Following an announcement at Spring Budget 2023, HM Treasury and the Department for Levelling Up, Housing and Communities has issued a consultation on business rates avoidance and evasion. 

Measures relating to unoccupied properties 

Empty property relief allows an exemption from business rates for temporary periods of non-occupation of a non-residential building. This provides relief for a three-month period (six months for industrial properties). There is then a six-week reset period during which the building must be occupied. After that period, the exemption is available again in relation to the same property. 

The government is concerned that this relief is being abused by rate payers. It is considering three potential changes: 

• Increasing the reset period from six weeks to three or six months.
• Only allowing the exemption to apply once to a property in a given time period.
• Changing the conditions under which a property is considered to be occupied. An example given in the document is that more than 50% of property’s floor space must be occupied. 

An exemption is also available where the ratepayer is a charity and it appears that, when next in use, it will be wholly or mainly used for charitable purposes. The government believes that this exemption is being misused in certain cases. This involves the owner leasing an empty property to a charity on a short-term basis, sometimes supported by a donation from the owner to the charity, despite there being no realistic intention for the charity to occupy the property. The government is seeking views on removing this exemption or introducing additional tests for the exemption to apply. 

Wider business rates avoidance and evasion 

The government has received mixed reports from billing authorities on whether their current powers are sufficient to effectively tackle evasion in their local areas. The government is keen to hear from a wider range of stakeholders on their experience with anti-evasion legislation, and to understand if there is a case for going further in future. 

The government is also interested to hear whether there is additional information held by HMRC which could be shared with billing authorities to aid them in tackling avoidance and evasion of business rates. This looks beyond the newly connected data achieved through digitalising business rates. 

The government has also noted that the regime for authorising tax agents to represent their clients through dealings with HMRC does not apply to business rating agents. The Valuation Office Agency (VOA) is currently developing a standard for rating agents. The government is keen to build on this work to find a balanced solution to a small minority of rating agents seeking to exploit ratepayers and the wider system. 

ICAEW plans to respond to this consultation. If you have any comments you would like to feed into the response, please send these to Richard Jones by Friday 15 September.