Government urged to strike right balance on Empty Property Relief consultation
The professional body for place leaders and managers has urged the Government to carefully manage possible changes to business rates regulations so as not to risk damaging high street investment.
With the Treasury currently consulting on the scope and scale of avoidance, evasion and poor rating agent behaviour in the business rates system, fears have been expressed that moves to tighten the rules could ensure more properties are left empty.
A ministerial introduction to the consultation states that, “…there is a small minority who seek to exploit the business rates system, either through false reporting, or through contrived means which circumvent the spirit and intention of the law. The former is evasion, the latter, avoidance. These practices unfairly shift the burden of business rates onto the honest majority, and result in loss of revenue which should be used for vital public services.”
The Institute of Place Management, IPM, has discussed the consultation proposals with members in the commercial agent and asset management field, and those supporting businesses and community organisations to take on vacant units. It has also reviewed feedback on the consultation from those in the high street property sector.
Chair of IPM, Professor Cathy Parker said, “We need the business rates system to be overhauled, as it’s an outdated and unfair tax. This consultation is just one part of that system, looking to tackle business rates avoidance."
"Feedback from council business rates teams suggests there are flaws in the system which can contribute to units remaining vacant for longer than they need to be. But any reforms must strike the right balance, otherwise they run the risk of using a sledgehammer to crack a nut.”
Further concerns were raised by a number of IPM members about the potential impact of what’s being proposed, including:
- that a number of initiatives currently using business rates reliefs, which are making a valuable contribution to high streets could be stopped as a result;
- any changes need to ensure that they don’t leave open other avoidance or evasion routes;
- and that adjustments are mindful of the importance of investment in the high street and take into account the challenges landlords are currently facing.
Phil Fishwick, IPM Member and Associate Director for town centre property consultants GCW, said the proposals could mean reducing the chances of getting vacant units back into play quickly, especially in areas with significant vacancies.
“Extending the minimum occupation period will potentially encourage more sustainable uses for empty shops, rather than quick fixes. However, in some locations it is likely to reduce the number of short-term lettings, so units stay empty for longer,” he explained.
“That’s because, at the moment, the tenant and landlord can agree a six-weeks-and-a-day letting and empty property relief kicks in. If the regulations change and it becomes three or six months, that will become the minimum for the landlord to guarantee the empty rates period and cover legal and other costs associated with occupation. But three or six months may be too long for the tenant, so a deal is never done.”
There are also concerns among IPM members who are working with arts and crafts, creative and cultural groups that are making use of current reliefs to add vitality to high street and shopping centre properties.
Paul Wright, IPM Senior Fellow and co-founder of the Whatifgroup is working on an interim use space scheme in Salford, which takes on units that are currently under-used and, together with community partners, gives them a new lease of life. It allows landlords to save a considerable amount on business rates.
“Schemes that contribute to pride in place can act as a catalyst for bottom-up regeneration, even generating an ecosystem of future ratepayers which are part of the KPIs we propose,” he argues. “Taking away any ability to save rates will be the final nail in the coffin for many landlords, compounding interest rate increases. It will be like hitting a person who is already on the floor.”
The value of such schemes was further emphasised by Iain Nicholson, Strategic Development Lead for IPM and founder of the Vacant Shops Academy, which works to help fill empty shops.
“It’s important that any changes strike the right balance so that initiatives like those which are supporting community organisations to add vitality to their high streets aren’t shut down, and that we’re mindful of the real challenges faced by landlords, especially in places where vacancy is high,” he added.
The Government forecasts that in 2023/24 almost £8 billion is expected to be awarded in business rates reliefs, including £2 billion in Charitable Rate Relief, around £2 billion in Small Business Rates Relief and over £1 billion in Empty Property Rate Relief.
The Business Rates Avoidance and Evasion consultation is open until 11am on Thursday 28th September 2023, can be accessed here.
About the author
Formed in 2006, the Institute of Place Management is the international professional body that supports people committed to developing, managing and making places better.