Scottish councils to get power to lower local business rates

Out-Law News | 19 Oct 2015 | 12:16 pm | 1 min. read

Local councils in Scotland will have the power to lower business rates for the benefit of businesses in their areas from the end of this month, Scotland's deputy first minister has announced.

Speaking at the Scottish National Party (SNP) annual conference in Aberdeen, John Swinney said that councils would be able to target any business rate cuts to different types of property, occupations or activities. They will also be able to retain 100% of locally-collected rates, according to the announcement.

Swinney said that the Scottish Government was "committed to giving communities real control over their own futures".

"This substantial new power will give councils more control over business rates, and an opportunity to tailor them to their local area," he said. "With these new flexibilities councils could, for example, use their local knowledge to attract new investment into town centres and help create vibrant communities where people want to live, socialise and do business."

An order giving effect to the relevant parts of the 2015 Community Empowerment Act, which introduced the new powers, will come into force on 31 October, Swinney said. The announcement was welcomed by the councils' umbrella body, COSLA; while property law expert Ewan Alexander of Pinsent Masons, the law firm behind Out-Law.com, said that Scottish businesses were likely to "welcome any measures that could lead to a reduction in costs as a move in the right direction".

"In addition control, albeit partial, over an extra economic lever at local level will be viewed positively," he said.

"However, the proposal does not really address what business generally views as the significant structural issue with the current system of rates being based on historic values, and on that basis it is unlikely to stem calls for that problem to be addressed and the system modernised more comprehensively," he said.

Business rates are charged on most non-domestic premises including shops, offices, warehouses and factories. Rates are currently set centrally, but collected and administered locally.

The new system will allow each of the 32 local authorities in Scotland to reduce, but not increase, business rates in their areas based on criteria that they choose. These could include the type of property, its location or the occupation or activity carried out there.

Earlier this month, UK chancellor George Osborne announced plans for similar new powers over rates for local authorities in England. Areas with elected mayors would also have the power to increase rates by up to 2p in the pound, provided that they "win the support of local businesses". Local authorities, which have been allowed to keep 50% of locally-collected rates since 2013, will be able to keep 100% of the proceeds by 2020 under the plans.

Business rates in Scotland were last reviewed on 1 April 2010, based on 2008 property values. The revaluation planned for 2015 was postponed until 2017, in line with that planned in England, at the end of 2012.