Latest Public Sector News

21.09.16

Businesses should lose licence for failing to pay business rates, councils say

Councils should be able to suspend the licences of businesses that refuse to pay their business rates, the LGA has said.

Outstanding business rates’ debts include £1.47m for Newcastle City Council and £190,000 for South Norfolk council, of which £115,000 is attributed to just one business.

Forest Heath and St Edmundsbury councils, meanwhile, have had to write off almost £300,000 in business rates from licensed premises.

Cllr Simon Blackburn, the LGA’s licensing spokesperson, said: “Councils know that it is a tough business environment out there and are willing to work with businesses struggling to pay their way, but some businesses, including council-licensed pubs, clubs and off-licences are deliberately avoiding paying their rates, knowing they can continue to operate without fear of being stripped of their licence.

"Councils are already struggling to fund vital services amid funding pressures and business rates debt means they are being deprived of large sums of money to be spent on key services, such as roads, schools and caring for the elderly, as well as supporting local business economies.”

They are currently not permitted to refuse or suspend licences for bars, restaurants, clubs and off-licences which refuse to pay rates.

In addition, companies that go bankrupt are legally allowed to reopen immediately as ‘phoenix companies’, with the same board of directors but no obligation to pay the previous company’s debts.

The LGA argued the government should close the legal loopholes and force ‘phoenix companies’ to pay their predecessor’s business rate debts.

Cllr Blackburn continued: “It must be particularly galling for law-abiding businesses who pay their rates on time but see competitors go bankrupt owing hundreds of thousands of pounds, only to legally reopen under the same directors scot-free.

"This is clearly unacceptable but councils are powerless to stop vast sums of unrecoverable money from building up or take action if a business closes and reopens under a different name.”

The LGA said the new powers are particularly important following plans to devolve all business rates to councils after 2020.

It has previously warned that business rates devolution could mean a loss of funds for councils in low-income areas and mean councils will lose more income through appeals.

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