See the Consultation Publication (PDF)

Business Rates provides a vital source of funding for local government –

In 2023-24 Rates income is forecast to be almost £25 billion in England, helping Local Authorities to deliver essential local services.

Avoidance and evasion action taken by some owners and occupiers means potential Rates income could be higher –

In 2020, the Local Government Association estimated that around one per cent of the total Business Rates income, or £250m, was lost to Business Rates avoidance in England each year. This figure is likely to have grown since.

Considering how much Local Authorities, across the country, are in need of income at the current time, the Government’s decision to explore this issue with a consultation is understandable.

The main proposals being considered, under the consultation are –

  • An increase in the duration of occupation required to trigger an Empty Rates Relief (EPR) period, from 6-weeks, to 3 or 6 months.
  • An introduction of a limit to the number of times a property can benefit from an EPR in a given period.
  • Adding conditions to the meaning of occupation, purely for the purposes of deciding whether a property should benefit from a further EPR period (such as – must occupy more than 50% of floor space).
  • Enabling Councils to decide under their discretionary powers whether to grant EPR to properties that have been vacant for more than 3 or 6 months.
  • Removing the charity ‘when next in use’ EPR exemption, or to devolve its award to the Council’s discretionary powers.

The proposed changes are not intended to impact on the Government’s provision of targeted reliefs and exemptions, to support ratepayers where necessary, in the way Parliament intended. The Government remains committed to these.

The outcome may well lead to policy change, with the need for changes in primary and secondary legislation.

Maughan Mitchell comment –

As the Rating system currently stands, industrial property classes, including warehouses and factories, receive 6 months Rates Relief from the date a property falls vacant, with all other property classes receiving only 3 months Relief. This unfair difference goes back to the start of Empty Rates, where prior to 1/4/2008 only vacant non-industrial classes paid Empty Rates, receiving 50% Rates Relief, after a 3 month period of full Relief. This was based on the assumption that industrial classes were more difficult To Let. This is now no longer the case (post Brexit and Covid lockdown) with online shopping being more prevalent, meaning higher demand on warehousing space and less office space requirements due to flexible office working being the new norm. Maughan Mitchel feel that it now makes much more sense to treat all property types equally, or even provide more relief to classes which are more difficult to bring back into use, if a sensible list of properties could be compiled of course.

Maughan Mitchell’s general view is, the Government should only legislate if any new rules can target the areas the Government wishes, without unfairly prohibiting those who should rightly receive Relief, from getting the help they need. Maughan Mitchell feel that the difference between an occupation with some ‘real’ benefit to the occupier and one which is only for tax efficiency (reduce Rates Bills) is often very narrow. There is some danger then that legislation, even if cleverly worded, will either allow rates mitigation practices to continue as they are (perhaps with slightly altered approaches), or otherwise prohibit owners (or tenants with surplus space), who have a ‘legitimate’ claim, from getting the Relief they should. It will be interesting to see the proposed legislation changes, if indeed the Government decides to move in this direction, after the consultation.

Maughan Mitchell will naturally keep up to date with this important consultation, including the outcomes, so we can continue to best protect our clients’ positions.