Government is attacking empty property rates relief, says surveyor

A leading rating surveyor has slammed the latest government consultation on business rates avoidance and evasion as an attack on empty property rates relief, which will put more pressure on property owners, pension funds and ultimately pension holders in a failing investment market. John Webber, head of business rates at Colliers (pictured), said: “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 or, by definition, the general public saving for a pension.” The latest consultation was launched on 6 July and runs for 12 weeks, closing on 28 September. The government has acknowledged that most businesses behave honestly and pay their due business rates bills. However, it is concerned about how to counter avoidance and evasion in the business rates system, which provides a vital source of funding for local services. In 2022/23, £25bn was raised, but the government believes £250m was lost to tax abuse. Abuse of empty property relief is regarded by the government as “the most common form of rates avoidance”. One measure the consultation focuses on is the third-party occupation scheme, which is currently practised and has been successfully tested in the High Court. However,  the government is potentially looking to close this scheme and bring it more in line with Wales and Scotland, which Webber said would severely limit the opportunity for longer-term empty rates relief opportunities using third parties. Other key proposals are: To change the reset period when a ratepayer can access repeated periods of EPR from six weeks to three or six months between a claim. To limit the number of applications for EPR per property. To possibly give a single relief period. To require property to be more than 50% occupied in the trigger occupation period. EPR, for any purpose, would become discretionary from the local authority. The consultation also covers other general abuses of the business rates system and operations carried out by rogue agents. Rating agents are not regulated and, given the complexities of the business rates system, there has been an increase in rogue practices in recent years. Colliers has already been a long-time caller for regulation and reform. Webber said: “While we acknowledge that 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 a UBR at 51p/£, unaffordable and unsustainable for many businesses. No other country in Europe has such a high property tax. The government should be spending its energy concentrating on reducing the multiplier and making the tax affordable and sustainable for the longer term. “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 believes the government would do better by extending the current six-month empty rates holiday to 12 months and to extend from the warehouse and industrial sector to include retail and offices. “One area in which we do agree with the government is the need to crack down on rogue agents,” Webber said. “Our clients have increasingly been approached by cowboy surveyors promising them unrealistic savings in their rates bills. Such agents often take an upfront fee and disappear without trace or tie small businesses into unfavourable long-term contracts. We have long campaigned for government regulation and for a register of rating advisers, similar to the FCA, to make sure that cowboys and the criminal element 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.” To send feedback, e-mail julia.cahill@eg.co.uk or tweet @EGJuliaC or @EGPropertyNews Photo © Colliers