UK councils forced to write off millions in business rates

  • By Stephen Rush

Legal loophole forces UK councils to write of millions in unpaid business rates

UK councils are being forced to write off millions of pounds in business rates because of a legal loophole, it has been claimed.

The Local Government Association (LGA) has said authorities were owed up to £1.5 million, with hundreds of thousands more left unrecovered from pubs, clubs and off-licences. The LGA called for new powers to allow councils to suspend the licences of businesses failing to pay their rates, adding that under current laws authorities cannot refuse or suspend a premises licence for an outstanding business rate debt.

The issue is being exacerbated by the completely legal practice of companies declairing bankruptcy, only for a second so-called phoenix company to start up overnight with the same directors, but without any obligation to pay their old company’s debts.

The LGA, which represents more than 370 councils in England and Wales, is calling for an urgent change in the law to stop debts being written off so easily.

LGA spokesman Simon Blackburn:

“Councils know that it is a tough business environment out there and are willing to work with businesses struggling to pay their way, but some businesses, including council-licensed pubs, clubs and off-licences, are deliberately avoiding paying their rates, knowing they can continue to operate without fear of being stripped of their licence.”

“It must be particularly galling for law-abiding businesses who pay their rates on time but see competitors go bankrupt owing hundreds of thousands of pounds, only to legally reopen under the same directors scot-free.” 

Many small businesses in more economically deprived councils have argued that the lack of return investment in the local community by their councils means that the businesses simply can not afford the often unbalanced rates demanded by the local authorities.