Empty premises cost tax payers £2.8million a year
Sunderland were exempt from paying £3.1m of rates under the scheme, while SunderlandCityCouncilcollected £88.7m in rates for all businesses. Relief is predicted to costanother£2.1min2019-20.
Business rates are a tax on non-domestic properties, based on a ‘rateable value’, linked to rental value.
Underlaw,emptybusiness premises cannot be taxed under the business rates system for at least three months. Afterthis,mostpropertyowners must pay full business rates.
This tax-free window can have a serious impact on councilfunding.Forinstance, the 2015 collapse of Teesside Steel cost Redcar and Cleveland council £10.4m in empty premises relief.
Businessratesareacontroversial subject and have been blamed, in part, for the declineoftheBritishHighStreet. But while retailers lobby for the burden of business rates to be lightened, councils are becoming more dependent on the income they provide as direct funding from central government is scaled back.
Government reports have acknowledged the effect uncertainty over the future of business rates reforms has had on councils’ financial planning. Councils do not get to keep all the rates revenue they collect – central government usually takes a sizeable share – and the government reallocates some business rates income from richer authorities to poorer ones but there have been concerns rates retention could eventually increase disparity between areas.
Northumbria University’s Dr Kevin Muldoon-Smith, an expert in property tax, said: “We have this perverse situation where local government needstaxtogoupandthebusiness community are lobbying very hard for it to go down.
“Butifyoulookattheproperty market, the relationship between business and bricks and mortar is changing.
“There’sagoodchancethat pool of income will start to reduce – at the very least it will be different.”