Prison sentences now a reality for business rate arrears

Recent figures released show that at least one small business owner a week is facing prison for failing to pay their business rate bills.

Courts in England and Wales handed down 54 prison sentences of up to 90 days on business owners for non-payment of rates in the year ending March 2017, revealed in a story published by the respected Press Association news agency.

The stats, obtained via FOI requests from the Ministry of Justice, show a worrying trend that sole traders and self-employed business men and women are most at risk. Limited companies can be put into administration if debts become insurmountable; sole traders and the self-employed business owners however now ultimately face prison – as is being illustrated here.

One local authority – Hambleton District Council in North Yorkshire – confirmed last month it was starting legal proceedings for committal to prison for business owners with rate arrears who were failing to pay.

The appeal process for those who wish to challenge their business rates also seems to be in disarray with a back log of cases still to be heard and expected reforms still being chewed over. In the meantime, those businesses must still pay their bills or face enforcement action through the courts while waiting for a decision – a costly and stressful situation for any business owner, large or small.

After the business rates’ Revaluation in April this year, the Government pledged a £300m relief fund, but only a tiny fraction of councils have dipped into the fund so far – just two out of nearly 100 local councils had paid out any relief, as of August.

It isn’t exactly one rule for the large and another for the small but the collapse of retailer Jaeger earlier this year is an illuminating example of this great business rates divide.

When it finally went into administration Jaeger apparently owed creditors £4.96m of which around £2m was in unpaid business rates to 39 councils. Experts believe they are expected to receive less than 2p in the pound against that. That leaves quite a hole in expected revenue for many councils who need to claw back other arrears to ensure the financial black hole doesn’t get any bigger – hence sole traders and the self-employed are being chased for payments and ultimately face a prison sentence.