Tackling Business Rates avoidance in Wales

The Welsh Government held a consultation (April to June 2018) consultation to discuss proposals aimed at tackling the avoidance of business rates payments in Wales, while ensuring that the needs of both businesses and local authorities are balanced.

The consultation includes specific sections exploring the extent to which avoidance activities might be associated with charitable relief and whether any changes could be made to the rates charged on unoccupied properties, including eligibility for exemptions and exploring whether the level of relief fits its intended purpose.

CTG responded to the consultation highlighting the importance of ensuring that charities are not used as a vehicle for avoidance of business rates. However, we queried the evidence that abuse is prevalent and made clear that any reforms must be proportionate and targeted. We also highlighted the importance of the mandatory relief for charities being protected and called for more consistency in the application of discretionary relief. The response was formulated following feedback from members and we are particularly grateful to Nicola Evans, Charities Counsel at BDB for her input.

Publishing a summary of responses document the Welsh Government states in respect of charities:

“I have considered the issue of falsely claiming charitable status for the purpose of avoiding rates and other liabilities. These ratepayers are not genuine charities but are seeking to use charitable status to avoid paying rates. I have listened to the concerns of the sector and do not, at this stage, propose making any changes to the arrangements for mandatory and discretionary charitable relief in this context. However, I will work with local authorities, the third sector and the Charity Commission to explore what can be done to reduce the abuse of charitable status.”

In respect of the changes to the arrangements for empty property relief  this will include lengthening the period of temporary occupation, which leads to repeated cycles of relief, from 42 days to six months. The Welsh Government will also remove zero-rating on empty properties that when next in use it appears they may be used for a charitable purpose. The Welsh Government will provide local authorities with local discretion to grant zero rating in genuine cases where a charity needs to own or lease an empty building and not make use of it.