Property rates avoidance warning

LANDLORDS and charities have been warned not to engage in deals designed to avoid business rates that could break the law.

Charities are exempt from business rates and there is evidence some landlords may be using the rules to avoid paying rates on empty properties.

The Charities Commission is investigating 700 tenancy agreements where there are concerns properties are not being used for charitable purposes.

Gareth Owen, property partner and member of the charities sector team at law firm hlw Keeble Hawson, said: “Charities must follow a proper and reasonable decision making process in accordance with the provisions of the Charities Act before entering into any lease.

“If the lease is not entered into for the proper purposes of a charity then it is quite possible that the charity trustees may attract a personal liability.”

The Charities Commission has warned that councils might consider these agreements to be business rates avoidance.

Mr Owen added: “Potentially the local authority could withdraw the discretionary relief, resulting in the charity being liable to pay 20% of the business rates. What is worse is that if there’s a suggestion that the relief has been claimed fraudulently then the charity and/or the trustees – and potentially the landlord – may face criminal proceedings.”