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Scottish business rates system findings to be made public Leisure centres and universities could face business rates bills
(35 minutes later)
A review of Scottish business rates is due to be published later by former RBS chairman Ken Barclay. Leisure centres, some golf clubs, private schools and universities should be brought under the business rates system, according to a major review.
The system has faced heavy criticism, particularly from hospitality sector. The Barclay Report into non-domestic rates has also recommended that childcare centres should be exempt.
Pub and hotel owners said a revaluation exercise of non-domestic rates would have left some facing a 400% increase in bills. The system has faced strong criticism, particularly from hospitality firms.
Scotland's finance secretary Derek Mackay quelled concerns earlier this year by capping rises for thousands of businesses. The review was commissioned by the Scottish government in March last year and headed up by former RBS chairman Ken Barclay.
Why are business rates causing concern? Other recommendations included;
Business rates - what do they pay? Mr Barclay carried out his review alongside two business experts, a lawyer and retired civil servant.
First Minister Nicola Sturgeon announced the review of the levy to "better support growth and respond to wider economic conditions and changing markets". Its remit was to review the system in a way that "encouraged business growth, improves fairness and continues to raise the same total amount for public services".
Mr Barclay, who left RBS in 2015 after almost 40 years with the bank, was asked to take into account "three guiding principles"; It looked at radical reforms, and the impact of the digital economy, but concluded that the basis of the current system should be maintained.
The revaluation of business premises, which was due to be applied in April this year, sparked controversy earlier in the year. Business rates are based on the notional rental value for offices, factories, shops, restaurants, hotels, warehouses and public buildings.
The tourism industry was particularly vocal along with entrepreneurs in Aberdeen and Aberdeenshire, who said the oil sector slump had not been taken into account. Ministers remain committed to the Small Business Bonus Scheme, which exempts up to 100,000 properties with lower rental valuations, until at least 2021.
Similar criticisms had been made in other parts of the UK, where revaluations were also being applied. That is worth £180m to businesses and much of it was funded this year through the large property supplement.
After Mr Barclay's appointment the Scottish Retail Consortium said the review heralded a "great opportunity to recast business rates for the decades ahead" and ensure a reformed system would be "modern, sustainable and competitive". However, the Barclay Report recommended a review of that scheme, questioning whether it was right that some should pay nothing, with a steep rise in costs for those just over the rental threshold of £15,000.
What was the issue with revaluations? It is suggested those being given relief could meet other goals set by government, such as paying the Living Wage, or providing apprenticeships.
For many small firms, their business rates bill is the second biggest cost they face, after staff pay.
What might be affected by the recommendations?
The report aims to close loopholes. That includes short-term relief for empty buildings.
It would also require owners of holiday homes, who claim to be renting them as businesses, to prove they are earning money from lets, rather than avoiding residential council tax.
The review group wanted to recommend a shift in the annual inflation uplift, replacing the higher measure of the retail price index. But they said this could not be done within their remit of maintaining the total tax take.
'Not about penalties'
It has recommended that a roll be kept of almost all rateable valuations of non-domestic property, which would require valuation of farms and forests, while continuing current exemptions for those.
In his introduction to the report, Mr Barclay wrote that reduced administration costs should help businesses.
He said: "Revenue raising measures may not be popular with some. They are not about penalising particular sectors. They are about removing anomalies, creating a level playing field and reducing avoidance.
"The 30 recommendations combined will, I believe, improve the economic climate in Scotland and give Scotland a competitive advantage in growing existing businesses and attracting new business."
Was the review radical enough?
By Douglas Fraser, BBC Scotland business and economy editorBy Douglas Fraser, BBC Scotland business and economy editor
Earlier this year, the revaluation - based on notional rental values for commercial property in 2015 - led to sharp increases for some. The Barclay Review could have been a lot more radical. The rise of the digital economy is a big challenge to a tax system based on building rental value, and may eventually require radical solutions.
Bills are based on a "poundage" of roughly 50p, which means businesses pay around half the annual rental value in business rates. However, there are significant exemptions and reliefs, including charities, places of worship and many sports facilities. But for the 2020s, this review opts for changes to the current system - closing loopholes, levelling the playing field, giving a nudge or two of help to businesses that want to invest, grow and be responsible employers.
The five-year revaluation cycle had been delayed, so this year's changes reflected a gap of seven years from 2008. Anything more radical ran the risk of being shelved. That has happened to reviews of council tax.
Coming out of deep recession, there had been substantial shifts in property values for different types of firm in different parts of the country. In the filing cabinet marked "politically too difficult", that tax on residential property remains stuck with its 1991 valuations.
In north-east Scotland, these failed to reflect the regional economic downturn that accompanied the oil price fall between 2015 and 2017. Anything more radical for business would also have meant divergence from England and Wales. On the contrary, the Barclay Report recommends that the supplement for bigger properties should be cut, to come into line with the rest of the UK.
Read more from Douglas Devolution was intended to allow for more divergence, and the Scottish National Party has talked about the need to have more business tax powers to help grow the economy.
Reform over the past 18 years of the Scottish Parliament has been limited to small business reliefs. It demonstrates that divergence from the rest of the UK is tougher than the rhetoric might suggest, particularly where it risks harm to the economy.