Scotland to boost investment incentives through business rate reform

13 Sep 17

Scotland’s finance secretary has announced he will boost investment incentives through reform of the business rates regime north of the border.

Although, Derek Mackay has decided to think further about proposals that could extend liability to private schools, wealthier sports clubs and universities.

Announcing his response to the Barclay Report on reform of business rates, Mackay told MSPs that he was minded to implement most of the recommendations and would go further than Barclay in respect of business stimuli.

In an £80m package of measures, he will exempt new-build business properties from rates, and give an initial twelve-month rates holiday to their tenants.

He also plans a Business Growth Accelerator, which will relieve improved business premises from increases in their rates bill for one year, will review the current relief scheme for small businesses, and will fully exempt day nurseries.

But he said that he wanted to give further thought to the review’s call to curb charity exemptions – which have favoured private schools and universities – and to tax some sports clubs.

Mackay also promised that future revaluations would take place every three years. 

The review was set up earlier this year after powerful protests from some hard-pressed sectors of the Scottish economy, like the hospitality industries, over the potential impact of a long-postponed revaluation.

The review, under former RBS chairman Kenneth Barclay, opted to extend the reach of the tax so as to ease the burden on existing payers.  He was told to seek solutions that were fiscally neutral, that retained relief for the smallest firms and that encouraged sustainable economic growth.

It established a principle of equal treatment for organisations of similar purpose, arguing that where public and private sector businesses compete they should be taxed on the same basis.

One consequence would be that businesses such as private schools could no longer shelter behind charitable status.  Equally, arms-length operations (ALEOs) which deliver services for local authorities – such as sports and leisure centres, theatres, museums and libraries could also become liable for rates, as could universities for activities like accommodation and catering.

The review has been criticised for failing to address the implications of an increasingly digital economy for a tax based on business property values. Opposition MSPs told Mackay that the system needed more fundamental reform.

  • Keith Aitken
    Keith Aitken

    covers Scottish affairs for Public Finance from Edinburgh. He was formerly economics editor and chief leader writer on The Scotsman and now has a busy freelance career as a writer, broadcaster and event chair.

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