Councils should be able to suspend licences over unpaid business rates: LGA

Local authorities should be allowed to refuse or suspend premises licences of businesses which wilfully or persistently fail to pay their business rates, the Local Government Association has said.

Under the LGA’s proposals licences would only be reinstated when the debt has begun to be paid off.

The Association said the problem of unpaid business rates was “being exacerbated by the legal practice of companies going bankrupt, only for a second so-called ‘phoenix company’ to start up overnight with the same directors – but without any obligation to pay their old company’s debts”.

The LGA called for an urgent change in the law to stop debts being written off so easily and phoenix companies being created.

According to the LGA, some councils individually face business rate debts of nearly £1.5m, while others have been forced to write off unrecoverable sums of around £300,000 owed by licensed premises including pubs, clubs and off-licences.

Newcastle City Council is owed £1.47min business rate debts accrued by licensed premises, accumulated over several years. West Suffolk (Forest Heath District and St Edmundsbury councils) has meanwhile had to write off almost £300,000 in business rates owed by licensed premises, with one nightclub alone owing £97,000.

Cllr Simon Blackburn, the LGA’s Licensing spokesman, said: “Councils know that it is a tough business environment out there and are willing to work with businesses struggling to pay their way, but some businesses, including council-licensed pubs, clubs and off-licences are deliberately avoiding paying their rates, knowing they can continue to operate without fear of being stripped of their licence.

“Councils are already struggling to fund vital services amid funding pressures and business rates debt means they are being deprived of large sums of money to be spent on key services, such as roads, schools and caring for the elderly, as well as supporting local business economies.”

Cllr Blackburn added: “It must be particularly galling for law-abiding businesses who pay their rates on time but see competitors go bankrupt owing hundreds of thousands of pounds, only to legally reopen under the same directors scot-free.

“This is clearly unacceptable but councils are powerless to stop vast sums of unrecoverable money from building up or take action if a business closes and reopens under a different name.

 “The Government should close the phoenix company loophole by making it a legal requirement for directors of bankrupt companies who start up a new business to pay their old company’s business rate debts.

“Giving council powers to refuse or suspend a premises licence at an earlier stage of the debt recovery process would be a simple way to tackle this problem and protect local services.”