Business Rates Avoidance – talking point or missing the point?
I’ve just finished reading HM Treasury’s summary on the business rates avoidance consultation. Thankfully I had a stiff drink next to me so I had something to splutter into every now and then.
The overall blessing was that it only ran to 10 pages, in fact the list of local authorities who had responded accounted for three of them.
I was one who did respond and Dunlop Heywood was duly listed in between Dudley MBC and Durham County Council but the overwhelming majority were LA’s which have a huge vested interest.
According to the summary there were 4 most common forms of BR avoidance:
- repeated periods of artificial/contrived occupation
- artificial/contrived occupation of properties by charities
- artificial/contrived arrangements where charities own a property and it appears that when next in use it will be mostly for charitable purposes
- the use of insolvency exemptions
The ruling in the Makro Properties Limited v Nuneaton & Bedworth Borough Council case in 2012 seemed to have a huge bearing on the type of avoidance schemes that are being seen. If you aren’t familiar with this scheme, Makro came out winner by using a tiny proportion (0.2%) of an empty warehouse to store pallets of files for six weeks to claim occupation. The judge ruled in their favour creating a major BR loophole in the process.
Not surprisingly most LAs felt the scale of avoidance was growing and would welcome greater powers. Rating agents generally were opposed saying that “sufficient, clear and well established powers, statutory mechanisms and rules already exist.”
Some respondents suggested defining the occupation of a property as a percentage of the utilised floor space; or extending the length of time an occupier is required to occupy a property in order to qualify for a relief; or placing a cap on the number of times that an exemption for an empty property can be claimed.
Others said removing/reducing some reliefs or exempting properties below a certain rateable value threshold could reduce abuse of reliefs.
When asked what changes could be made to the administration of reliefs and exemptions, some thought that limiting backdating for retrospective claims and a more formal application process would make the granting of reliefs a more transparent process.
It was also suggested that reliefs should be discretionary so local authorities could set their own criteria and ratepayers should be able to dispute their BR liability at a Valuation Tribunal rather than a Magistrates’ Court to ensure rates continued to be paid throughout the process.
If I haven’t sent you heading for the hills yet with this summary then the solutions that were offered surely will.
The majority of the respondents suggested that a centralised information sharing portal where local authorities could share experiences and solutions would be helpful – yawn.
Others requested further financial support from the government such as a funding scheme that would help local authorities take joint action in order to cover legal costs – another begging bowl.
Some identified the need for two-way data and information sharing between local authorities, the VOA and other public bodies to help strengthen attempts to tackle avoidance – Point No 1 dressed up as Point 3.
It was suggested that local authorities could act proactively by withholding reliefs and exemptions – pro-active or illegal?
Answers to the final question on what else could be done seemed so bland they could have been mistaken for a microwave chicken korma:
- increase awareness of avoidance schemes
- improve understanding of the rules around business rate reliefs
- closer co-operation between LAs and the HMRC
- improve communication channels between LA’s, the Charity Commission and Companies House was highlighted.
My overwhelming impression after reading this document was that they are completely missing the point – to get rid of Business Rates avoidance they have to remove the financial incentive. Remove that and there will be no point and the problem disappears.
This was the point I raised in my submission – which was not listed in the summary, but I’m not bitter – and you can do this by reinstating the pre 1st April 2008 position.
Anyway rant over – back to my chicken korma for one.
The deadline is looming for anyone who wishes to send in a submission for consideration in the latest inquiry into business rates. Launched by the Treasury Committee, it is...
It seems pretty much everyone these days is considering an appeal against their business rates bill – even the Queen.
When the new business rates bills for 2019/20 start to land next month, there will be many out there who feel they are shouldering an unfair tax burden.