By Jack Walsh & Gillian McKenzie
LICENSEES and trade groups have slammed the Barclay group’s business rates review for failing to suggest any reform of the system used to calculate the rateable values (RVs) of hospitality businesses.
The report, published last week following a year-long review of non-domestic rates in Scotland, puts forward 30 recommendations for the Scottish Government to consider, including a move to a three-year revaluation cycle (rather than every five years) from 2022, and the introduction of a 12-month delay on increased rates if and when an existing property is expanded or improved upon – but there is no mention of overhauling the system used for licensed trade businesses, whose RVs are based on turnover compared to square footage for businesses in other sectors.
Many operators have been hammered with crippling increases of several hundred per cent under the new RVs, which came into effect on April 1; a temporary 12-month 14.75% ‘transitional relief’ cap on increases until next March is available to apply for via local authorities.
Acknowledging that the hospitality sector “made a particular case to us that their method of valuation was flawed”, the Barclay report said that a separate submission to the group “failed to identify any alternative method of valuation that would be acceptable to all in the sector”, which it said was “disappointing”.
The lack of any proposed reform in the report has drawn fire from operators, trade groups and surveyors.
Ian Gibson, whose pubs include Platform 3 in Linlithgow and Winstons in Edinburgh, branded the report a “whitewash”.
“Nothing’s changed; the report is a waste of time for the hospitality sector,” he said.
“It’s very disappointing; they had an ideal opportunity to bring in a scheme that was transparent across the board, completely open.”
“It’s not going to be easy to get a system that everyone in the licensed trade agrees on but it shouldn’t have just been ignored,” he said.
“Where’s the comfort for those facing increases of 400% if the cap isn’t extended?
“If Derek Mackay and the Scottish Government agree to the report’s recommendations then they’re agreeing to do nothing for this sector and that would be outrageous.”
Graham Fleming, owner of the Beach Bar in Lossiemouth, said: “I’m not particularly happy with what’s come out [of the report].”
“I was hoping there was going to be some form of a fairer, more transparent system of how they come to their figures (to calculate rateable values).
“To me, they’ve still got it wrong; the business should not be assessed, it should be the premises that’s assessed.”
Trade groups also criticised the report, saying that while there are some positives, the lack of a major overhaul is disappointing.
In a joint statement, the British Hospitality Association (BHA), Scottish Licensed Trade Association (SLTA) and Scottish Tourism Alliance (STA) said that in their submissions to Barclay during the review period, they suggested that assessors “engage with the industry, its trade bodies and advisers to discuss and agree a future valuation framework which is acceptable to and understood by the industry”. “BHA and the other trade organisations will continue to make this case to the Scottish Government,” said the statement.
Surveyors have also expressed disappointment at the lack of any proposed reform in how hospitality businesses’ rates are calculated.
Martin Clarkson, partner at Gerald Eve, said: “Unfortunately, but unsurprisingly, the review has not addressed the perceived discrepancies in the assessment of rateable values, so we remain reliant on the short-term fix of the sector-specific transitional relief and, possibly more fundamentally to the appeals process, to try and alleviate the impact of the 2017 revaluation,” he said.
Steve Dalton, partner at Montagu Evans, said it is “disappointing that some of the more pressing issues for this sector weren’t tackled”.
Tim Bunker of Graham & Sibbald echoed that view, adding that the report’s failure to go into any detail about extending the transitional relief “is of considerable concern for the sector”.
The Scottish Government said it will “respond swiftly” to the recommendations in the Barclay report. When asked by SLTN if it intended to extend the transitional relief cap on increases beyond 12 months, a spokeswoman for the Scottish Government said “this will be considered as part of the annual budget process”.