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    News, views and updates from Moorcroft Property Guardians.

Guardians - A Rates Mitigation Scheme?

There has been a lot of discussion within the Property Guardian Industry recently about how the use of Guardians can act as a Business Rates mitigation scheme.  This is an interesting concept, but one with which Moorcroft Property Guardians disagrees.

Ultimately, as we have demonstrated in previous articles, Property Guardians are a tried and tested solution to provide security for vacant property and to protect the capital value of the asset – nothing more and nothing less.  In the simplest of ways, Guardian’s presence at a property protects it from asset stripping, antisocial behaviour and helps to identify essential building maintenance that would otherwise go unchecked, thus diminishing value.

There is a debate that a commercial building can have its rating basis changed from paying Business Rates to the Council Tax banding – potentially saving a large amount of money by paying the lower Council Tax figure.  Without trying to become Rating experts, this is technically correct, however there are a number of questions about the process that we think make this a challenging and potentially troublesome approach.  Questions to ask about this approach include:

  • Speed – there is a well-documented backlog of appeals at the Valuation Office (VO) which could make this progress take a long time to go through – there is no quick answer to this so when will any potential reduction begin?
  • Mitigation Schemes – over the past few years, local authorities and the VO have been cracking down on the various mitigation schemes people have been using to avoid paying Business Rates.  Will they see this approach in the same light as the ‘Charity Bluetooth Transmitters’ scheme which was found to be not valid a few years ago?

 

  • Willingness - Local Authorities are under extreme financial pressure – how likely are they to be willing to accept that a commercial property which once generated them thousands of pounds is now ‘residential’ and therefore generates them a much lower amount?
  • Planning – if a property previously attracted a ‘commercial’ planning use category and is now classified as ‘residential’ use for Council Tax, what impact is this going to have from a planning perspective?
    • Will a change of use application need to be made?
    • How much will this process cost?
    • What impact will it have on the sale of a property – will prospective purchasers be put off that they have to re-apply for a change of use back to the original classification?
  • Re-Valuation – when the need for Property Guardian occupation ends and the building returns to its ‘normal’ use, the Valuation Office are going to have to re-value the property for rating purposes.  What if this new valuation figure ends up being much higher than it was originally, resulting in increased business rates being due?  That could be a major own goal when costs increase dramatically!

The other angle which Guardians could be used for Business Rates mitigation is for their occupation to be used to trigger the empty rates relief of 3 months once they vacate the property after occupying for the required period.  This seems to be a more simplistic short term mitigation scheme with less of the potential problems highlighted above.  It does though counteract the ultimate aim of using property guardians – to protect the property and its capital value – moving Guardians in to a property with the sole aim of making it empty again a short time later doesn’t protect the building.

In summary, our strongly held view is that to use Guardians for anything other than property security and Capital Value protection defeats the benefits that Guardians bring and worryingly creates the potential for further headaches at a later date.