Small businesses want better deal from rates review

A major review of business rates will be published today as evidence shows smaller firms face a higher burden from the tax than big companies.

The report is expected to recommend radical changes to business rates in a review of a funding system that many companies view as unfair and unbalanced.

The review has been led by Ken Barclay, the former RBS Scotland chairman, who was commissioned by Scottish ministers to look into ways of improving the system.

Expectations among business chiefs that he will come up with radical ideas are high, particularly after he told MSPs this year that he was considering endorsing a different approach to business taxation.

But its launch was given greater resonance yesterday when research was published showing big differences in the burden placed on businesses.

Scottish parliament research found that smaller firms in the hospitality and retail sectors faced burdens that were proportionately higher than big companies. Some regional hot spots — such as the east of Scotland and the Borders — face particularly high rates.

This latest report appears to back up complaints from organisations such as the Federation of Small Businesses in Scotland that smaller shops, hotels and pubs face a proportionately heavier burden.

The report stated: “There is a significant variation of rates as a share of operating surplus [profits] across different sectors.

“Non-domestic rates as a share of operating surplus is significantly higher in the accommodation and food services sector than any other sector of the economy, particularly construction and manufacturing.”

David Lonsdale, director of the Scottish Retail Consortium, stressed the need for change. “The report reinforces the pressing need for a reformed rates system which flexes with trading conditions, better reflects our changing economy and which encourages commercial investment.”

Ministers faced a rebellion from businesses this year when rates rises doubled many bills. Some companies refused to pay while others warned that they would be driven out of business by the increases.

The Scottish government stepped in to offset some of the worst effects of the rates rises and stressed that the Barclay review would come up with a long-term solution.

Now that the review is ready for publication, business organisations have called on Mr Barclay and the Scottish government to make the system fairer.

Paul Waterson, chief executive of the Scottish Licensed Trade Association, said that many firms only survived because of the cap imposed by ministers, but unless the changes set out in the Barclay review were fair then Scotland would lose “thousands of pubs”.

Jackie Baillie, for Labour, said: “Small businesses are the lifeblood of our economy and it is unacceptable that they face disproportionately high rates compared with larger firms, despite contributing as much to our growth.”

Ms Baillie added: “Businesses have told me they want the Barclay review to put forward reforms to the system to make it simpler and level the playing field across different parts of the economy.”

Dean Lockhart, for the Conservatives, said: “We need to see from the Barclay review a real change which will ensure we never see a repeat of the mess earlier this year.”

He added: “And if the SNP doesn’t strike this right, it will risk yet more accusations of not running a government that understands the economy or the needs of business.”