Councils count the £250m cost of firms avoiding business rates
BUSINESS RATES avoidance is costing local services an estimated £250m a year, a new survey by the Local Government Association reveals.
The poll of local councils responsible for collecting business rates found that eight in 10 said they did not have adequate powers to tackle the problem in their area.
More than a quarter (26 per cent) of responding councils reported firms using insolvency to avoid paying empty property rates while others reported difficulties in establishing ownership, with some claiming that another person had taken over a business.
The LGA said councils need new legal powers to enter and inspect non-domestic properties to verify information and to request information from ratepayers and third parties.
Coun Richard Watts, chairman of the LGA’s Resources Board, said: “Business rates are an extremely important source of income for councils and the local
services our communities rely on every day.
“Too many businesses are exploiting loopholes and manipulating the system to avoid paying the tax they owe.
“The scale of business rates avoidance shows more needs to be done to tackle this behaviour and reduce avoidance. Every penny lost through business rates avoidance is money that could be spent on adult social care, children’s services, fixing roads and other vital community services.”
Coun Watts added: “Councils want to work with government to explore how to better protect the system and the powers needed so they can collect money owed for local services.”
On average, respondents estimated that the total amount of business rates lost to avoidance in their local authority area in the financial year 2017/18 was £798,000.
Using this average, it is estimated that the overall scale of avoidance in England is £250m, which equates to one per cent of the overall total business rates payable.
Almost half (42 per cent) of responding councils had taken or were taking legal action against those businesses avoiding paying rates.
Of those that were not taking action, more than half reported that this was because the schemes in use were within the law.