Friday, 23 September 2016 05:34

Call for action on business rate debts

Written by  Ruralcity Media
Call for action on business rate debts

Local authorities have called for new powers to tackle huge business rate debts.

Millions of pounds in unpaid business rates are being written off by cash-strapped councils due to a loophole in licensing and business laws being exploited.

Some individual councils are facing business rate debts of nearly £1.5m, while others have been forced to write off unrecoverable sums.

West Suffolk (Forest Heath District and St Edmundsbury councils) has had to write off almost £300,000 in business rates owed by licensed premises.

And South Norfolk Council is owed about £190,000 in business rates accrued by licensed premises, of which £115,000 is attributed to one business

Now the Local Government Association is calling for new powers so councils can suspend the licences of businesses which wilfully or persistently fail to pay their business rates.

Licences would only be reinstated when the debt has begun to be paid off, said the LGA.

Under current licensing laws, councils cannot refuse or suspend a premises licence for outstanding business rate debts.

The LGA said the problem was being exacerbated by the legal practice of companies going bankrupt, only for a second so-called "phoenix company" to start up overnight.

These phoenix companies had 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 also calling for an urgent change in the law to stop debts being written off so easily.

Council leaders say new licensing powers would also help councils manage business rates more effectively when this is devolved to local government by 2020.

LGA licensing spokesman Simon Blackburn said some businesses were deliberately not paying their rates, knowing they could continue to operate without being stripped of their licence.

"Councils are already struggling to fund vital services amid funding pressures and business rates debt means they are being deprived of large sums of money to be spent on key services.”

This lost revenue would have been spent on roads, schools and caring for the elderly, as well as supporting local business economies, said councillor Blackburn.

"Councils are powerless to stop vast sums of unrecoverable money from building up or take action if a business closes and reopens under a different name.”

Councillor Blackburn said the government should close the phoenix company loophole.

It should be made a legal requirement for directors of bankrupt companies who start up a new business to pay their old company's business rate debts, he added.

"Giving council powers to refuse or suspend a premises licence at an earlier stage of the debt recovery process would be a simple way to tackle this problem and protect local services."

People in this conversation

  • Guest (Michael Sutton)


    It is absolutely disgraceful that collection of business rates cannot be enforced and that businesses can take advantage of the 'phoenix company loophole's. This goes against natural justice and is not available to individuals who rack up debt. They would be pursued rigourously. This anomaly in the law should be corrected, it has been overlooked for far too long and has become embedded in the business culture to be exploited by rouges.

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