Reform demanded as empty business rate costs UK £1BN

Empty businesses cost UK taxpayers £1bn a year, prompting calls for urgent reform of the system.

Some councils lose out on millions of pounds of potential business rates income through a tax relief on empty properties, analysis by the BBC Data Unit shows.

A local authority mayor in northern England said the money “added up to a lot” and the system was unfair.

The Treasury said it would announce a review of business rates “in due course”.

Experts say the current system pits local authorities – which want stable income – against businesses.

Andy Preston, independent Mayor of Middlesbrough, said: “There’s a window where we lose money and that adds up to a lot, so we’re doing everything we can to help make sure we can sustain businesses.

“We’re trying to bring people into town to live here, for leisure, to work, but it’s a big battle, and what’s worse, an unfair battle.

“We need to get a much fairer system from central government.”

Some smaller businesses argue the rates system should be reformed to bring down costs.

Pie Jackers owner in Middlesbrough Julie Fletcher said she had put her “heart and soul” into the business but may have to close due to an “astronomical” rates bill.

“It will have a massive impact, it will stop us employing another person and we just feel like there should be more support,” she said.

Dr Kevin Muldoon-Smith, a lecturer in public sector finance and property development at Northumbria University, said: “Unfortunately, we have this perverse situation where local government needs tax to go up and the business community are lobbying very hard for it to go down.”

Professor Paul Greenhalgh, who researches real estate and regeneration at Northumbria University, said short-term relief could also show some businesses were expanding into different premises.

Councillor Richard Watts, who chairs the Local Government Association’s Resources Board, said business rates were “an extremely important source of income” for local government at a time when they face an overall funding gap of £8bn by 2025.

“The Government must commit to moving forward with vital reforms, which include addressing business rates avoidance and the impact of reliefs, such as empty premises relief,” he said.

This week, the boss of department store chain Beales, said councils “don’t really care” about supporting high streets, because they could depend on landlords paying rates on empty shops when relief ran out.

A Treasury spokesman said: “Empty property relief strikes a balance between incentivising property owners to put vacant properties to use, while not penalising those who lose a tenant at short notice.”

He said the system had been designed to redistribute rates income according to the needs of local areas.