Business rates holiday for some, but others left out in the cold

Business rates holiday for some, but others left out in the cold

For many small, family-owned and SME businesses, this will be a huge relief to what is already a difficult time. The business rates holiday, however, only applies to retail and leisure companies who are likely to bear the brunt of the current coronavirus concern with customers staying in, avoiding travel, and staying away from cafes, gyms and restaurants.

But what about everyone else?

Commercial landlords, and property agents have been calling for changes to the business rates system for a significant time. A further review is promised later this year, but as it stands, there are no firm proposals. The current business rates holiday for small businesses and SMEs may, however, have unforeseen consequences.

Currently, a 50% business rates retention scheme applies to all local authorities. This means that 50% of the funds that they recover through business rates are kept within the local authority. That scheme has been so successful in increasing business rates collection, that there have been further trials where some local authorities retain 75% and even 100% of the business rates collected. Why is this important? Under the scheme, the local authorities’ retained funds go back into the local authorities’ budgets and can be used to fund other services. Quite simply, it is in the local authority’s best interests to collect as much as it can.

The incoming business rates holiday announced earlier this week, will have a significant financial impact upon local authorities and their collections. Local authorities are already under significant financial pressures, and will seek to offset those losses through other means. We are increasingly seeing local authorities challenging landlords and tenants in relation to the application of business rates reliefs, particularly in relation to whether empty property relief or charitable relief applies. These challenges are becoming tougher and we are seeing a greater willingness from local authorities to take these matters to the Magistrates’ Court for a full challenge of a Liability Order.

That said, it is very possible to contest these challenges and wrongly sought liability orders from local authorities and we’ve seen success in these decisions being overturned including high profile cases within the Magistrates Court and high Court.

What should you do if challenged?

Make sure you collect and retain as much evidence of your, or your tenant’s occupation, so you are prepared if this happens. If an occupation or application for relief is challenged, get legal advice as soon as possible as many of these matters can be sorted before any liability order is obtained and court action required. If, however, a liability order is obtained against you, you need to act fast in order to persuade the local authority to change their mind or in order to dispute that liability order at Court.

If you are experiencing challenges from a local authority in relation to a business rates bill, or have been challenged as to whether a particular business rates relief should apply, contact Ben Humphreys or Barry Jervis in the dispute resolution team.

For advice or guidance on any other legal issue, a member of our team can help – please click here to discuss.