South Ribble Council is tightening its rules in a bid to prevent landlords pocketing from a controversial new ‘tax avoidance scheme’.
It has come to light that owners of empty buildings are allowing charities to move in as a way of avoiding paying full business rates – but councils and taxpayers are the ones paying the price.
With the new welfare reform agenda set to take affect from April, South Ribble Council has pledged to alter its discretionary rate relief policy to stop this type of scheme occurring in the borough.
Coun Stephen Robinson, cabinet member with responsibility for finance and resources, said: “Charities taking a commercial property such as offices, shops and warehouses qualify for a mandatory 80 per cent discount on business rates.
“With the exception of shops, they can also apply to the council for a further 20 per cent discretionary relief.
“At present, if a commercial property is empty for three months, the owner becomes liable for full business rates.
“Over the past couple of years, a number of owners and landlords nationally have tried to avoid paying full business rates by allowing charities to take empty premises for just a nominal rent.
“As a result, we felt it was time to change our policy to prevent charities being eligible for discretionary relief if they pay only a token rent for commercial premises.
“We have tightened the rules to protect our council taxpayers and ensure we don’t end up subsidising landlords by funding what amounts to a tax avoidance scheme.
“We will still be providing discretionary business rates relief to charities and not-for-profit organisations in South Ribble because we recognise the valuable contribution they make, especially in providing services to the public.”
A report which went before the council’s cabinet last week read: “The council’s existing policy’s sole aim is to provide assistance to rate payers which are charities or not-for-profit organisations.
“Many of these organisations support the council’s aims and objectives and in some cases they relieve the council of the burden of providing these services.
“This policy needs to be amended to prevent the council inadvertently contributing towards any rate avoidance schemes.”