Government Debates Empty Property Rates for Businesses Amidst Industry Concerns
On Tuesday 2 January, 2024, the property industry was thrown into turmoil as the government proposed changes to the Non-Domestic Rating Bill. The bill aims to increase transparency in the empty property rates system, but many in the industry remain skeptical of its effectiveness. In recent developments, however, the government and local authorities have shifted their focus towards addressing the minority of individuals who abuse the system, rather than providing support and simplification for the majority.
The recent autumn statement was an opportunity for the government to address the issue of empty property rates, but experts were disappointed by the lack of action taken. Despite consultation efforts from the Department for Levelling Up, Housing & Communities, it has been found that some businesses are exploiting the system by maintaining minimal occupancy periods in order to receive repeated reliefs. This has prompted the government to review how empty property reliefs should be implemented, potentially leading to a negative impact on charitable organizations that use vacant properties for purposes such as aid distribution centers. These organizations currently have zero rates liability as long as the properties are used for charitable purposes, but there are concerns that they may lose this relief altogether.
The current economic climate has also made it difficult for businesses to invest in their own operations, both on a local and national level. With high inflation and low growth, many business owners and leaders are unable to invest in additional properties. While some may be eligible for reliefs such as the Retail Hospitality and Leisure (RHL) relief, which offers a 75% discount on rates payable, this has not been enough to encourage investment. Anthony Hughes, Managing Director at RVA Surveyors, expressed his concerns about the situation, stating that punishing the majority for the actions of a few is not a solution. He also emphasized the need for more reasonable business rates in light of the current economic challenges.
One aspect of the empty property rates system that has been under scrutiny is the empty property relief. Currently, properties are eligible for relief for a period of three months, with industrial units receiving six months of relief. After this period, the property cannot receive relief unless it is occupied for at least six weeks before becoming vacant again. In September, a Treasury spokesperson stated that there are no plans to abolish this relief, but they are seeking views on proposals to address abuse and evasion.
In Wales, measures have already been taken to combat business rates avoidance. They have implemented a “reset period” of six months, during which a property must be occupied for at least six weeks before becoming eligible for relief again. This is one of the proposals being considered in the Business Rates Avoidance and Evasion Consultation.
According to the Local Government Association (LGA), unpaid business rates cost the Treasury £250 million in 2017/2018, which is equivalent to 1% of the projected total business rates income for that year. The most common form of avoidance was found to be repeated short-term occupation of a property, resulting in an average loss of £396,000 for that tax year. However, this is only a small portion of the expected £24.9 billion in business rates for 2023/2024. It is clear that the government’s resources would be better spent streamlining the business rates system to better suit modern needs.
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