‘Sneaky’ way London shop landlords exploit business rates

A majority of London Assembly Members have agreed that the practice should be banned, saying that it accounts for hundreds of millions of pounds in lost income for councils across the country each year.

A motion demanding action on the issue was put forward at a recent Assembly meeting by Green member Siân Berry.

Ms Berry told her colleagues: “We all know about those shops on our high street which are empty for years on end, and then you might see a few signs of life inside them for a few weeks.

“You’ll see some boxes and then they’ll disappear and that shop will not open as something more exciting than an empty shop…

“What happens there is that a bad landlord can in quite a sneaky way overclaim relief on business rates.

“You put boxes into an empty commercial space and say it’s being occupied by a business. If you do that for six weeks, and then take the boxes out, you can claim three months of additional business rates’ relief.”

Ms Berry said that according to one estimate, this type of avoidance technique has cost councils across England £250m annually.

According to statistics sourced by the Local Data Company, London saw a 2.4 percentage point rise in empty shop and leisure units between 2019 and 2021 – an increase from 8.3 to 10.7 per cent.

Sian Berry AM (Image: London Assembly)

Earlier this year, the Government launched a consultation on business rates avoidance, which closed in September.

The Conservatives were the only group to vote against Ms Berry’s motion, with the group’s deputy leader Emma Best saying: “On the face of it, I think that this seems like a good idea.

“I do have some concerns about the fact that the big players, the big boys, will be able to get around this sort of thing and it will be those little owners that end up getting caught out, perhaps acting in the right way but getting unduly fined and so I want to make sure that any legislation that comes about makes sure that it targets the right people.”

She pointed out that the Government’s consultation on the issue had now closed, and said that if Assembly Members cared about the problem, they would have submitted their views while it was open. Ms Berry indicated that she had participated in the consultation.

Ms Best said: “We’re going to look at the body of evidence now [when the consultation outcome is published] and see the recommendations from the Government and if they support this, then I’m sure we will look at that evidence and support it too.”

Ms Berry’s motion successfully passed with 13 votes from the Green, Labour and Liberal Democrat groups. The seven Conservative members present at the meeting voted against. An earlier suggested amendment to Ms Berry’s motion by the Conservatives was rejected by the other groups.

A spokesperson at the Department for Levelling Up, Housing and Communities said: “It is unacceptable that a small minority seek to exploit the business rates system.

“We have held a consultation to explore the causes and potential options to combat business rates avoidance and evasion to protect essential funding for local services. We are currently considering the replies to that consultation and will respond in due course.”