Measures to address avoidance of non-domestic rates: summary of responses

Following consultation in 2018, the Welsh Government announced a package of measures to tackle avoidance of non-domestic rates. Since then, through a mix of primary and secondary legislation, a range of measures have been introduced.

The Welsh Government has recently sought views on 2 proposals that would give full effect to the measures we have legislated for. The consultation was focused on proposals for regulations to:

• define a range of artificial avoidance arrangements, giving effect to the general anti-avoidance framework we have established
• create a duty for ratepayers to report certain changes of circumstances to billing authorities

This consultation was open for a 12-week period, from 7 April until 30 June 2025.

In total, the consultation received 25 responses from a range of stakeholders, including billing authorities, professional or representative bodies, rating agents, businesses and individuals. A full list of respondents is included in annex a.

A majority of respondents supported most of the individual proposals set out in the consultation. Billing authorities supported all of the proposals, whereas rating agents were generally opposed to most of them. A mixture of responses to individual proposals was received from professional or representative bodies, businesses and individuals. 

A summary of the responses received to each question is provided below. It does not aim to capture every point raised by respondents, but to highlight the key themes.

Artificial avoidance arrangements

Question 1: Do you agree with the proposals to define artificial avoidance arrangements in which the occupation is not on a commercial basis?

This question was answered by 24 respondents, of which 10 agreed with the proposals and 14 did not. Those in favour of proposals were billing authorities and 3 professional or representative bodies, whilst those against were 5 professional or representative bodies, rating agents, businesses and individuals. Specific comments were made by 19 respondents.

Most respondents who agreed with the proposals did not provide detailed explanations of their views. Comments from billing authorities included confirmation that the proposed definitions reflected avoidance activity they had experienced and appeared to cover the relevant indicators. Some respondents who supported the proposals noted that it would be important to ensure genuine commercial attempts to bring empty properties back into use were not inadvertently captured. 

The primary concern from respondents who did not support the proposals was that the proposed definitions could cover some legitimate commercial arrangements for occupation, such as incentives for new occupiers, short-term discounts, rent-free periods and different forms of ‘payment’. Some respondents noted that these could be features of short-term occupations with a charitable or community benefit, which are offered by property owners because they facilitate rates mitigation. 

There was a related concern that the definitions may not be applied consistently and that billing authorities may lack the expertise and resources to do so. Respondents with this concern generally suggested that additional guidance or safeguards would be beneficial to help billing authorities determine when individual cases should not be treated as artificial avoidance arrangements. While some billing authorities noted that there are resourcing implications associated with addressing avoidance, none were of the view that they did not have the expertise or experience to identify relevant activity.

Question 2: Do you agree with the proposals to define artificial avoidance arrangements in which the ratepayer is wound up voluntarily?

This question was answered by 23 respondents, of which 14 agreed with the proposals and 9 did not. Those in favour of proposals were billing authorities, 4 professional or representative bodies, a rating agent and 2 businesses, whilst those against were 3 professional or representative bodies, rating agents, businesses and individuals. Specific comments were made by 16 respondents.

Views in favour of proposals were generally critical of the practice of using voluntary wind-up to avoid non-domestic rates and stated that proposals would provide clarity in addressing these actions. Comments from billing authorities included confirmation that the proposed definitions reflected avoidance activity they had experienced, which often resulted in rates not being paid and write-off of bad debts. One respondent agreed that the proposals may reduce the use of phoenix companies and special purpose vehicles in avoidance arrangements, subject to billing authorities being able to identify the other elements of the defined arrangements.

The primary concern from respondents who did not support the proposals was that winding up a company is legitimate and necessary for unviable businesses, but did not appear to recognise that there are other elements to the defined arrangement which would need to be present for such activity to engage the proposed definition. Some respondents were of the view that billing authorities would lack the expertise and resources to identify these arrangements. The awareness and experience evident in responses from billing authorities did not support that view.

Question 3: Do you agree with the proposals to define artificial avoidance arrangements in which the owner or occupier exhibits characteristics or behaviours?

This question was answered by 23 respondents, of which 12 agreed with the proposals and 11 did not. Those in favour of proposals were billing authorities, 5 professional or representative bodies and a business, whilst those against were 2 professional or representative bodies, rating agents, businesses and individuals. Specific comments were made by 18 respondents.

Views in favour of the proposals confirmed that they capture many of the characteristics and behaviours observed, particularly by billing authorities, in cases of avoidance. Some respondents who supported the proposals noted that, depending on the circumstances of individual cases, relevant arrangements may be relatively straightforward or challenging to identify in practice.

The primary concern from respondents who did not support the proposals was that some of the relevant characteristics and behaviours could apply to legitimate business arrangements or circumstances in which the landlord may be unaware that they were being exhibited by the tenant. There was also a concern that the proposed arrangements would not be consistently and fairly identified by billing authorities.

Some respondents were of the view that the description of these arrangements was vague or otherwise lacked clarity, and did not appear to have considered the specificity of the individual definitions which were proposed. A small number of respondents who had considered the detail made more specific comments, including a view that failure to provide the name of the ratepayer should not be treated as avoidance. 

Question 4: Do you agree with the proposals to define artificial avoidance arrangements in which the occupation has certain characteristics? 

This question was answered by 24 respondents, of which 12 agreed with the proposals and 12 did not. Those in favour of the proposals were billing authorities and 5 professional or representative bodies, whilst those against were 3 professional or representative bodies, rating agents, businesses and individuals. Specific comments were made by 17 respondents.

Views in favour of proposals welcomed the intention to address specific schemes which have previously been enabled by case law relating to beneficial occupation. Some respondents who supported the proposals referred to previous case law and did not appear to understand that the proposed regulations, together with the anti-avoidance framework they enable, would take precedence. It was also noted that arrangements of this type may be the most likely to give rise to appeals and that it would be beneficial to provide additional guidance to billing authorities about factors to consider in their decision making.

