The Government has launched a consultation paper this month, part of which looks at an evasion of Business rates through abuse of Empty Property Relief (‘EPR’).
The consultation focuses on what research has highlighted to be the main abuses of EPR.
Currently businesses can qualify for EPR after the property becomes vacant, for three months (or six months). The property is not permitted to benefit from additional EPR until the property is then ‘occupied’ for a minimum of six weeks (‘reset period’) before the property becomes vacant again.
The government research has identified that a number of businesses are claiming continuous rate free periods through short lets or temporarily using the property for storage. The Consultation explores if businesses are able to do this because there is currently no statutory definition of what ‘occupation’ is and if the ‘reset’ period is too short.
To address this the paper considers increasing the ‘reset period’ to 3 or 6 months, adding conditions to the meaning of ‘occupation’ (which could include requiring that more than 50% of the property’s floor space to be occupied), and/or introducing a limit on the number of times a property can benefit from EPR in a given period.
Relief from EPR can also be claimed where the ratepayer is a charity and, when next in use, it appears that the property will be wholly or mainly used for the purpose of that registered charity.
The Consultation has identified that a number of businesses are using this exemption by leasing an empty property to a charity on a short-term basis even though there is no real intention for the charity to occupy the property. If the next occupier is not a charity there is currently no recourse to allow backdated rates to be collected.
The Consultation explores whether this exemption should be retained, removed, qualified or whether local authorities should be allowed to determine when to award or withhold relief.
The consultation closes in September but will be of interest to many commercial landlords who hold empty property and are at the mercy of unpredictable market demand and longer term socio-economic influences.