In evidence to the Welsh Government, the Vale of Glamorgan Council has listed graphic details of how some registered charities in the Vale are helping landlords of local business premises avoid paying their full-whack of rates.
In doing so, the charities are being consciously complicit in rip-off tax-dodging schemes which help local property owners avoid paying rates on their buildings at the expense of ordinary, honest, taxpayers.
It is also being suggested that some registered charities may have been specifically formed just to play the system – and that some “food banks“ and “churches” are involved in scams which are disadvantaging honest taxpayers .
This is the way the Vale Council says the charities scam works:-
- The property-owner arranges for his property it to be occupied by a registered charity.
- By law the charity then is able to claim an 80% Mandatory Rate Relief .
- On top of that 80% Mandatory Rate Relief, the charity – the Vale Council says – “may also be granted the additional 20% [Rate Relief] due to their charitable activities (food bank, church etc.)” – which means that neither they – nor the property owner – pay a bean in rates or council tax.
The Vale drops a heavy hint that in some instances the charities involved may well be receiving backhanders from their landlords in return for all the Business Rates that they no longer need to pay.( i.e. putting a charity into empty business premises is a “win-win” for both parties.)
The Vale Council is telling the Welsh Government that where charities are involved in such arrangements , steps should be taken to ensure “that the charitable use of the property is clearly established; the charity is bona fide; the charity has been established not for rate avoidance but for other worthy causes and the charity has not been given a financial incentive by the landlord /agent to enter into the lease agreement.”
There are other dodges too – not involving charities.
TAX DODGE NO 2: The “Blue-Tooth” Exemption
The occupant of a large property with a high Rateable Value occupies just a small area of the big building – just enough for a couple of “boxes of files and a Blue-Tooth device“. He stays there for just 42 days. This tactic then gains him 6 months exemption from paying any rates. The property owner too is sitting pretty – with no rates to pay.
TAX DODGE NO 3: Company Musical Chairs
A big building with a high rateable value is first occupied on the basis Tax Dodge No 2 see above). Then, after the 6 months’ exemption period is up, the original company moves out of the “rented” building and a different – but related – company moves in. This triggers a new period of 42 days followed by a further 6 months’ exemption.
TAX DODGE NO 4: The Square Dance
This involves an agent declaring that only part of the building is occupied – and only for a short period. Goods or stock are moved into the building to occupy just a portion of the floor space. Then the goods are moved to “another area” [within the same building] “thus changing the divided Rateable Value ratio and gaining another period of statutory exemption” . No rates are paid.
TAX DODGE NO 5: The Phantom Occupant
This time the building is empty – and stays empty. Normally this would mean the owner would have to pay the rates due on the building – but the owner retrospectively – and dishonestly – claims the property was “occupied” for the statutory 42 days. He gets 6 months exemption, claimed in retrospect. The Vale Council may have a strong hunch that the property owner is lying through his teeth and is actually committing fraud BUT , the council says “the onus of proof is exceptionally difficult until a pattern has been established.”
TAX DODGE NO 6: Small Business Rate Relief
Here the building – or land – has a Rateable Value “greater than £2,600 (exempt from Empty Property Rates (EPR) threshold) but below the £6,000/£12,000” mark. It is asserted that the building is “occupied” . This means the owner gains Small Business Rate Relief rather than having to pay Empty Property Rates.
The Vale of Glamorgan Council is suggesting to the Welsh Government that the “42 days occupation period” before granting exemption is increased to 6 months for industrial buildings and 3 months for retail premises.
It also wants the thresholds for Empty Property Relief and Small Business Rate Relief to be “considered together to avoid the practice of claiming SBRR occupation as a “better buy”.