Government barking up wrong tree with new consultation on business rates avoidance - Colliers

Leading rating surveyors Colliers say attack on Empty Property Rates Relief will put more pressure on property owners, pension funds and ultimately pension holders in a failing investment market.

According to John Webber, head of business rates at Colliers: “The government 's timing is impeccable. 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- certainly not property investors or pension funds- and by definition the general public saving for a pension. ”

The new consultation will run for 12 weeks, closing on 28 September 2023 and encourages feedback. Whilst acknowledging most businesses behave honestly and pay their due business rates bills, the government is concerned how best to counter avoidance and evasion in the business rates system. Business rates provide a vital source of funding for local government, helping local authorities to deliver essential local services. In 2022/3 it raised £25 billion, and the government believes £250 million was lost to tax abuse last year.

The consultation consists of three sections.

The first focuses on specific proposals to reform Empty Property Relief, which according to the government 's research “is not working as intended ” and that abuse of EPR is “the most common form of rates avoidance ”.

One measure it focuses on is the third-party occupation scheme which is currently practiced and had been successfully tested in the High Court. The Government is potentially looking to close this scheme and bring it more in line with Wales and Scotland, which will severely limit the opportunity for longer-term empty rates relief opportunities using third parties.

The third section of the consultation covers other general abuses of the business rates system and the fourth relates to operations carried out by rogue agents.

John Webber said, “Whilst we acknowledge tax avoidance and evasion should be stamped on, we think the government has its emphasis all wrong. The main issue with the business rates system is that it is an unfair tax, and with an UBR at 51p/ £, unaffordable and unsustainable for many businesses.

“We are particularly concerned about the attack on the Empty Rates Relief system. 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.

“Given the decimation in the retail markets in recent years and now concerns about the office sector, 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. By increasing the holding costs of such property, the government is impacting on the value of everyone 's pension in the longer term.

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 and offices.

Mr Webber continued: “We will be responding to the consultation and voicing our concerns. 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. ”