Measures to tackle business rates avoidance schemes unveiled

The Welsh government has come out fighting with a raft of new measures to combat business rates’ avoidance schemes, following its summer consultation on the subject.

Mark Drakeford, Cabinet Secretary for Finance issued a statement last week with the Assembly’s plan to address the issue which, they say, costs the country between £10-20m in lost rates’ revenue every year.

The measures include:

1. A new legal obligation on ratepayers to notify their local authority (LA) of a change in circumstances which would affect their rates bills
2. A new legal power for LAs to request information from ratepayers and third parties to aid the billing and collection function
3. A new legal power for LAs to enter and inspect non-domestic properties (hereditaments) to verify information relevant to the billing function
4.  Lengthening the period of temporary occupation of empty property, which leads to repeated cycles of rates relief, from 42 days to six months. Zero-rating on empty properties will be removed if it appears that when next in use they may be used for a charitable purpose. LAs will have local discretion to grant zero rating in genuine cases where a charity needs to own or lease an empty building and not make use of it
5. Working with LAs to publish a list of ratepayers in receipt of rates relief (subject to GDPR compliance)
6. LAs which make efforts to maximise compliance will be allowed to keep a percentage of the additional revenue collected

Businesses and industry experts are now looking over the measures which are great in sentiment but lack any real detail on implementation.

One key recommendation put forward by many as part of the consultation was a reintroduction of empty rates relief to help landlords with vacant properties. It is interesting to see that hasn’t been included in the measures, as it could have had a clear effect on avoidance schemes by reducing the incentive, virtually overnight.

The other measures are interesting but, as always, the devil will be in the detail. For example, if ratepayers face a legal obligation to notify their LA of a change in circumstance what would the definitions be? How promptly do they need to act and what will the desired outcomes be for both LAs and the businesses which comply?

Legal powers to aid billing and collection function – again, what will this entail as it could easily become an onerous task for both the LA and businesses if the legal powers are too sweeping. The third measure is sensible but do LAs really have the manpower to be sending staff out on fact-finding field trips all the time? I doubt it.

Measure 4 could conceivably have the fastest visible effect on rates avoidance schemes with the rest period increasing 42 days to six months. However, it could hit landlords hard who have properties that have traditionally attracted short term lets or are affected by seasonal lettings.

The new measures are to come in force from April 2021 to align with the implementation of the next rating list and revaluation exercise but there is a lot of work to be done between now and then.