New business rate reliefs announced by Derek Mackay

Derek Mackay - PA

Additional help for businesses which face a steep rise in non-domestic rates has been announced by Finance Secretary Derek Mackay.

Thousands of businesses will now have the increase in their business rate increase capped at 12.5 per cent.

Business rates across the UK are to rise following the first revaluation in property values since 2010.

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In its budget the Scottish Government initially announced it would raise the threshold of tax from £10,000 to £15,000 and reduce the percentage rate.

Following pressure from business groups and opposition parties, Mackay today announced further measures to ease the burden on some businesses.

These include capping any increases at 12.5 per cent for hotels, pubs, cafes and restaurants, a similar cap for businesses in Aberdeenshire to reflect the collapse in the oil industry and a range of relief measures for small renewable energy schemes.

Mackay said he had “engaged constructively” with businesses who had concerns.

“Although councils retain all the revenue from business rates and have the power to offer rate reductions, it has become clear that there are some sectors and regions where the increase in rateable values is out of kilter with the wider picture of the revaluation,” he said.

Opposition MSPs repeatedly asked how the new measures – estimated to cost around £40m – would be paid for. Labour’s Jackie Baillie asked if Mackay had found it “down the back of his sofa,” while Liberal Democrat leader Willie Rennie asked: “Where on earth has he found this money?”

Mackay said there would be no negative impact on other parts of the budget.

Scottish Conservative shadow finance secretary Murdo Fraser said: “We’ve heard on more than one occasion that this budget has been maxed out, yet once again Mr Mackay has been able to find a bit more money down the back of the couch.

“It’s a desperate eleventh-hour move which will do very little to ease concerns within Scotland’s business community, given that it is for one year only.”

Business representatives welcomed the new package but warned the tax system remained too complicated.

The Federation of Small Businesses in Scotland called the measures “sensible” while the Scottish Chambers of Commerce (SCC) said they will “deliver much needed support when it is most needed”.

However, SCC chief executive Liz Cameron said: “What it doesn’t do, however, is get to the root of the problem."

The Scottish Retail Consortium called the measures “a sticking plaster”.

Head of policy Ewan MacDonald-Russell said the business rates system was “not fit for purpose” and needed reform.

“Profound structural changes are changing the Scottish economy. For example, in retail almost a quarter of non-food retail sales are done online, and over the past seven years the number of shops has fallen by 1,700 in Scotland,” he said.

“These changes are likely to accelerate, calling into question the very wisdom and financial sustainability of the tax.”

A review into the business rates system in Scotland led by former RBS chairman Ken Barclay will report this summer.