This item was published during the term of a previous administration that ended in April 2007
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Non domestic rates revaluation package
08/12/2004
The Executive is examining how business rates could be
used as incentive to increase investment in research and
development in Scotland, the Parliament was told today.
Minister for Finance and Public Service Reform Tom
McCabe also announced details of decisions relating to the
2005 revaluation of non-domestic property in Scotland.
The business rates poundage for 2005-06 will be 46.1p -
down from the current poundage of 48.8p.
TMr McCabe explained that the reduction will ensure
there is no overall increase in the rates burden on
Scottish business as it offsets the increase in rateable
values in Scotland due to the 2005 revaluation.
The Minister continued:
"Growing the economy is our top priority. The Executive
wants to create an environment where all businesses - large
and small - can thrive.
"We have invested heavily in the transport 'central
nervous system' that supports business. We have invested
heavily in skills and knowledge to enhance the quality of
the Scottish workforce which will also benefit the business
community.
"And we introduced our Small Business Rate Relief Scheme
which benefits around 70 per cent of non-domestic subjects
in Scotland.
"The revaluation of all non-domestic properties in
Scotland kicks in from April 1 2005. Our key aims for the
revaluation are stability and certainty for businesses and
continued harmonisation of valuation treatment and practice
on both sides the border.
"It is against that positive backdrop - of increased
investment in the skills and infrastructure that the
business community craves - and the 2005 revaluation that I
announce the poundage rate for next year.
"For 2005-06, because of the revaluation, we are
reducing the poundage rate - down from 48.8p to 46.1p - to
offset the increase in rateable value in Scotland. This
measure will ensure there is no overall increase in the
rates burden on Scottish business.
"For the third consecutive year, the poundage rate in
Scotland has been adjusted by less than the RPI rate of
inflation - more than meeting our Partnership Agreement
commitment to increase the 2005-06 poundage rate by no more
than the rate of inflation.
"I can also announce that we are exploring how business
rates could be used as an incentive to increase investment
in research and development. Scotland has a proud
traditional of innovation - and we will examine how we can
help Scottish firms invest in R&D to continue their
good work in this important area.
"It is important, however, to recognise that business
rates are just one part of the equation for businesses -
there are many other factors which are likely to have a
greater impact on business behaviour.
"Staff costs for example account for a far more
significant element of total business costs than business
rates do. Transport and property costs are other factors
which are likely to have more of an impact on the balance
sheet than business rates."
Transitional Arrangements which will allow ratepayers
time to plan to accommodate their new rates bills will be
implemented from April 1, 2005.
The 2005 Transitional Rate Relief Scheme will be a
simplified version of the Scheme introduced at the last
Revaluation in April 2000.
Mr McCabe also confirmed:
- The 2005-06 Small Business Rates Relief Scheme
supplement will be 0.45p
- Rateable value thresholds for the small business
and the various rural rate relief schemes will be
uprated to reflect the Revaluation
- A range of useful information for businesses on
rating issues will be available on the Executive and
Local Government websites, including a business rates
calculator
- The Scottish Assessors Association portal, which
offers a single point Internet access to the Valuation
Roll and Council Tax information on a Scotland-wide
basis, has gone live
Occupiers of non-domestic property in Scotland pay
non-domestic rates which are levied on the basis of a
national poundage rate (set by the Scottish Ministers)
multiplied by the rateable value of each non-domestic
subject in the valuation roll.
Adjustments are made to take account of any rate relief
a property may be entitled to before arriving at the rates
liability for the forthcoming financial year.
The rateable values for non-domestic properties are set
by the Scottish Assessors.
The rateable value is the Assessor's estimate of the
annual rent which that property would command on the open
market.
The Scottish Assessors are required by statute to
revalue all non domestic property in Scotland every five
years.
This ensures that rateable values keep pace with changes
in the property market and that the distribution of the
rates burden between ratepayers remains equitable. The last
revaluation took effect on April 1, 2000. The next
revaluation takes effect on April 1, 2005.
Each year Scottish Ministers set a uniform poundage rate
which is levied throughout Scotland.
