Struggling Scottish firms facing huge tax increases issue plea for rates freeze
Scots businesses are calling for a rates freeze in the next Budget after Humza Yousaf said there would be no increase to council tax.
Council tax rates will be frozen in the next financial year to support people struggling with the effects of high inflation, the First Minister announced on Wednesday.
This would benefit every council taxpayer at a time when rising prices are putting significant strain on household finances, Yousaf said.
Businesses, however, could be forced to pay an extra £205 million in rates next year because they are tied to the rate of inflation, industry groups warn. The poundage for nondomestic rates is calculated using the consumer price index, which stood unchanged at 6.7% last month.
David Lonsdale, director of the Scottish Retail Consortium, said: “In our Budget recommendations paper sent to Scottish ministers at the start of last month, we called on them to be wary about adding to the pressure on household finances given the economic circumstances.
“The move to freeze council tax suggests they have taken heed. We need to see a similar ambition from ministers when it comes to business rates.
“Without a freeze to the headline business rate Scotland’s retailers alone face a whopping £43m tax hike from April and businesses, generally, a £205m tax rise. The business rate is already at a 24-year high.”
In June, the Scottish Fiscal Commission projected a 5.4% uplift in the headline business rate next April.
It said this would add £34m on to the rate bills for shops, £6.4m for hotels and £2.4m for pubs. Factories would be hit with a £27.5m hike while offices would face a £22.2m extra payment.
Colin Borland, director of devolved nations at the Federation of Small Businesses (FSB), called for the reintroduction of rates relief for its members, many of whom are struggling to cope with rising overheads.
He said: “To alleviate some of the burden, the Scottish Government’s December Budget must look at reintroducing some of the specific rates reliefs we saw during the Covid-19 crisis, matching the 75% relief currently enjoyed by retail, hospitality and leisure businesses south of the border.
“Across the board, it also makes sense to freeze the poundage rate.”
He added: “Policies designed to help householders must not come at the expense of the hundreds of thousands of Scots running small businesses.”
Shadow Secretary for Business, Economic Growth and Tourism Murdo Fraser said: “The SNP government said it wanted to reset its relationship with business, but it is still not matching the rates relief in other parts of the UK – despite having been given the funding to do so.”
The Scottish Government said: “The Budget 2023-24 ensures the lowest poundage in the UK for the fifth year in a row and supports a package of reliefs worth an estimated £749 million, including the Small Business Bonus Scheme which is estimated to take over 100,000 properties out of rates altogether. We further estimate around half of the properties in the retail, hospitality and leisure sectors to be eligible for 100% SBBS relief in 2023-24.
“Decisions on non-domestic rates policies for 2024-25 will be made as part of the Budget later this year.”