Businesses face legal action over unpaid business rates

News Article

Local authorities have begun to take legal action against businesses that fail to pay their business rates bills.

A new report from property consultancy Colliers has shown that an increasing number of businesses have begun to receive letters demanding payment and/or a court summons.

In response, many businesses have started to appeal their business rates assessments on the grounds of a Material Change of Circumstance (MCC) to their business operations as a result of the Coronavirus crisis.

Data shows that around 183,000 businesses began the appeal process in the six months between 1 April and 30 September 2020. That is equivalent to 1,000 appeals per day.

John Webber, Head of Business Rates at Colliers, said: “It is ironic that the Government is preventing private landlords from taking recovery action against tenants not paying rent, while at the same time turning a blind eye to billing authorities acting on recovery action as if COVID-19 didn’t exist!”

Although businesses operating in the retail and leisure sectors were granted a business rates holiday during lockdown, office occupiers and some other businesses have not been given the same support.

John Webber added: “We appealed to the Government to introduce a business rates holiday for the period of lockdown and to introduce some reliefs for the disruption to businesses seen since.

“In the meantime, we have been negotiating on our clients’ behalf with local billing authorities requesting them to show leniency to businesses that are struggling to pay their bills. We are finding that attitudes vary greatly depending on where businesses are based and the attitudes of the individual billing authority.

“There is a total lack of consistency – some clients for example with properties across boundaries find they are granted reliefs for some of their properties by certain local billing authorities but not from others.

“And recently there has certainly been a step-up of enforcement activity via the courts. We believe we’ll see more court summonses and enforcements as we go forward.”

Jeremy Sirrell, a Partner with Palmers, said: “When a business is affected by economic uncertainty, it is better to address financial concerns early on, rather than allowing the problem to escalate.

“If cash flow is a significant issue, businesses need to ensure that late or missed payments from customers are being chased and managed properly.

“In some circumstances, a missed payment from a major customer can be the difference between survival and ceasing trading, so if business owners are concerned about late payment issues they should seek prompt legal advice rather than defaulting on business rate payments which leaves them open to legal action.

“Palmers offers a Commercial Debt Recovery Scheme to help businesses manage the recovery of their debts and to keep legal costs proportionate. Often a strongly worded solicitor’s letter is all that is needed to recover the outstanding payment but where this fails mediation and other alternative dispute resolution (ADR) procedures can be effective in recovering outstanding business debts. As a last resort, formal recovery action can also be taken.”

For support with business disputes and alternative dispute resolution, please contact us.