This year, the poundage rate calculation requires to
take account of the 2005 Revaluation.
As a result of the revaluation, rateable values in
Scotland have risen on average by 13.3 per cent and this
increase has been offset by a decrease in the poundage rate
to maintain the income from rates at the revaluation.
This has been further adjusted to take account of
inflation (the Scottish Executive has made a below RPI
inflation adjustment of 2 per cent) and estimated losses
from revaluation appeals (4.6 per cent).
After taking account of all of these adjustments the
2005-06 poundage rate will be 46.1p, 2.7p down on the
current year's poundage rate of 48.8p.
As a result of the 2005 Revaluation, some ratepayers in
Scotland will find that their rateable values will rise by
more than the "average" increase of 13.3 per cent.
These ratepayers will face real increases in their rates
bills. The aim of transitional arrangements is to protect
these ratepayers from sudden sharp increases in their bills
in the period immediately following the revaluation. This
allows ratepayers time to plan to accommodate the true bill
over a longer period.
The 2005 Transitional Arrangements are a simplified
version of the Arrangements put in place at the last
Revaluation (1 April 2000). Increases in rates bills above
(12.5 per cent) in real terms will be phased in over a
three year period.
This transitional protection will be funded by decreases
(in real terms) in rates bills of greater than 10 per cent
being phased in over the same period. All non domestic
ratepayers will be paying their "true" rates bill in
2008-09.
It is estimated that around 33 per cent of non domestic
subjects in Scotland will be affected by transitional
arrangements.
The Executive introduced a small business rate relief
scheme on April 1, 2003. Since that time, all non domestic
subjects with a rateable value of £10,000 or less have been
eligible for a discount of between 5 and 50 per cent on the
poundage rate.
Non domestic subjects with a rateable value within the
"buffer zone" (greater than £10,000 to £25,000) have paid
the standard poundage rate.
Non domestic subjects with a rateable value greater than
£25,000 have paid a small supplement on the poundage rate
(0.6p in 2003-04; 0.3p in 2004-05) to cover the additional
costs of the Scheme.
The rateable value thresholds and bandings and have been
increased to reflect the 2005 Revaluation as follows.
Rate relief for subjects with a rateable value of
£11,500 or less - based on total RV of all subjects
occupied - is:
- Less than £3,500 - 50 per cent
- £3,500 or above but under £4,500 - 40 per cent
- £4,500 or above but under £5,750 - 30 per cent
- £5,750 or above but under £7,000 - 20 per cent
- £7,000 or above but under £8,000 - 10 per cent
- £8,000 or above or eligible for other
non-discretionary relief - 5 per cent
The exact level of relief therefore depends on the total
rateable value of all subjects occupied by the rate-payer;
and whether or not the property is eligible for one of the
existing non-discretionary rate reliefs.
Non domestic subjects with a rateable value within the
"buffer zone" (greater than £11,500 to £29,000) will pay
the standard poundage rate (46.1p in 2005-06).
Non domestic subjects with a rateable value greater than
£29,000 are liable to pay a small supplement on the
poundage rate (0.45p in 2005-06) to cover the additional
costs of the Scheme.
Thresholds for the various rural reliefs have been
increased to reflect the 2005 Revaluation. This means that
eligible ratepayers continue to receive the same level of
relief despite the overall increases in rateable value at
the 2005 Revaluation.
The rateable value threshold for granting 50 per cent
mandatory rate relief to qualifying post offices, general
stores and small food stores will increase from £6,000 to
£7,000; for qualifying petrol filling stations, small
hotels and public houses from £9,000 to £10,500.
Additionally local authorities have discretionary powers
to grant up to 100 per cent relief to qualifying properties
used for purposes which are beneficial to the local
community. This rateable value threshold will increase from
£12,000 to £14,000.
The stud farm derating allowance will increase from
£3,000 to £3,500 and the associated discretionary relief
threshold will increase from £6,000 to £7,000.
The rateable value threshold for granting 50 per cent
mandatory rate relief to former agricultural premises will
increase from £6,000 to £7,000.