December 2018

Scottish Budget

Posted on December 12, 2018December 12, 2018 by Fiona Campbell

As you will be aware, the Cabinet Secretary for Finance, Economy and Fair Work, Derek Mackay, presented the Scottish Budget to the Scottish Parliament today.

“In the spirit of the Barclay Review which calls for the provision of better information on non- domestic rates and for the Scottish Government to explain changes to the rating system, I would like to take this opportunity to highlight the relevant measures announced.

Last year we delivered the number one ask of Scottish businesses when we matched the English rates multiplier and raised the poundage by CPI, not RPI. In 2019-20, we are going further and will increase the poundage from 48.0p to 49.0p– a below inflation increase of 2.1 per cent. This decision will save Scottish businesses £35 million compared with the previous published plan for a RPI increase, and will ensure that over 90 percent of properties in Scotland pay a lower poundage than they would in any other part of the United Kingdom.

Our dedication to delivering a rates regime which is fair, sustainable and competitive will continue into 2019–20. We will continue to deliver the most generous package of reliefs available anywhere in the United Kingdom, worth an estimated £750 million in 2019-20, up from £732 million in 2018-19.

We are also introducing a new 100% relief for new fibre lit on or after 1 April 2019, available for a ten-year period to March 2029. This relief, which is 5 years longer than any of the equivalent reliefs in the UK, will assist in our aim to deliver superfast broadband access to 100% of premises in Scotland by 2021.

Our Small Business Bonus Scheme (SBBS) continues to be a success by lifting over 100,000 recipients out of rates altogether and providing a record relief to over 119,000 businesses across Scotland this year. This represents an 85% increase in the number of premises receiving the relief since it was introduced in 2008-09 offering an average saving per property of £2,127 in 2018-19. Despite this success, we have accepted the Barclay Review recommendation that SBBS should be evaluated, with any recommendations to be addressed in time for the next revaluation in 2022. Details of the evaluation will be announced in 2019.

The Scottish Government will further continue to support business as part of our commitment to inclusive economic growth by maintaining a number of popular reliefs which were welcomed by businesses in 2018. These include the Business Growth Accelerator, which encourages new business investment by temporarily suspending rates liabilities for new builds and improvements made on existing buildings. We are also maintaining the Day Nursery relief which provides a 100% relief to all eligible day nurseries. This reduces the costs of early learning and childcare to promote longer term benefits for children and young people offering them the best possible start in life.

Finally, we committed earlier this year to maintaining transitional relief to the next revaluation in 2022, delivering a year-on-year 12.5% cap on the increases in individual rates bills for the all but the largest premises in the hospitality sector, and offices in Aberdeen and Aberdeenshire.

We are committed to implementing the agreed recommendations of the independent Barclay Review as a matter of priority. Ministers are carefully considering and reflecting on all the information received from the recent Barclay consultation, stakeholder engagement sessions and input from the Barclay Implementation Advisory Group with the aim of reaching a concluded view on the way forward in early February 2019. We are also continuing to work with councils and Assessors to progress the administrative changes of the Barclay Review, including on standardised billing.

However, after listening to feedback from stakeholders, I can confirm today that we have decided not to take forward the Barclay recommendation to introduce an out-of-town levy in the forthcoming Non-Domestic Rates (Scotland) Bill.

Alongside these, the Cabinet Secretary has announced changes to the rates and bands in place for non-residential Land and Buildings Transaction Tax (LBTT) and the ScottishGovernment’s intention to introduce investment related LBTT reliefs following further consultation.

The Scottish Government will reduce the lower rate of non-residential LBTT to 1 per cent, increase the upper rate to 5 per cent, and reduce the starting threshold of the upper rate to £250,000. Taken together, these changes mean that non-residential LBTT rates and bands are the most competitive in the UK for all non-residential transactions. These changes are proposed to come into force from 25 January 2019, but will not apply if the contract for a transaction was entered into prior to 12 December 2018.

In addition, in order to safeguard the investment in, and the development of, Scottish real estate and to further increase the attractiveness of Scotland as an investment destination, the Scottish Government plans to introduce two targeted reliefs over the course of 2019following further consultation. These are: a relief for the ‘seeding’ (initial transfer) ofproperties into a Property Authorised Investment Fund (PAIF) or Co-owned Authorised Contractual Scheme (CoACS); and a relief for when units in CoACS are exchanged. This decision follows an initial consultation exercise in summer 2018. A consultation on draft legislation and potential impacts will be published once there is sufficient clarity on theterms of the UK’s withdrawal from the EU.

I greatly value the important contribution of businesses to the Scottish economy and look forward to engaging further with you in future to ensure that Scotland provides the best possible environment for businesses.”

Kate Forbes MSP, Minister for Public Finance and Digital Economy

Business Rates: Transitional Relief

Posted on December 12, 2018December 12, 2018 by Fiona Campbell

Kate Forbes MSP, Minister for Public Finance and Digital Economy has confirmed the Scottish Government’s intention to extend Transitional Relief until 2022:

“I am writing to inform you that on 26 October, I confirmed the Scottish Government’s intention to extend transitional relief until the next revaluation in 2022, whilst visiting the Ness Walk Hotel development site in Inverness.

This will mean annual rates increases will be capped at 12.5% in real terms for the full five- year period between the 2017 and the 2022 revaluations for all but the largest properties in the hospitality sector in Scotland, and for offices in Aberdeen City and Shire.

Transitional relief will continue to be delivered through annual subordinate legislation and the inflation measure used to calculate the cash terms increase will be set out therein each year.

This decision was taken following extensive consultation as part of our Barclay Review implementation plans and I hope this announcement and the certainty it provides will be welcomed by all stakeholders.

