Business Rates Avoidance Schemes
Wednesday, 16 September 2026
Contributions
Question
Asked by
Lord Sikka
To ask His Majesty’s Government what steps they plan to take to disable business rates avoidance schemes and the industry promoting them.
Lord in Waiting/Government Whip (Lord Wilson of Sedgefield) (Lab)
Most businesses pay the rates that are due, but a minority abuse the system to reduce their bills or avoid paying altogether. This imposes an unfair burden on the majority and prevents funding reaching local services. This Government will not tolerate tax avoidance and are committed to taking the necessary action to address avoidance and evasion. Decisions on tax are set at fiscal events and I will not speculate on the upcoming Budget.
Lord Sikka (Lab)
My Lords, I thank the Minister for his reply. After claiming empty property relief, some businesses place empty boxes in premises to give the appearance of occupation, subsequently removing them to trigger an additional period of relief. One scheme operated by Principled Offsite Logistics Ltd has deprived councils of £500 million of business rates. Can the Minister ensure that business rates avoidance receives the same priority as tax avoidance and will the Government publish an annual estimate of the revenues lost, require registration of all business rates avoidance schemes and prosecute the enablers?
Lord Wilson of Sedgefield (Lab)
My noble friend raises an important point on tax avoidance with business rates. There has been coverage of some of the most egregious instances of business rate avoidance over recent years, including the use of snail farms and prayer rooms. A recent court case, which my noble friend referred to, has made it significantly more difficult for the most common avoidance schemes to be effective. This was a case brought by the City of London; the Court of Appeal ruled in favour of the City of London, and as a result the attempt to secure repeated periods of empty property relief using box shifting failed. The ruling has closed down this particular avoidance scheme, and as a result local authorities can withdraw empty property relief if they are satisfied that a scheme in their area falls within the ruling.
Lord McCabe (Lab)
My Lords, does the Minister agree that more needs to be done to tackle the antics of rogue rating agents who exploit small businesses by submitting false valuations, charging huge fees and often locking them into lengthy and expensive contracts of little or no value?
Lord Wilson of Sedgefield (Lab)
I thank my noble friend for his question. While they do not apply to business rates, additional criminal sanctions were introduced in the Finance Act 2026 that will enhance the deterrent against the promotion of tax avoidance and increase protection against harm caused to the Exchequer, the taxpayer and the tax system. The new measures, when combined with HMRC’s existing powers, mean that promoters of marketed tax avoidance will face large fines or criminal sanctions if they do not disclose their avoidance scheme, promote types of schemes that HMRC has set out as prohibited, do not comply with our information notices or do not stop promoting their schemes when issued with a legal notice requiring them to do so. There is a lot going on, but I accept the point that my noble friend makes.
Baroness Kramer (LD)
My Lords, despite the court ruling that made it illegal to practice box shifting, as described by the noble Lord, Lord Sikka, and some of these ridiculous things such as snail farming, many local authorities are finding it hard to enforce. They do not have the resources and get caught in fairly elongated court processes. Have the Government looked at giving them more direct and immediate powers to be able to crack down on this? These landlords go from one strategy to another, one form of cheating to another, and the close-down is vital.
Lord Wilson of Sedgefield (Lab)
I accept what the noble Baroness is saying. The Government are committed to consulting on a general anti-avoidance rule, covering all local authorities. There is something similar in Scotland and Wales, and the Government are seriously looking at it. I will leave the question of when it will happen to the Chancellor of the Exchequer in the Budget.
Lord Kirkhope of Harrogate (Con)
My Lords, although it is important for the Government to take action against those who break the rules and the law, high streets in this country are virtually crippled as a result of taxation, including the business rates that are applied to them. What will the Government do to lift these burdens and encourage small businesses to continue to trade on our high streets?
Lord Wilson of Sedgefield (Lab)
I kindly say to the noble Lord that, at the last Budget, the Valuation Office announced updated property values from the 2026 revaluation. In recognition of the impact of the revaluation on bills, the Government have introduced a support package worth £4.3 billion to protect against ratepayers seeing large overnight increases. As a result, over half of ratepayers will see no bill increases in 2026-27, including 23% whose bills will go down. This also means that most properties are seeing increases capped at 15% or less in 2026-27, or at £800 for the smallest.
Lord Berkeley (Lab)
Has my noble friend seen an increase in the use of disused buildings for snail farms? People who run snail farms can claim agricultural relief from some rates. Is he aware of this and, if not, can he look into it?
Lord Wilson of Sedgefield (Lab)
We are talking about snails, so I do not know how quickly we will act on this. I will look into this and write to my noble friend.
Baroness Buscombe (Con)
My Lords, is there not a problem with the two-tier system that we have on our high streets? Many thousands of shops are opening up all over our villages, towns and cities, most of which do not have to pay any taxes and are cash only. We know that they do not even require any customers because their focus is organised crime. Why should legal shops have to pay their taxes when they are right next door to others that are committing crime and no one is touching them?
Lord Wilson of Sedgefield (Lab)
I accept that point. We have just introduced something to look at the impact we could have on shops that do not have any social responsibility, such as vape shops, through additional rates, et cetera, so that we can invest in shops in those communities that do a really good job, especially in rural areas. Living in a village, I know very well how important the local shop is.
Baroness Neville-Rolfe (Con)
My Lords, I know from having had ministerial responsibilities for public sector fraud that there is much scope for reducing it in local authorities. Scams relating to empty business premises are a very good example of this. Do the Government have any wider plans to tackle fraud in local authorities, perhaps with the support of the Public Sector Fraud Authority, and to get at the problems that we have been hearing about?
Lord Wilson of Sedgefield (Lab)
As I mentioned in answer to my noble friend Lord McCabe, the Government are looking seriously at this. We laid out our plans in the Finance Act 2026 earlier this year. We realise that the issues raised by the noble Baroness need to be taken into consideration, so a lot more initiatives will take place to accommodate them.
Baroness Bennett of Manor Castle (GP)
My Lords, the noble Lord, Lord Sikka, referred to the role of enablers in supporting business tax avoidance schemes. We know that, in many areas of financial crime, estate agents, bankers, lawyers and accountants are corruptly aiding these avoidance schemes. How many such enablers have been prosecuted for business tax avoidance schemes in recent years?
Lord Wilson of Sedgefield (Lab)
I do not know the figure off the top of my head, but I can look into it and write to the noble Baroness with the answer.
Lord Sahota (Lab)
My Lords, years ago, when I was a council leader, we had some instances where there were really large buildings lying empty, so the landlords would have to pay some form of business rent on them. What they did was put a desk and a chair inside for a charity, so that they did not have to pay any business rates. Because the landlords had to pay such a large amount in rates, they would pay something to the charity. Are the Government aware of that kind of scam?
Lord Wilson of Sedgefield (Lab)
We know that quite a few scams are going on. The industry—if I can call it that—has a very good way of evolving, changing and adapting, which is why we do not want to make any policy decisions prior to the Budget. They morph into other kinds of entity, and we want to stop that. We want to crack down on the wide range of scams going on. A general anti-avoidance rule may be the answer.
Source: UK Parliament Hansard API. Debate ID: 5408630.