Luton loses out on 2% of business rates each year through empty shop units

Luton Borough Council is losing 2% of income from business rates each year due to empty shop units, a new study has revealed.

Figures obtained by the BBC Shared Data Unit found that in Luton, lost income through tax relief has remained consistent at 2% over the past five years with £9.67m lost in total.

Luton town centre

Luton town centre

It has however, gradually fallen from £2.20m (2.87%) in the 2014/15 financial year to £1.71m (2.18%) in 2018/19.

Currently, landlords of empty shops, offices and warehouses are exempt from paying business rates for three months as part of a tax relief system.

The aim of the tax relief is to allow for property investment and give landlords time to find a new occupant.

However, the cost to the taxpayer of empty business units has now risen to more than £1bn a year across England and Wales, with claims that individual landlords are exploiting the system.

Some local authorities lose out on up to 6% of their business rates income through this tax relief.

Dr Kevin Muldoon-Smith, an expert in property tax, said business rates were critical to the stability of local authorities going forward.

“We have this perverse situation where local government needs tax to go up and the business community are lobbying very hard for it to go down,” he said.

A Luton Borough Council spokesman said: "It is a reality of life that some businesses, while not acting illegally, seek to avoid paying business rates through a variety of means including suspending their activities in one way or another – perhaps temporarily – so that local authorities cannot claim money that should be owed.

"This is not fair on other businesses and defrauds residents of money to spend on vital services.

"Whilst not complacent, Luton has a relatively low rate of 2% of all business rates that cannot be collected due to this. Avoidance is not illegal and the council does not have powers to act in these circumstances.

"Nevertheless we continue to work hard with partners, including Luton BID, to help businesses occupy premises that are misused in this manner."