The Government has announced a review of business rates avoidance advises commercial property agent Prop-Search, which really boils down to looking at the avoidance measures used in connection with empty premises.
During the last year the Department for Communities and Local Government led a business rates anti-avoidance working group to understand the type and scale of business rates avoidance, and to identify and evaluate means of closing any loopholes. The group has identified a range of methods of avoidance, the majority of which take advantage of specific reliefs and exemptions, for example where properties are unoccupied. It has also highlighted cases where properties do not appear on the ratings list or valuations do not reflect material changes of circumstance.
Chris Billson, a Director Prop-Search, said: “The Government considers that for 2013/14, the amount of empty property rates exemptions in England was £988 million. However, the previous Labour Government effectively created an industry of trying to avoid empty rates by various ‘legal’ schemes following their amendment of empty rate legislation.”
Previously, for example, vacant industrial properties did not pay any empty rates at all, whilst other vacant properties – including shops and offices – had a void period of three months and then paid half rates. But following the 2008 changes, industrial property now receives six months exemption and then pays full rates, whilst all other vacant properties get just three months exemption and then pay full rates.
Chris Billson, added: “These changes significantly increased the rates bill for businesses holding empty buildings during tough recessionary times and this continues to be a burden.”
The Review therefore unsurprisingly reveals that the most common methods of avoidance appear to be:
· Avoidance of empty property rates through repeated periods of artificial/contrived occupation
· Avoidance of empty property rates through artificial/ contrived occupation of properties by charities
· Avoidance of empty property rates through artificial/contrived arrangements where charities own a property and it appears that when next in use it will be mostly for charitable purposes
The Government is seeking ideas and views from ratepayers, agents and other authorities on how to tackle this form of avoidance, and what other changes could be made to the legislation. Responses to the consultation are requested by 28 February 2015.
