Tick Tock Tick Tock - Winding Down To The Scottish Budget - Business Rates

12th November 2024

The next Scottish budget will b on 4 December 2024.

Mairi Spowage and João Sousa For Fraser of Allender - Scotland's Budget Report Preview 1 - what might the Scottish Government do on Business Rates?.

In the Budget, the Chancellor announced that Retail, Hospitality and Leisure (RHL) businesses would receive 40% rates relief in England next year, following a 75% relief in the current year.

RHL businesses in Scotland have had no such relief since 2021-22, which (as you can imagine) has led to many businesses saying they are at a disadvantage to their counterparts South of the Border. Given this extension in relief in England, businesses in the RHL sector are likely to be calling on the Scottish Government to follow suit.

Such a decision by the Chancellor does generate Barnett consequentials for the Scottish Government, because the UK Government compensated English councils for the lost revenue. Business rates are devolved to all three devolved nations, and there is no obligation for any of the devolved governments to replicate measures in their jurisdiction.

Last year, we looked at the 75% relief announcement in England and tried to estimate how much it would cost to replicate. This analysis concluded that it was likely to cost considerably more in Scotland to replicate the relief than was provided through Barnett, because:

The business rates system is just differently structured in Scotland; but mainly;
RHL businesses make up a larger share of the property tax base in Scotland.
What about the 40% relief?
As we did last year, we have looked at the data available on the tax base for business rates to try to estimate how much it might cost to replicate the 40% relief in Scotland.

We must emphasise that this is not completely straightforward from the publicly available data. Whilst the Valuation Roll (which lists all properties and their rateable value) is a public document, the extent to which different properties attract reliefs is not on this database, so we have to make some assumptions about the extent to which properties may already be receiving reliefs. Obviously, for example, if a property is already receiving 100% relief (e.g. through the Small Business Bonus Scheme), then they cannot receive any more relief from the 40% measure, even if they are in RHL.

This is important because 100% relief for property is actually quite common: 48% of properties receive this.

Read More at FOA

The Fraser of Allander Institute (FAI) is a leading economy research institute based in the Department of Economics at the University of Strathclyde, Glasgow.