Unpaid business rates worth millions of pounds are being written off by local authorities due to a loophole in licensing and business laws being exploited by some pubs, clubs and off-licences, according to the Local Government Association.
Debts worth almost £1.5m have been recorded by Newcastle City Council, while Forest Heath DC and St Edmundsbury BC have had to write off nearly £300,000 in business rates owed by licensed premises. South Norfolk Council is owed about £190,000, of which £115,000 business rates debt is attributed to one company.
Under current licensing laws, councils cannot refuse or suspend a premises licence for outstanding business rate debts.
The LGA said the problem was being “exacerbated” by the legal practice of companies going bankrupt, only for a second ‘phoenix company’ to start up with the same directors and no obligation to pay their old company’s debts.
Powers to let local authorities suspend the licences of businesses which wilfully or persistently fail to pay their business rates are now being called for by the LGA. Licences would only be reinstated when the debt has begun to be paid off.
The LGA argued the powers would also help councils manage business rates more effectively once they are fully devolved to local authorities.
Simon Blackburn (Lab), the LGA’s licensing spokesman, said councils were “willing to work with businesses struggling to pay their way” but added some businesses were “deliberately avoiding paying their rates”.
He said it was “unacceptable” but added councils were “powerless” to recover the money.
“Giving council powers to refuse or suspend a premises licence at an earlier stage of the debt recovery process would be a simple way to tackle this problem and protect local services,” said Cllr Blackburn.