The government will introduce measures to tackle business rate avoidance, including those involving charities, according to documents published today alongside the budget.
The government has published updates on the action it is taking to “improve the administration of business rates, including the appeals system, and tackle business rate avoidance.”.
Two of the main methods of avoiding business rates involve charitable occupation, and the government intends to tackle the “avoidance of empty property rates through artificial or compensated occupation of properties by charities.”.
It said some respondent’s favoured giving the Charity Commission new powers to tackle business rate abuse by charities.
It was often the case that, where avoidance of empty property rates through artificial occupation of properties by charities took place, unsuitable premises for the charity’s purposes were taken on. This includes premises that are overly large or located inconveniently.
Business rates are the most valuable tax relief to the charity sector and are worth £1.64bn a year.
Responses suggested that charities were often unable to substantiate claims of future use and that occupations were minimal or infrequent.
The Local Government Association estimated that around £230 million per year is lost to business rate avoidance.
Recommendations for changes to legislation to clearly set out the types of ratepayers and properties eligible for exemptions and relief included the Charity Commission and Insolvency Service using their powers more effectively or being given new powers.
Other recommendations include defining property occupation by a percentage of utilised floor space or extending the length of time a property must be occupied to qualify for relief.
Further suggestions to tackle avoidance by charitable vehicles included increasing awareness of avoidance schemes by local authorities and improving the understanding of the rules around business rate reliefs.
For a free consultation and a review of your business rates, contact Roger Hannah & Co. today.