Business Rates and Investment: Call for evidence, 18 February 2026

The LGA exists to strengthen local government, so communities thrive.  This means championing and being the voice of local government, ensuring it has the resources, powers and support to deliver the best possible outcomes.

This response has been approved by the LGA’s Local Government Resources Committee Lead Members.

We welcome the opportunity to submit a reply to HMT’s Business Rates and Investment Call for Evidence. This follows previous Transforming Business Rates papers to which we responded. In December 2024, the LGA, along with Solace and CIPFA, published a report on Reforming the local government funding system in England. It contains suggestions for both improvements to the current local government finance system and for longer term reform, including to business rates and council tax.

Before addressing the specific consultation questions, there are a number of key summary points that are important to make.

Local government needs a system that raises sufficient resources for local priorities in a way that is fair for residents and gives local politicians all the tools they need to be the leaders of their communities. It is welcome, therefore, that the Government acknowledges that “business rates play a fundamental role in local government funding, providing a stable source of revenue that is used in turn to fund critical local services” and that any “reforms to the tax will be designed to ensure the stability of public finances”. For councils, it is also important that the tax system, including business rates, provides as much certainty as possible.

In our view taxes should adhere to the principles of sufficiency and transparency so that financing for local government services are sufficient, predictable. It should also be relatively straightforward to work out how the tax has been derived. The LGA also supports transitional protection for both councils and businesses to ensure fairness, stability and predictability for ratepayers, preventing sudden increases in liability and allowing businesses and local authorities time to adjust to any changes.

In addition, the LGA is concerned about compliance with, and avoidance of, business rates. We carried out a survey in July 2019 which found that the main methods of avoidance are repeated short-term occupation to qualify for periods of empty property relief, misuse of charitable relief for avoidance purposes, misuse of the insolvency exemptions, and dividing properties in order to claim small business rates relief. In our previous submission to the Call for Evidence for the Business Review we called on the Government to tighten up on the abuse of reliefs on the same lines as in Wales and Scotland. This would mean giving billing authorities new powers to crack down on avoidance.

The LGA believes that property continues to provide a good basis for a local tax on business. Business rates are efficient to collect and have been relatively predictable and buoyant in recent years. However, the changing nature of business alongside the nature of demand pressures on councils means that alternative means of funding councils will be needed as well as a reformed business rates system.

In the context of the current system of business rates, and not withstanding our views about the need for new sources of finance, our responses to the specific questions posed in the call for evidence are set out below. We have not responded to the questions that are aimed at business rate payers.

Question 1: In what capacity are you responding?

On behalf of local government.

Question 2: Please provide details of the business or body you represent.

The LGA is a representative of 315 English local authorities.

Question 3: Where in England are you based?

The LGA represents local authorities across the entirety of England and Wales.

Question 4: What sector are you representing?

We are a politically-led, cross-party organisation that works on behalf of councils to ensure local government has a strong, credible voice with national government.

Questions 5 to 11:

These questions are aimed at businesses.

Questions 12 to 18:

These questions are aimed at business and therefore the LGA does not currently hold a view on the issues raised in these questions.

Question 19:What are the benefits and downsides of a system where the property occupier is liable for business rates, versus the owner?

Shifting business rates liability from the occupier to the property owner could provide a more stable and predictable tax base, as ownership changes far less frequently than occupation and is easier to verify through sources such as the Land Registry. This would reduce administrative workload, limit opportunities for avoidance linked to short-term or artificial occupation and potentially improve collection rates because owners are generally easier to trace than transient occupiers. It could also potentially reduce disputes between landlords, tenants and billing authorities, and strengthen owners’ stake in the condition and performance of local areas.

However, owner liability raises several challenges. Landlords may pass costs on to tenants in complex or uneven ways, affecting rental values, lease negotiations and rent reviews. Incorporating rates into rents could also influence the rental evidence used for future revaluations, creating circular impacts. Existing lease structures may not allow owners to recover costs, leading to inconsistent effects across the property market. Higher or less predictable costs for owners could deter investment or speculative development, particularly in areas with high vacancy. Finally, some owners, especially those overseas, may be harder to locate and pursue, potentially complicating enforcement.

Question 20:What changes could be made to the administration of the system to support business investment?

Business rate payers are best placed to advise on administrative changes that would support business investment.  However, we would ask the Government to consider the impact that any administrative changes could have on local authorities and to ensure that business rates are efficient to collect, predictable and transparent for all.  Any changes to the administration of business rates should be accompanied by a new burdens assessment and the relevant funding to meet any new burdens arising.

Question 21: Do you have any specific examples where ‘cliff-edges’ in the system have been, or will be an impediment to investment?

Question 22:What types of investment would be supported by a move to a slice-based system?

These questions are aimed at business and therefore the LGA does not currently hold a view on the issues raised here.

Question 23: What are the wider benefits or downsides of a slice-based tax? 

A slice-based tax could have benefits such as reducing cliff-edges for businesses. However, there are risks of added complexity in administration, potential confusion for ratepayers, and potential risks to revenue stability for councils. 

Question 24:What types of improvements have you considered, but not taken forward because of business rates? Where possible, please provide specific examples where Improvement Relief (IR) has factored into these decisions.

These questions are aimed at business and therefore the LGA does not currently hold a view on the issues raised here.

Question 25:Are there any other aspects of IR that you would like to make the Government aware of that would support investment?

