Trade bodies warn against Scottish Budget’s reduction in rates relief threshold

The Scottish Grocers’ Federation (SGF) said the budget proposal to reduce the threshold for 100 per cent rates relief, from a rateable value of £15,000 down to £12,000, could hit struggling small businesses and retailers.

Scottish Deputy First Minister John Swinney on Thursday announced a freeze to Business Rates poundage at 49.8p.

"This delivers the lowest poundage in the UK for the fifth year in a row and is expected to save ratepayers £308 million compared to an inflationary increase," Swinney said.

However, proposed changes to the Small Business Bonus Scheme (SBBS) could see many businesses moved from 100 per cent relief down to just 25 per cent, the trade body said.

Previously the 100 per cent relief threshold was set at a £15,000. Now, businesses higher than £12,000 will see a tapered decrease in the support they receive to 25 per cent.

The budget offers a Small Business Transitional Relief to ensure that properties that lose SBBS or Rural rates relief eligibility do so in a phased manner, with the maximum increase in the rates liability being capped at £600 in 2023‑24, rising to £1,200 in 2024‑25 and £1,800 in 2025‑26.

Swinney said this will protect an estimated 19,000 properties who will lose some or all their eligibility for SBBS relief or Rural relief.

“At the very least, the deputy first minister should match the targeted support announced for retail in the chancellor’s Autumn Statement. Instead, many small businesses will see their rates relief dropped by up to seventy five percent,” Pete Cheema, SGF chief executive, commented.

“Convenience retailing businesses are being confronted with an exceptionally challenging trading environment which is characterised by the industry being exposed to soaring energy costs, rising inflation, rising interest rates and a cost-of-living crisis.”

He welcomed the ‘overdue’ freeze on the poundage rate, but asked the Scottish government to “go back to the drawing board and deliver meaningful support for struggling businesses, instead of trying to pull the wool over people’s eyes.”

Many retail businesses in Scotland are already at a competitive disadvantage to their counterparts in the rest of the UK, the SGF claimed. The UK government’s Autumn Statement announced an uplift of the Retail, Hospitality and Leisure Relief Scheme, increasing targeted relief for eligible retail business from 50 per cent to 75 per cent in the next tax year.

The budget has introduced a business rates exemption for prescribed plant and machinery used in onsite renewable energy generation and storage in Scotland from 1 April 2023 until 31 March 2035.

BIRA expresses disappointment

The British Independent Retailers Association (BIRA) said it is "disappointed" with the budget move. The association added that the government has "turned their backs" on hard pressed independent retailers on the high streets by not offering more support .

"Unlike the governments in England and Wales, the Scottish government has not introduced a retail discount to reduce next year’s rate bills by 75 per cent for the smaller high street retailers. Whilst the limit for rates relief has been increased, this will not help many of those entrepreneurs who own shops,” Andrew Goodacre, BIRA chief executive, said.

“I cannot understand why the Scottish government has decided to ignore the high street in this way.

"The challenges faced by the smaller retailers are the same throughout the UK and Scotland should have followed the examples set in England and Wales where the retail discount for rates has been increased to 75 per cent.

"Many Scottish retailers will now pay more in business rates than they have done this year, on top of the massively increased fuel bills, higher wages and supply chain inflation. This budget will harm the local high streets that are integral to communities throughout Scotland. It is ironic that a government standing for independence has turned its back on independents,” he added.