Expert warns against rating pubs on rental values
Commercial property firm Colliers International is behind a petition lodged with the Scottish Parliament that claims the move risks having a “devastating” effect on the retail trade.
The crux of the petition, which is backed by the Scottish Chambers of Commerce, is that retail businesses, including drinks retailers, are still paying non-domestic rates based on rental values taken at the height of the property market.
Experts says rental values have fallen by an average of 23% since recession struck in 2008. By delaying the next revaluation from 2015 to 2017, which ministers say keeps the system in line with England and Wales, they say it will signal more pain for Scottish retailers.
Peter Muir, director and head of rating for Colliers International, said the delay stems from a political desire to maintain a uniform business rate between Scotland and England and Wales.
Should a revaluation take place in Scotland in 2015, he said, it would reveal a significant reduction in rental values, which would have led to lower revenue for the government derived from business rates, and put pressure on ministers to lower the rate poundage (which determines how business rates are calculated) compared to down south.
Ministers say this would put Scottish firms at a disadvantage, but Muir fears the worst.
“The decision to postpone the revaluation by two years rides roughshod over Scottish businesses and the harsh realities they have to face up to,” he said. “For the retail sector, in particular, this could have a devastating impact.”
Bob Mowat, ratings partner at property surveyor DM Hall, also opposes the delay, even though he sees the logic of the Scottish Government’s argument. “Fundamentally I disagree with it, purely and simply on the grounds of a tax base,” he told SLTN.
“If you’re looking to have a competent tax base then the methodology for calculating that should be as up to date and robust as reasonably possible, bearing in mind that hiatus we’ve had over the past few years in terms of values.
“And I think we’re a long way from that. We’re in danger of having a tax base that is as irrelevant to the current market as the council tax is.”
The revaluation delay, confirmed by the government in its current consultation on business rates, is likely to re-open the debate over whether pubs should pay rates on rental values like shops as opposed to turnover. Mowat questioned whether this would help the on-trade, claiming that rental values for lessees would be higher than they are under the present arrangements.
The closing date for anyone wishing to sign the revaluation petition is March 15, after which the petitions committee at Holyrood will decide if it merits parliamentary time.