Update on Business rates

England and Wales

Summary  

This Law-Now1 summarises some recent developments in relation to business rates following the Spring Budget 2024 and the Government’s summary of responses to the Business Rates Avoidance and Evasion consultation.

Business Rates: Avoidance and Evasion – change to reset period

Empty Property Relief (“EPR”) operates by giving owners of empty non-domestic properties 100% relief for the first three months (or six months for industrial properties) after a property becomes empty. If the property remains empty once such relief period ends, the owner must pay the property’s full business rates liability. The position before 1 April 2024 for England was that should the empty property be occupied again for a period of six weeks or more, it became eligible for another period of EPR when it fell empty again. The six week period of occupation required to be eligible for another period of EPR is known as the ‘reset period’. 

In the Government’s summary of responses to the Business Rates Avoidance and Evasion consultation SoR_A_E_V8_.pdf (publishing.service.gov.uk) (and see also Business Rates Avoidance and Evasion Consultation (cms-lawnow.com)), the Government stated that 58% of respondents had argued that extending the reset period to three or six months would be the most effective means of reducing losses from rates avoidance, highlighting the precedent set by similar reforms in Scotland and Wales. 

‘Box-shifting’ had been a particular issue, involving moving items into a building, solely to satisfy the six-week occupation condition and items were then removed once the reset period was complete, rendering the building unoccupied and eligible for another period of EPR. In the summary of responses document and at the Spring Budget 2024 the Government announced that the EPR “reset period” will be extended from six weeks to three months (thirteen weeks) from 1 April 2024 in England. The Government will keep the treatment of empty properties under review and consider further changes should abuse of reliefs or exemptions persist.

Consultation on “General Anti-Avoidance Rule” for business rates in England

The Government will consult on a “General Anti-Avoidance Rule” for business rates in England. This would provide the Government with greater flexibility to tackle emerging avoidance schemes as they materialise. This consultation will explore how such a rule could work in practice. It will also consider the merits and the viability of such an approach to counteracting rates avoidance in England to ensure a level playing field for all ratepayers. The consultation will be published in due course.

Film Studios Relief 

Eligible film studios in England will receive a 40% reduction on gross business rates bills until 2034. This is to promote investment in new studio space and ensure that the UK continues to be a world leader in producing film and high-end TV. The relief will be implemented as soon as possible, and bills will be backdated to 1 April 2024. This is a tax cut worth, according to the Government, around £470 million over the next 10 years.

English Local Authorities will be fully compensated for the loss of income as a result of this relief and will receive new burdens funding for administrative and IT costs.

Rogue agents

The Government’s summary of responses to the Business Rates Avoidance and Evasion consultation stated that respondents to the consultation were clear that “rogue” business rates agents are an established problem in the business rates system, focusing in particular on small business owners with a lack of understanding of the system. In response to this, the Government is increasing its communications to raise awareness among ratepayers of available reliefs and the use of agents. 

The Valuation Office Agency published their “standard for agents” on 30 January 2024, which set out how agents must act in their behaviour and their professional practice and also set out the level of service that agents should provide to their customers, maintaining high standards that promote compliance. The Government will keep the situation under review and carefully consider the case for further action in future if necessary.

[1] This article contains public sector information licensed under the Open Government Licence v3.0 Open Government Licence (nationalarchives.gov.uk)