Business rates consultation 'ignores fundamental issues'

Closing on Thursday 28 September, the consultation aims to counter evasion in the business rates system by encouraging feedback and focusing on reformation of EPR, “the most common form of rates avoidance”, according to the Government.

However, head of business rates at rating surveyors Colliers, John Webber, urged the Government to rethink investigations into business rates evasion, stating “nobody will benefit”.

Webber said: “Just as the investment markets stall and values fall, the Government considers an attack on Empty Property Relief, which will make holding property even more expensive.

“We can only wonder who it really believes will benefit from such measures. It seems that overall, this is just another way of putting additional burdens onto ratepayers but ignoring the fundamental issues of the current system.

“The golden goose of business rates has well and truly been cooked and property investors and pension funds are about to get fleeced, just as values are tanking.

“Making owning and holding property more expensive will impact pension funds and other long-term institutions and ultimate the value of everyone’s pension. No one will benefit. The Government should think again.”

Complicating and politicising

Key proposals outlined in the consultation include a change to the reset period when a ratepayer can access repeated periods of EPR from 6 weeks to 3 or 6 months between a claim, limiting the number of applications for EPR per property and potentially offer a single relief period.

Webber added Colliers was “particularly concerned about the attack on the EPR system” and urged the Government to focus instead of reducing the multiplier to make the tax “affordable and sustainable”.

The consultation also suggested EPR should be at the “discretion” of local authorities, adding properties should be more than 50% occupied in the trigger occupation period.

“Putting Empty Rates Relief at the discretion of the local authority is also worrying, not only complicating and politicising the system further, but taking us back to the 1980s when some local authorities charged double for Empty Rates.

“Again, an attack on property owners and pension funds eventually feeds down to pension holders”, Webber continued.

Another measure the consultation focuses on is the third-party occupation scheme, which Colliers stated is currently practiced and had been successfully tested in the High Court.  

The Government is also potentially looking to close this scheme and bring it more in line with Wales and Scotland, which, according to Colliers, would “severely limit the opportunity for longer-term empty rates relief opportunities.”

Unaffordable and unsustainable 

“Whilst we acknowledge tax avoidance and evasion should be stamped on, the Government has its emphasis all wrong.

“The main issue with the business rates system is that it is an unfair, unaffordable and unsustainable tax for many businesses, as the number of hospitality business casualties has shown. No other country in Europe has such a high property tax.

“The Government does not seem to understand that the significant amount of long term empty commercial property in England is due to a lack of market demand and longer-term socio-economic factors, not because the landlord wants to keep it empty”, Webber continued.  

According to the consultation, business rates provide a “vital source” of funding for local Government, helping local authorities to deliver “essential services”.

The consultation added that in 2022/3, business rates​ had raised £25bn, however, the Government claimed £250m was lost to tax abuse during this period.

Moreover, the head of business rates stated the proposals could cause “unintended consequences”, such as the demolition or vandalising or empty to properties as owners attempt to “avoid paying punitive empty tax rates”.

He said: “Given the decimation in the retail markets in recent years, property owners and pension fund institutions need all the help they can get if they are to hold property and to keep the markets functioning.

Administrative burden

“By increasing the holding costs of such property, the Government is impacting on the value of everyone’s pension in the longer term.

Webber added Colliers would be “responding to the consultation” and “voicing concerns”.

“Colliers believe the Government would do better by extending the current six months empty rates holiday to twelve months and extend from the warehouse and industrial sector to include retail/ hospitality and offices, who currently only have a three-month holiday”, he claimed.

However, the ratings surveyors stated it “agreed” with the consultation on tackling the abuses of the business rates system carried out by unregulated “rogue agents”​, incidents of which have increased in recent years, according to Colliers.

Webber said: “Such agents often take an upfront fee and disappear without trace or tie small business into unfavourable long-term contracts.

“We have long campaigned for Government regulation and for a register of rating advisers to make sure those that prey on businesses are kept at bay.

“Yet if the business rates system, particularly CCA (the appeals system), was less complex and more transparent, such cowboys would not be able to get a foot in the door.

“The Government’s new requirements for annual returns and duty to notify, adding to the administrative burden on rate payers is only making the situation worse.”