Empty businesses cost Northants councils millions

Empty businesses have cost Northants councils millions in 2018-2019, according to new data from the BBC.

Thursday, 16th January 2020, 6:00 am
Tax relief for empty businesses in Wellingborough cost the council more than 1m in 2018-19

In 2018-19, Corby, Kettering, Wellingborough and East Northamptonshire councils lost a combined total of £2.87m through tax relief for empty business units.

Business rates is a tax on non-domestic properties, like shops, and they are based on the rental value of the property.

Councils can lose that income suddenly when businesses close and the premises like shops, offices and warehouses becomes empty as empty businesses cannot legally be taxed for three months.

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Dr Kevin Muldoon-Smith from Northumbria University said: "Business rates, along with council tax, will be very critical to the stability of local authority finances going forward because of central government grants being reduced.

"Unfortunately, we have this perverse situation where local government needs tax to go up and the business community are lobbying very hard for it to go down."

In Northamptonshire, Wellingborough Council lost the most money to empty units in 2018-19.

The council lost £1,107,628 in tax relief to empty premises, where the business rate could not be taxed for the first three months the property was empty.

That works out to 3.49 per cent of potential business rates in Wellingborough lost to tax relief for empty premises.

However, it marks a decrease compared to 2017-18, when Wellingborough Council lost £1,128,733, which was 2.49 per cent of its potential business rate income.

Other Northants councils also made losses in 2018-19, with Corby losing £734,491 or 1.83 per cent of business rates to tax relief, while Kettering lost £553,142 or 1.44 per cent.

East Northamptonshire Council lost £474,597 to tax relief, which was 1.25 per cent of its rates income.

Despite every council having lost income, no Northants local authority had losses above average compared to the rest of England.

Kettering and East Northants had below average levels of tax relief for empty premises while Corby and Wellingborough's tax relief was normal for that year.

Corby has made a big recovery since 2014-15, when the council lost £1.7m in tax relief to empty businesses, which was 4.6 per cent of its rate income that year and above average.

In England, the council with the highest percentage of rate income lost to tax relief was Westminster, which lost £152,253,335 which was 6.37 per cent of its potential business rates income.

Across England, empty premises relief has amounted to an average of £949m a year over the last five years, generally decreasing to around £916m in 2017.

It was forecast to drop to around £813m in 2018-19, but instead rose to £996m.

Councils are becoming increasingly reliant on business rates for income, yet some retailers feel high business rates is one reason high streets are struggling.

Dominic Curran, property advisor at the British Retail Consortium, said: "It has been a challenging year for many retailers, as many shops struggle to adapt to rising cost pressures and changing consumer habits.

"High among the concerns for retail firms is business rates – a tax which disproportionately harms retailers, driving shop closures and job losses, leaving empty shopfronts and harming local communities."

Mr Curran called for the government to reform the system, as did the chair of the Local Government Association's resources board, Cllr Richard Watts, who said: "Business rates are an extremely important source of income for local government.

" With an overall funding gap of £8 billion by 2025, the Government must commit to moving forward with vital reforms, which include addressing business rates avoidance and the impact of reliefs, such as empty premises relief."

A spokesman from the Treasury said: "Empty property relief strikes a balance between incentivising property owners to put vacant properties to use, while not penalising those who lose a tenant at short notice.

"Whilst the rate of business rates collection varies between individual authorities, the local government finance system has been designed so that business rates income is redistributed across the country according to the needs of local areas.

"We will announce further details of the business rates review in due course."