Agency outraged at latest business rates proposal by government

Colliers, the agency and property consultancy, has issued another outspoken attack on government policy - this time prompted by a formal consultation about business rate changes.

Colliers says the exercise indicates that “yet again thegGovernment has shown how out of touch it is with the current property markets.”

John Webber, head of business rates at Colliers, comments: “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- and by definition the general public saving for a pension.”

The new consultation will run  until September 28 and suggests that the government is concerned how best to counter avoidance and evasion in the business rates system. 

Business rates provide a major source of funding for local government: in 2022/3 it raised £25 billion, and the government believes £250 million was lost to tax abuse last year. 

The consultation consists of three sections. The first focuses on specific proposals to reform Empty Property Relief, which according to the government’s research “is not working as intended” and that abuse of EPR is “the most common form of rates avoidance”. One measure it focuses on is the third-party occupation scheme which is currently practiced and had been successfully tested in the High Court. The government is potentially looking to close this scheme and bring it more in line with Wales and Scotland.

The second section of the consultation covers other general abuses of the business rates system and the third relates to operations carried out by what the government calls “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. 

Webber continues: “Whilst we acknowledge 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 … 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 believe the government would do better by extending the current six months empty rates holiday to 12 months and extend from the warehouse and industrial sector to include retail and offices. 

Webber concludes: “The golden goose of business rates has well and truly been cooked and property investors and pension funds are about to get fleeced,  just as values are tanking. Making owning and holding property more expensive will impact pension funds and other long-term institutions and ultimate the value of everyone’s pension. No one will benefit. The government should think again.”