Business rates fraud
17 November 2020
What is business rates fraud?
Business rates fraud is when businesses attempt to gain relief or exemptions from business rates that they’re not entitled to. It’s also known as non-domestic rate (NDR) fraud.
Rates are worked out based on the ‘rateable value’ which is set by the Valuation Office Agency. There are many reliefs and exemptions available, including small business rates relief, which means businesses under a certain+ rateable value pay no business rates.
However this only applies as long as the business doesn’t occupy another property.
Other reliefs include discounted rates for charities, non-profit organisations, community amateur sports clubs, and buildings that are empty.
According to The Chartered Institute of Public Finance and Accountancy’s latest counter fraud tracker, business rates fraud costs local authorities an estimated £7.7m a year.
How does fraud occur?
Common types of business rates fraud:
- False applications for reliefs and discounts: for example, a business applies for small business rate relief and fails to declare the have other business properties that would affect their entitlement
- False tenancy or lease agreements
- Charitable exemptions where the premises is actually being used for something not related to a charity, eg storage
- Failure to report changes in circumstance: changes that might affect the amount of business rates to pay include increases in the rateable value, taking on new business premises, or not informing the council when a business closes
- Identity fraud to attempt to avoid paying for business rates
- Scams involving stolen credit or debit cards
Case study: forged tenancy agreement causes loss of £4k
In 2018, a York-based barber forged his tenancy agreement to make it look like his landlord was liable for business rates, rather than him. A false signature and phone number were put on the document, and he pleaded guilty to perverting the course of justice for submitting the fake document to investigators.
As well as the barbershop, he also owned a fish and chip shop, and therefore shouldn’t have been able to claim small business rate relief. He used the fake agreement to try and avoid paying over £4k in business rates.
Following our investigation, this case was prosecuted by the council, in what we believe was one of England’s first convictions relating to business rates fraud. At court he was given an eight-month custodial sentence, suspended for two years. This was in addition to paying back the business rates lost, and court costs of £1,400.
How to spot fraud and report it
Many discrepancies or odd details on applications may raise suspicion. This doesn’t always signify fraud, but it’s good practice to remain vigilant.
Short periods of liability for a non-domestic property followed by an application for an empty relief might be a sign of attempted fraud. Scammers may also use forged documents to avoid paying rates, so look out for details that don’t add up or things spelt wrong.
We work for over 500 public sector bodies in the north of England including nine local authorities. You can report fraud affecting your organisation on our anonymous hotline or by email:
0800 9179 247 | [email protected]
This week is International Fraud Awareness Week (IFAW). We’re raising awareness of some key fraud areas affecting local government and the public sector.