Business rates keep high-street shops empty

Councils do not want to lose the business rate income

Britain’s dysfunctional business rates regime is helping to keep high-street shops empty, according to campaigners.

High streets now have 10,499 shops which have been empty for more than three years, according to the Local Data Company, but local councils appear unwilling to turn them into housing because they will lose out on potential business rate payments.

Campaigners are calling on the Government to make it easier for landlords to change the usage of empty space and help to regenerate struggling town centres.

If a shop has been empty for more than three years, landlords can appeal to the Valuation Office Agency to have the property removed from business rates, which are charged on all commercial premises, leaving shortfalls in council budgets.

However, the business rates expert Paul Turner Mitchell explained: “It ought to be in everyone’s interest to convert neglected wasted assets into desirable usable assets but that does not mean it will happen.

“Power rests with the local authorities because the process requires permission for change of use from retail to residential. In most places, this is hard to get because councils do not want to lose the business-rate income.”

He added that during the three-year period landlords must still pay rates on the property, often leaving them unable to afford to appeal for a change of usage.

It is estimated that if the empty shops had been filled, local authorities in England and Wales would have received an extra £131m this year.

Currently shops are exempt from business rates for just three months after they become empty and no small business rates relief is given for vacant premises.

Retailers have been calling on the Government to reform the business rates system and have criticised ministers for saying they will not review the process for another three years. Pressure on the Chancellor to look again at the system is likely to intensify ahead of the Autumn Statement due on 3 December.

A spokesman for the British Retail Consortium said: “If we fundamentally reform the business rates system then we can breathe life back into many of these empty shops now. Let’s not wait until 2017 to address one part of a wider problem. Retailers will tell you that high rate bills are one of the main reasons why they have to shut up shop.”

Business rates are set to raise £27bn in receipts this financial year.