Empty business premises cost Sunderland tax payers more than £14million over five years - with more predicted to come

New research shows business rates relief on empty properties across the city totalled £14.2million between 2014 and 2019 – an average 2.7 per cent of the potential total every year.

In 2018-19, landlords in Sunderland were exempt from paying £3.1million of rates under the scheme, while Sunderland City Council collected £88.7million in rates for all businesses.

Relief is predicted to cost another £2.1million in 2019-20.

Business rates are a tax on non-domestic properties, based on a ‘rateable value’, linked to rental value.

Under law, empty business premises cannot be taxed under the business rates system for at least three months. After this time, most property owners must pay full business rates.

This tax-free window can have a serious impact on council funding. For instance, the 2015 collapse of Teesside Steel cost Redcar and Cleveland council £10.4million in empty premises relief .

Business rates are a controversial subject and have been blamed, in part, for the decline of the British High Street.

But while retailers lobby for the burden of business rates to be lightened, councils are becoming increasingly dependent on the income they provide income as direct funding from central government is scaled back.

Government reports have acknowledged the effect uncertainty over the future of business rates reforms has had on councils’ financial planning.

Councils do not get to keep all the rates revenue they collect – central government usually takes a sizeable share -and the government reallocates some business rates income from richer authorities to poorer ones but there have been concerns rates retention could eventually increase disparity between areas.

Northumbria University’s Dr Kevin Muldoon-Smith, an expert in property tax, said business rates were critical to the stability of local authorities going forward.

“We have this perverse situation where local government needs tax to go up and the business community are lobbying very hard for it to go down,” he said.

“But if you look at the property market, the relationship between business and bricks and mortar is changing. There’s a good chance that pool of income will start to reduce – at the very least it will be different.”