FIRMS relying on the small business bonus scheme to survive could face a difficult future following significant changes announced in yesterday’s Scottish Budget.
Business rates specialist WYM Rating said last night that the 100% relief threshold is being reduced from £15,000 to £12,000.
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It added that relief will now be tapered between the rateable value limits, but there will be transition for businesses impacted by the loss of 100% relief. Rates bills will increase next year by a maximum of £600, then by no more than £1,200 in 2024 and a maximum of £1,800 in 2025.
WYM described the changes as “significant”, and that they would “adversely impact” some businesses reliant on the bonus scheme to survive.
It added: “Whilst changes are not unexpected, the reduction of the 100% threshold is very surprising – bearing in mind the government’s strong commitment to the scheme as one of its major business-rates policies.”
However, WYM did say that the relief scheme should assist firms in the short-term.
A more-positive announcement for companies in yesterday’s Budget involved their rates bills.
There had been concerns that John Swinney would increase the rates poundage for next year. The rateable value of each business property is multiplied by the rates poundage to arrive at the actual rates payable on the building.
But the finance secretary said: “On non-domestic rates, we have listened to businesses and by freezing the poundage we will deliver the lowest poundage in the UK for the fifth year in a row.
“This will ensure over 95% of non-domestic properties continue to be liable for a lower property tax rate than anywhere else in the UK.”
Russell Borthwick, Chief Executive of Aberdeen & Grampian Chamber of Commerce, said: “The Chamber and other business organisations have been pressing for business rates to be frozen, so we are grateful that the finance secretary has listened to our calls on this.
“However, the north-east continues to be disproportionately-expensive place to do business, often leading companies to site premises elsewhere and risking our growth ambition.
“In the previous revaluations from 2015, which still apply today, the region incredibly took almost 50% of the total increase in rateable value across the whole nation.
“Although we have seen an overall reduction of around 5% in rateable values in Aberdeen, Aberdeenshire and Moray this time, there have been winners and losers and this nowhere near reflects the reality of the business environment.”
Liz Cameron, Chief Executive of Scottish Chambers of Commerce, also welcomed the news. But she added: “Looking ahead, businesses need to see widespread reform to the business rates system ensuring it is fit for purpose and aligns with the economic reality that firms operate in.”
Despite the poundage freeze, WYM said the tax take would still increase by 9%-10% next year.
“Business rates look set to increase for the majority of ratepayers,” it added.
Landlords are also unhappy at their sector taking a financial hit in the Budget.
Mr Swinney announced an immediate increase in the additional dwelling supplement from 4% to 6%.
The finance secretary said: “Increasing the tax due on the purchase of additional dwellings such as second homes maintains our commitment to protect housing opportunities for first-time buyers in Scotland, while also raising vital extra revenue.”
The change means landlords and second homeowners will have to pay thousands of pounds extra in tax when they buy property.
A landlord buying the average £195,000 home in Scotland will now pay an extra £3,900 in tax.
It means that the bill for a landlord purchasing a typical home in Scotland will now be £12,700 – nearly 13 times the £1,000 bill for a person purchasing their primary residence.
The new 6% rate will be double the 3% surcharge paid in England. In Wales, buyers purchasing additional properties pay a surcharge rate at 4%.
The Chamber’s Mr Borthwick commented: “We have concern about the continued targeting of the private rented sector, which plays a crucial role in providing the flexible housing we need in Scotland.
“With rent freezes in place, landlords are now being squeezed from both sides. Nobody wins if private landlords are driven away from the sector, risking homelessness among groups unable to get onto the property ladder – exacerbated by the highest interest rates we have seen in years.”
The Budget is also committing £50million next year to the Just Transition Fund for the North-east and Moray – more than double the 2022-23 allocation.
The aim is to diversify the regional economy away from carbon-intensive industries and capitalise on the opportunities presented by new, green businesses.
The Just Transition Fund is a £500million, 10-year commitment.
The Chamber welcomed this second tranche of funding, and it hopes that the Scottish Government continues to work closely with the regional economic partnership to ensure this money is wisely targeted to deliver maximum return on investment.
The Chamber also says it is vital for the North-east to be awarded green freeport status to catalyse the first minister’s ambition that Aberdeen should become the net zero capital of the world, which she stated at the recent SNP conference in the city.
