John Webber and Louise Daly consider whether proposals for reform north of the border contained in the Barclay Review could be applied in the rest of the UK.
The business rates systems in Scotland and England are currently evolving and are, in the short term at least, taking different approaches. An example is the introduction of “check, challenge, appeal” in England, which even in its infancy has many imperfections. Due to the varying time constraints and deadlines for appeals, it would not be feasible to introduce a system such as this in Scotland unless drastic changes are made to the time limits for appeal.
Scotland is currently maintaining a relatively unchanged business rates system, but the recommendations made by the recent Barclay Review could encourage some drastic reform.
Regular revaluations
One key reform called for in both Scotland and England is for three-year revaluation cycles with a one-year tone date/antecedent valuation date, which would benefit both systems and ratepayers, by instantly making valuations less historic and more responsive to changing and evolving marketplaces.
The Westminster government has noted that it aims to move toward more frequent revaluations following consultation and has explored potential ways of delivering this. We believe reform should be effected within both systems.
Westminster has said an announcement will be made in the Budget this November on the recommendations of the “Business rates: delivering more frequent revaluations” consultation, which closed in July 2016.
It will be interesting to see what elements of the Barclay Review are present in that announcement. It would seem likely that a recommendation of a three-year revaluation starting in 2022 will be made. On the other hand, Barclay made no mention specifically of self-assessment and it has been mooted that the Westminster government may well announce plans to go down that road.
Consistent decisions
Due to the Valuation Office Agency structure south of the border, there is (in theory at least) some uniformity and consistency in approach. In Scotland there are 14 different assessors without a single governing body as all operate independent of one another.
There is the Scottish Assessors Association, which publishes practice notes as guidance, but the individual assessors can opt to adopt these schemes or derive their own. The Barclay Review proposes that the assessors achieve more consistency and transparency voluntarily or a new Scotland-wide statutory body should be created which would be accountable to ministers. Again, this brings the system in Scotland a little more in line with England in terms of consistency and information provided to the ratepayer.
Many provisions such as this and penalties for non-return of information could now feature in the Scottish system, creating more harmonisation UK-wide.
Currently the large supplement to the uniform business rate in Scotland is greater than that in England and the Barclay Review has proposed that this should be reduced in line with England. Maintaining the large business supplement at a higher level than that of England has made Scotland a less competitive place than England to do business.
Appeals
Another recommendation that is welcome within the Scottish system is the one that addresses reform of the appeals system. There is some reform already under way, moving the system away from valuation appeal panels to the Scottish tribunals structure. This is not planned to be in place until the next revaluation in 2022.
The reform is desperately needed given that the current committee system is inconsistent and not completely independent or impartial, due to the training provided. Points which were highlighted in the move to the tribunal system include: an open and transparent process for appointment to panels; diversity in appointments; basic remuneration for panel members and chairs; fixed-term appointments; mandatory formal training; a clear code of conduct; and consideration of fees for lodging an appeal to cover any costs associated with the structural change, etc. A lot of this brings Scotland more into line with England.
One area of the Barclay Review that could also benefit the system in England is the review of plant and machinery regulations. It has always been the intention that they should be reviewed regularly, and it has now been advised that this should take place with a view to any changes being implemented by 2022.
The system is outdated and it is questionable whether it is accurate when looking at technological advances and emerging industries, such as renewable energy generation. Changes and modernisation such as this would benefit business rates on the whole, including in England.
Time to unite
A large part of the Barclay Review relates to a wider review of reliefs, be they charitable or listed buildings, or bringing into charge areas of the agricultural industry that are currently exempt. We believe that it is very important in a post-Brexit world that the different parts of the UK pull in the same direction. At Colliers, we have called for a widespread review of all reliefs and exemptions and it is important that Scotland does not do something radically different from England. Why reinvent the wheel when the issues that face Scotland are the same as those affecting the rest of the UK?
What Barclay fails to deal with is the growing concern (if often just a perception) that online businesses are not paying an appropriate proportion of the tax burden. This review appears to still focus on the “golden goose” – that is businesses in bricks and mortar. But if the tax burden is not spread among other emerging industries, the goose may be on borrowed time – and that won’t be good news north or south of the border.
John Webber is head of rating and Louise Daly is an associate director of rating at Colliers International
