Businesses divided on business rates reform

The Government has claimed the business world is “divided” regarding the idea of reforming business rates, throwing into question the prospect of the controversial tax being revamped.

According to the Treasury and the Department for Communities and Local Government into the administration of business rates claimed there was “no clear consensus” on whether properties should be revalued more often than they are now.

Retailers have been desperate for more regular revaluations of properties. George Osborne has since given the green light for an even wider review after fierce pressure from the business world.

At present, properties are supposed to be revalued every five years, but retailers believe that if revaluations took place every year then business rates would more accurately reflect the economic conditions.

The Government report said while “just over half of respondents, including most businesses and their representatives” agreed with calls for more frequent valuations, “a significant minority of respondents, including most respondents representing local government” disagreed.

The EEF, the manufacturing trade body, suggested the industry was happy with the existing set-up, claiming it provided “stability and certainty for manufacturers looking to make long term investments”.

It stated: “The findings of the Government’s interim review, which received responses from a wide range of business sectors, demonstrates that there are elements of the current system of business rates which are widely recognised to be working well.

Business Rates Liability.

A High Court ruling has provided helpful clarification on whether or not a landlord is liable to pay business rates on an empty property following the liquidation of a tenant and the subsequent disclaimer of the lease.

Business rates are payable by the occupier of the property. Though when unoccupied, the owner of the property – which is the person entitled to possession of it – will be liable.

This court was to determine whether the landlord was entitled to possession and therefore the owner of the property.

The Tenants liquidator disclaimed the tenants interests in the property but the landlord did not exercise his right to take up occupation of the property. Rather chose to demand payment of rent from the tenant’s guarantor under the terms of the guarantor agreement for which the guarantor made the payment.

The local authority therefore demanded payment of business rates from the landlord for the period following disclaimer.

The landlord refused and the local authority was granted a liability order in the sum of £590,000. The landlord appealed, saying he was not liable as it could not be said he was entitled to possession of the property.

The high court ruled in favour of the local authority and held that the landlord was liable to pay the rate. Once the tenants liquidator has disclaimed the lease, the lease ceased to exist and the landlord became entitles to immediate possession of the property.

Conversely the guarantor did not have an immediate right to possession of the property. It would only be entitled to possession of the property if it exercised its statutory right to call for an overriding lease, and the guarantor had not done so in this case.

The guarantor would be remain liable to make good the former tenant’s default in paying the rent under the determined lease until such a time as the landlord exercised its right to immediate possession.

Posted on: 23/12/2014