From the LGA’s perspective the introduction of Improvement Relief (IR) appears to have gone smoothly, particularly as regards collaboration between billing authorities and the VOA.

The implementation of IR will continue to be an ongoing cost for billing authorities. This includes liaising with the VOA on the qualifying works certificate and carrying out occupation checks. The new burdens assessment should be updated regularly to ensure councils are fully compensated for potential increases in both the costs of the relief and for any administrative costs incurred. 

Question 26: To what extent does Empty Property Relief (EPR) influence your business’s decisions to acquire, hold, invest in, or dispose of empty properties?

Question 27: What are the main factors that contribute to bringing an empty property into use within your sector? Please provide details.

These questions are aimed at businesses.

Question 28:The government is committed to tackling avoidance, while also ensuring that EPR supports business investment. How can the government best meet those aims through reform?

We welcome the Government’s commitment to tackling business rates avoidance.  We submitted evidence on the misuse of empty property relief in response to the previous Government’s consultation on business rates avoidance and evasion.  We note the period of minimum occupation to qualify for a further period of empty property relief was raised from 6 weeks to three months. We have some anecdotal evidence that this has not helped to materially reduce business rates avoidance and evasion and would call for the Government to look again at this limit with a view to raising it further, such as to the six months originally consulted on.

We would also support the introduction of a limit on the number of times EPR could be claimed in a given time period at it would aim to deter businesses claiming sequential relief through minimal occupation such as storing boxes and it would aim to make such activity less financially rewarding.  However, a limit could mean that the new occupier could be prevented from claiming EPR for a legitimate reason such as refurbishment so billing authorities could be given discretion over such cases.

Removing the next use in use exemption could help tackle avoidance through EPR.  As genuine charities could be adversely affected by this; this could be tackled by making the relief discretionary.  These discretionary reliefs should be funded by Central Government. There are many examples of local authorities using their s.47 discretionary relief powers which are funded by the Government, and these could be used as a model.

Councils should have discretionary powers to charge a premium on property which has been empty for over a certain period (on the lines of the council tax premium for empty property). We would suggest that if this were to be considered there should be reforms to the basis of liability so that ratepayers could not respond by simply putting a property beyond beneficial use, meaning that it would be likely to be taken out of the rating list by the VOA.

We also call on the Government to tighten up on other abuse of reliefs including the abuse of charitable relief.  This could be along the lines of the measures introduced in Wales and Scotland. This would mean giving billing authorities new powers to crack down on avoidance. The Government previously committed to making further progress to tackle avoidance and to publishing a consultation on adopting a “General Anti Avoidance Rule” for business rates in England.  We encourage the Government to publish this consultation as soon as possible.

Question 29: EPR has a reset period of 13 weeks. What are the typical lease durations of occupants of non-domestic properties?

Question 30: What is a typical number of days per year that short-term lets are (a) available to let and (b) actually let?

These questions are aimed at business and therefore the LGA does not currently hold a view on the issues raised here.

Question 31:What evidence is there that SBRR is being used by second home owners whose main aim is not to operate a local business but to manage tax liabilities?

In 2019, the results of a LGA survey included the figure that 27 per cent of respondents had concerns about “exploitation of the overlap between council tax and business rates”. We have not repeated the survey since the new eligibility rules for non-domestic rates were applied to self-catering properties. We await the publication of the numbers of self-catering holiday homes moving between the council tax and business rates lists for England later this year. Until this time, we encourage the Government to listen to the responses provided by individual councils. 

Question 32:How could SBRR be reformed to limit its use be second homeowners who are not mainly operating a local business while maintaining support for those who are? And

Question 33:Does the current system for monitoring and enforcing which short term lets (STL) qualify for business rates work effectively?

We note that the current rules in England whereby a property will be eligible for non-domestic rates if over the last 12 months: minimum availability is at least 140 nights in total; occupancy was at least 70 nights; and an intention to make the property available for short periods for at least 140 nights in the next 12 months, applied in Wales prior to April 2023.  From April 2023 these were changed in Wales to increase the availability period to 252 nights, and actual let period to at least 182 nights, and future availability to 252 nights.  We suggest that the Government considers whether any lessons can be learnt from Wales in terms of the reasons for this change.

On a related note, the LGA is concerned that the Deregulation Act 2015 which relaxed rules to make it easier for individuals to become STL ‘hosts’ is not working as intended and is having unintended consequences for housing stock levels.

Questions 34 to 40: 

These questions are aimed at businesses. 

Question 41: Are there wider changes government should consider to the business rates system that would better enable high-value, long-term investment?

Business rate payers are best placed to advise on what other changes could support business investment.  However, we believe that billing authorities should be allowed to be parties to appeals as was the case before the introduction of Check, Challenge and Appeal. Local authorities frequently have an interest in strategically important ratepayers, particularly given the implications for business rates retention and they should be allowed access to the process in order to be able to submit evidence which will help the VOA or a tribunal come to a view. We have heard concerns about the closure of the 2017 list and restoring powers to billing authorities would make it easier to challenge those valuations which billing authorities find problematic.

We consider that billing authorities should have powers to seek information from ratepayers for the purposes of non-domestic rating, to require ratepayers to supply to billing authorities information relevant to determining liability to non-domestic rates, and to give billing authorities powers to inspect properties. Such powers are now in force in Wales. In England they should work alongside the powers for the VOA contained in the 2023 Non-Domestic Rating Act.

Question 42 to 46:

These questions are aimed at businesses.