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Councils 'having to write off business rates debts because of legal loophole'

Published 20/09/2016

The Local Government Association said some authorities were owed £1.5 million
The Local Government Association said some authorities were owed £1.5 million

Cash-strapped councils are having to write off millions of pounds in business rates because of a legal loophole, it has been claimed.

The Local Government Association (LGA) said some authorities were owed £1.5 million, while hundreds of thousands of pounds were left unrecovered from pubs, clubs and off-licences.

The LGA called for new powers to allow councils to suspend the licences of businesses failing to pay their rates, adding that under current laws authorities cannot refuse or suspend a premises licence for an outstanding business rate debt.

The problem is being exacerbated by the legal practice of companies going bankrupt, only for a second so-called "phoenix company" to start up overnight with the same directors, but without any obligation to pay their old company's debts.

The LGA, which represents more than 370 councils in England and Wales, is calling for an urgent change in the law to stop debts being written off so easily.

LGA spokesman Simon Blackburn 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.

"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."

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