Government to tackle business rate avoidance using charities

Date: 14th July 2015
Author: Mark Keirl
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The government will introduce measures to tackle business rate avoidance, including that involving charities, according to documents published today alongside the Budget.

The government has published updates on action it is taking to “improve the administration of business rates, including the appeals system, and on tackling business rates avoidance”.

Two of the main methods of avoiding business rates involve charitable occupation, and the government intended to tackle the “avoidance of empty property rate through artificial/contrived occupation of properties by charities”.

It said some respondent’s favored 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 occupation is minimal or infrequent.

The Local Government Association estimated that around £230m per annum is lost to business rate avoidance.

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.

For a free consultation and a review of your business rates, contact Roger Hannah & Co today.

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Mark Keirl MRICS Director