Hospitality businesses could face full impact of rateable value increases from next year, writes chartered surveyor Gary Louttit
FINANCE minister at Holyrood, Derek Mackay, recently announced a 12.5% cap on rates bill increases for hotels, pubs, restaurants, cafes and other accommodation – as well as many premises with offices in the Aberdeen area together with relief for renewables companies – though the detail of how this will work in practice has yet to be revealed.
The cap will only benefit ratepayers in the hospitality sector for a year.
This move acknowledges that these sectors have been unfairly treated at this revaluation and the problems of hoteliers and publicans being unable to pay the additional levels asked of them had to be addressed.
Mr Mackay spoke about the benefits the cap would bring to those facing crippling increases in their rateable values as a result of the revaluation of commercial premises taking effect on April 1 this year, but there could be a sting in the tail.
Whilst the cap announcement provides welcome news for those faced with rocketing rateable values, what might have been overlooked in the announcement of the cap of 12.5% is that it will only benefit ratepayers in the hospitality sector and some office occupiers in Aberdeen for one year.
In years two through to five of the life of this revaluation, these ratepayers will face the original increases in rates payable, almost certainly exacerbated by an increased Uniform Business Rate.
Rateable value is an assessment of the annual rent of premises on the open market at the tone date.
For this rating revaluation, the tone date is April 1, 2015; the previous tone date was April 1, 2008, which was prior to the economic downturn, and many businesses have therefore been paying rates since then based on rateable values with no regard to the downturn in rental values, the economy and, in turn, business levels.
The rateable values of hospitality sector operators are likely to have reduced significantly since the tone date when the sector was at its peak, as a consequence of Scotland having played host to such international sporting events as the Commonwealth Games and the Ryder Cup boosting business significantly, though temporarily. As such, the finance minister’s latest announcement on rates has served to highlight the need for reform of the rating system.
Indeed, the government has established the Barclay review group to make recommendations that seek to enhance and reform the business rates system in Scotland to better support business growth and long-term investment and reflect changing marketplaces; recommendations are due in July.
It acknowledges that these sectors have been unfairly treated.
In the meantime, we would strongly advise that ratepayers in the hospitality sector take advice on their new rateable values from local experts in the field and press on with appeals against the new assessments on the basis that they will still face increases in year one, albeit not as high as expected, but that in years two to five they will face the full impact of these contentious increases if they don’t.
• Gary Louttit is head of the hospitality and leisure department at Shepherd Chartered Surveyors.