices throughout Scotland being inundated with appeals as rate payers take the alternative route to reducing their business rates liability.”
• Sandy Roy is Head of Rating Consultancy at commercial property experts, FG Burnett, Aberdeen.
Note to Editors
FG Burnett Ltd was founded in 1960 and the practice has now grown to become the largest firm of chartered surveyors and property consultants based in Aberdeen and Glasgow.
FG Burnett provides Scotland-wide coverage for a range of services including sales, lettings and acquisitions; building surveying; development consultancy; investment consultancy; property management; rating consultancy, rent reviews and commercial valuation and compensation.
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