The government will introduce measures to tackle business rate avoidance, including that involving charities, according to documents published today alongside the Budget.
The Budget report said the government has published progress updates on action it is taking to “improve the administration of business rates, including the appeals system, and on tackling business rates avoidance”.
A summary of responses to a consultation on business rates avoidance was published today, alongside the Budget documents.
The summary of responses said the government intended to tackle the “avoidance of empty property rate through artificial/contrived occupation of properties by charities”.
Two of the main methods of avoiding business rates involve charitable occupation, the document said.
It said some respondents favoured giving the Charity Commission new powers to tackle business rate abuse by charities.
The summary said that it was often the case in these cases 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 occupation is minimal or infrequent.
The Local Government Association estimated that around £230m per annum is lost to business rate avoidance.
Some local authorities said they were in favour of having more powers available to them to tackle avoidance, although some opposed this idea suggesting “that granting specific anti-avoidance powers could lead to differences in interpretation of the legislation by local authorities”.
Recommendations of 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 including defining property occupation by a percentage of utilised floor space, or extending the length of time a property must be occupied to qualify for a 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.
The need for better communication between the Charity Commission and Companies House was highlighted.
CFG says it has been made aware that the government will be announcing new business rates anti-avoidance rules.
CFG, NCVO, the IoF and the Charity Retail Association had submitted a response to the review which said ideas put forward by government to tackle business rates avoidance would harm charities and should not be taken forward.
The government also today published a consultation on the introduction of a business rates relief for local newspapers.