I value the important contribution of businesses to the Scottish economy. The Scottish Government will continue to support business as part of our commitment to inclusive economic growth.”

What Might A Tourist Tax Mean For You?

Posted on December 12, 2018December 12, 2018 by Melanie Allen

The Scottish Government is facilitating a national discussion on the issue of a tourism tax, to allow all relevant and interested parties to share their views and evidence for and against. Please click here to take part in the conversation and share your views.

A Message from STA:

The arguments for and against a tourism tax have been played out through the media over the course of 2018 and with the current Scottish Government national consultation now live, we felt it was time to set out some of the facts and figures that lead us to believe that a tourism tax would have a negative impact on Scotland’s tourism industry.

We also thought it would be useful to consider some questions; things that nobody knows the answer to at the moment but will be useful in framing your thinking.

Whether you’re a tourism business, a supplier to the industry or a destination, we hope you will find the following useful in helping you to shape your views on a tourism tax.

Scotland as a global destination

We are simply at the bottom of the pile when it comes to competing on price against other global destinations.

If price and value for money is a deciding factor in a visitor’s choice of destination, there are 134 places in the world that will be more attractive to them than the UK.

Where would we sit in relation to price competitiveness if we introduced another tax on the international visitor, and indeed our domestic tourists?

Is tourism really booming?

Despite what you might be reading in the news, Edinburgh, Scotland’s busiest destination, is not having a good year.

As measured by STR (source for premium global data benchmarking, analytics and marketplace insights), Year to Date occupancy is down 1.4%.

Edinburgh is one of the few European cities in decline. Glasgow figures are showing the same trend. There is a misconception of a buoyant industry.

Transparency in pricing?

Unlike many of our competitor destinations where additional taxes can be hidden behind the room price advertised, pricing to the public in UK must be inclusive of all taxes and compulsory payments.

We would be at a competitive disadvantage to other locations with a much lower VAT, who do not include any tourist taxes in public prices. Scotland would be presenting perceived high prices.

Prices displayed by our competitor destinations will always look more attractive at first glance.

The hidden costs to accommodation providers

If a tourism tax was introduced and collected through accommodation providers, those businesses would be paying credit card commission and OTA commission on two taxes (VAT and Tourist Tax).

The research and evidence we have gathered over the past two years shows that the rising costs of doing business remains the number one concern of tourism business in Scotland.

Increases in price reduces tourism

Research by Tourism and Travel Research Institute (TTRI) at Nottingham University (Tourism Competitiveness: Price and Quality – March 2005) revealed that an increase in price of 1% relative to competitors reduces tourism by 1%.

Research by BTA (now VisitBritain) shows an increase in the value of currency of 1% will reduce tourism earnings by 1.3%.

Tax our visitors more and they will spend less

Also by TTRI, Study of Tourism Demand in UK (2007) shows that a 1% increase in UK prices or relative exchange rates would lead to a 0.61% fall in tourism expenditure.

The Association of Scotland’s Visitor Attractions published recent statistics which showed that the average visitor spend in the last quarter in attraction shops in Scotland was just £1.59. In catering outlets in visitor attractions in Scotland, the average spend was £1.19.

A tourism tax could negatively impact businesses that rely on the tourism economy by reducing visitor spending right across the industry; in pubs, restaurants, shops, cafes, visitor attractions and entertainment venues. What would this mean for your business, destination and local economy?

We’ll tax you when you arrive and tax you when you leave

We welcome our visitors with one of the highest rates of VAT in the world and we wave them goodbye with the highest level of Air Passenger Duty in Europe (and one of the highest in the world).

Our visitors are taxed at every point in their journey while in Scotland.

Other destinations where a tourist tax has been introduced have significantly lower rates of VAT and APD. We cannot compare the UK to these destinations. We are simply far more expensive for tourists. When tourists visit these destinations, they are able to spend more, stay longer because ultimately, they are taxed less. Does the idea of introducing an additional tax to visitors seem sensible given that it costs them significantly more to travel to Scotland and holiday here?

Questions to consider

Attractiveness of Scotland for future investment
How would we be perceived by investors, people who want to invest in Scotland’s tourism economy by creating hotels, attractions, shops, restaurants, bars and activities, all of which equal job creation and a boost to the economy if we were to introduce an additional tax on our visitors? Investing in a tourism economy likely to take a downward turn would seem unlikely.

Do you want to pay a tourist tax?
In the event that a tourist tax was introduced in our destinations, if you’re holidaying in Scotland you would also pay this tax were this to be collected by accommodation providers. The UK gives Scotland 60% of our market. The tourist tax is not just a tax on international travellers, this would come out of your expenditure too.

Where does the money go?
None of the facts around the ringfencing or distribution of a tourist tax have been made clear by any of the proponents of the levy or details of how the tourism industry would benefit from these additional funds if a tax was introduced. Where would the money go? Potholes or destination marketing?

Do you need another administrative burden?
The logistics and costs of administering a tourist tax in your accommodation is important to consider. How does this fit with your IT systems? What are the costs of making modifications to the way you charge guests? How do you absorb these costs? Can you absorb these costs? The cost of regulation and legislation for our tourism and hospitality industries is significant and is already eroding the profit that you could be making according to our research. A reduction to profit impacts the quality of your product, the service you deliver and greatly reduces your opportunity to invest.

One night or two?
What could be a two-night stay, might become one. Our domestic market is already feeling the pinch. Household budgets are squeezed and we’re not able to spend as much on leisure activities as we used to. Two nights can become one, expenditure in your hotel or tourism business is therefore halved.

The Scottish Government is facilitating a national discussion on the issue of a tourism tax, to allow all relevant and interested parties to share their views and evidence for and against. Please click here to take part in the conversation and share your views.