Business rates avoidance is costing local services £250m ($326m) a year, new study has suggested.
The Local Government Association (LGA) has said that money is being lost when firms go into insolvency and local authorities have problems establishing the ownership of a property meaning that business rates are not paid.
Business rates are taxes charged on most non-domestic properties such as shops, offices, pubs, warehouses, and factories.
Instances of short-term periods of occupation are also contributing to the problem, the LGA said on Friday. When a property becomes vacant the owner is exempt from paying business rates for three months. Owners of non-domestic properties can exploit this loophole by having short-term periods of occupation back-to-back.
Councils are calling on the government to introduce stricter laws to counter business rates avoidance and require new legal powers so that they can inspect non-domestic properties to verify information, according to the LGA.
Spokesman Richard Watts said: “Business rates are an extremely important source of income for councils and the local services our communities rely on every day. Too many businesses are exploiting loopholes and manipulating the system to avoid paying the tax they owe.
“The scale of business rates avoidance shows more needs to be done to tackle this behaviour and reduce avoidance.
“Every penny lost through business rates avoidance is money that could be spent on adult social care, children’s services, fixing roads and other vital community services.”