Local Authorities looking to plug future business rates’ shortfalls

Stuart Hicks, Manchester Office, Director - Dunlop Heywood

By Stuart Hicks, Managing Director.

Student accommodation could be the next target for cash strapped Local Authorities to target if they see any revenue shortfalls when the new business rates’ rules come into play.

Coventry, for example, looks set to lose out on £27million under new business rates rules set to come in under the West Midlands Combined Authority.

Plans for the WMCA – commonly referred to as ‘Greater Birmingham’ – include the region keeping all business rates collected in the area rather than the 50% local councils currently retain with the rest going to central government.

Councils then see their income topped up by needs assessed grants from Westminster.

A recent report to Coventry Council’s suggests annual business rates retained by the city will increase from £67million to £137million in 2020. But the forecast also indicates that the predicted withdrawal of government support grants will result in a total shortfall of £27million from today’s income.

One method of increasing revenues could be to get the government to change the rules around student accommodation which means large scale operators currently pay no business rates or council tax.

If the government grants are retained on top of the new business rates income – there would be an increase of £44million in revenue, but that is highly unlikely so top of many LA’s lobbying hot list could well be student accommodation.

At the moment even large privately-operated private student accommodation buildings don’t pay business rates and instead fall under council tax rules.

Student-occupied buildings also do not pay council tax and these exemptions affect thousands of student properties per university city or tens of thousands per region.

I’m sure other LAs will also be desperately looking for other business rate exemptions or loopholes over the next couple of years but in this case, the commercial development sector is experienced and well-funded – it won’t take any move against their current protected status lying down.

Watch this space.