Small businesses could fail to 'qualify' for Scotland’s rate relief

From 1 April 2009, the Scottish Government’s Small Business Bonus Scheme will allow businesses with premises worth up to £8,000 to pay no rates at all.

At present, they are eligible for a reduction of 80 per cent. Many small businesses in Scotland will miss out, however, according to small business lobby group the Forum of Private Business (FPB).

Premises valued at between £8,000 and £10,000 will get a 50 per cent reduction (up from 40 per cent), while those valued at between £10,000 and £15,000 will be eligible for a 25 per cent reduction (up from 20 per cent). However, businesses with a rateable value in excess of £15,000 will not benefit because they are not classified as small businesses.

Welcoming the scheme in principle, the FPB’s spokesman for Scotland, Jim Gorie, warned that many struggling high street businesses will not qualify for the tax relief.

“This is an incentive for very small firms and may encourage fresh start-ups at a difficult time," he said. "But it will have only a marginal impact on Scottish high streets, where a restaurant or a retailer, for example, might have a rateable value equal to that of a large supermarket chain’s ‘local’ store, including equal floor space.”

Mr Gorie added: “If the government wishes to create more retail and office jobs, it should look seriously at easing the rate burdens on small businesses by linking payment to turnover rather than calculations based entirely on floor space and current local valuations.”

The FPB is also warning that small retailers with multiple units may find that their combined rateable value makes them ineligible for the relief, while a business with the same turnover but fewer units may qualify.