The primary concern from respondents who did not support the proposals was that legitimate short-term or unconventional occupations of a variety of forms would be treated as avoidance and disincentivised. There was also a general view among some respondents opposed to these proposals (and others) that rates mitigation is legitimate, should be allowed to continue and is motivated by the imposition of non-domestic rates liability for empty properties. 

Question 5: please provide details of any artificial avoidance arrangements you are aware of which may not be covered by the proposals.

Approximately half of respondents (12) answered this question. Comments were provided by billing authorities, professional or representative bodies, rating agents and businesses. Almost half of those who answered confirmed that they were not aware of any avoidance arrangements which are not covered by the proposals.

The other half of respondents who commented referred to specific arrangements they are aware of. These included a range of avoidance methods which are intended to be covered by the proposals (e.g. the use of phoenix companies, withholding of information, and scenarios where the sole benefit is mitigation). They also included the attempts to exploit exemptions which were referred to in the consultation and considered by the Welsh Government during development of the proposals.

A further potential arrangement which had not previously been considered was detailed by a billing authority. The arrangement arises when the owner or leaseholder for a property sub-lets different parts of it to separate occupiers, but a single hereditament (unit of property with a rating assessment) is shown in the relevant rating list. The owner or leaseholder for the whole hereditament cannot be treated as liable, as they are not in exclusive occupation of it. As a consequence, the hereditament is occupied, but no liability can be attributed and collected from any of the occupiers until the Valuation Office Agency (“VOA”) has considered whether it should be split into multiple separate hereditaments. 

Another respondent highlighted the importance of keeping the coverage of the proposed definitions under review and the potential need for regular updates in the future, recognising that new and novel methods of avoidance may emerge over time.

Question 6: please provide details of any other sources of evidence it may be useful for billing authorities to consider where they identify that an artificial avoidance arrangement may have been made.

Approximately half of respondents (12) answered this question. Of these, 6 specific comments were made, with the remaining 6 stating that they were not aware of other sources of evidence that may be useful for billing authorities to consider. Specific comments were made by a billing authority, 3 professional or representative bodies, a rating agent and a business.

Two respondents suggested increased information sharing and collaborative working between billing authorities. It was also suggested that access to HMRC data may help billing authorities identify relevant connections and evidence of legitimate business activity. Another 2 respondents suggested that billing authorities should consider the operation of the market, where features including shorter-term leases and incentives to reduce vacancies may be common.

One response highlighted that the majority of relevant sources are publicly available and should be used alongside the powers of billing authorities to gather relevant evidence. Another noted that it would be helpful for guidance to set out sources of evidence which should be considered.

Question 7: Do you agree with the proposal to enable billing authorities to determine that a particular arrangement is not artificial in individual cases?

This question was answered by 22 respondents, of which 17 agreed with the proposal and 5 did not. Those in favour of the proposal were billing authorities, 5 professional or representative bodies, a rating agent and 2 businesses, while those against were a professional or representative body, a rating agent, a businesses and individuals. Specific comments were made by 15 respondents.

Respondents in favour of the proposal were generally of the view that it was important to recognise that some arrangements which involve indicators of avoidance may be made for legitimate purposes. Some respondents who supported the proposal suggested that factors which billing authorities may consider should be set out, to support consistency and transparency. The importance of the rights of review and appeal provided by the anti-avoidance framework were also highlighted. Concerns about the capacity of billing authorities to consider complex cases were noted by some respondents who supported the proposal.

The respondents who did not support this proposal were also opposed to the proposals to define artificial arrangements set out earlier in the consultation. Where additional comments were provided, they reflected a concern that the overall proposals risked inconsistency between billing authorities.

Question 8: Do you agree with the proposal to impose a financial penalty for failure to pay an amount due, to counteract the advantage gained from an artificial avoidance arrangement?

This question was answered by 24 respondents, of which 14 agreed with the proposal and 10 did not. Those in favour of the proposal were billing authorities, 5 professional or representative bodies, a rating agent and a business, whilst those against were 2 professional or representative bodies, 2 rating agents, businesses and individuals. Specific comments were made by 15 respondents.

Views in favour of the proposal emphasised the importance of ensuring that penalties are applied in a proportionate manner and based on the correct identification of avoidance. A billing authority noted that it is necessary to ensure there is a deterrent and consequence of failing to make payments, once an artificial avoidance arrangement has been identified. Some wider comments were made about the administrative implications for billing authorities.

Most of the respondents who did not support this proposal were also opposed to most or all of the proposals to define artificial avoidance arrangements set out earlier in the consultation. Some of the additional comments supported the existence of an appeals process prior to a penalty applying, without directly referring to the right of appeal provided by the anti-avoidance framework. Another respondent was of the view that penalties should be considered as a further measure once the success of the broader proposals could be reviewed following implementation.

Duty to report change of circumstances to billing authorities

Question 9: Do you agree with the proposed duty for ratepayers to report specified changes of circumstances to billing authorities?

This question was answered by 24 respondents, of which 16 agreed with the proposal and 8 did not. Those in favour of the proposal were billing authorities, 6 professional or representative bodies, 2 rating agents and a business, whilst those against were a professional or representative body, a rating agent, businesses and individuals. Specific comments were made by 17 respondents.

Views in favour of proposals highlighted the need to ensure that the requirements are clear and communicated effectively to ratepayers. Some respondents were also of the view that the proposal should not duplicate the parallel duty to report information to the VOA. It was also noted that the proposal would support timely and accurate billing. A billing authority suggested the required timeframe for reporting information should be shortened to 30 days, but another respondent noted that the proposed 60-day deadline would be consistent with other requirements to provide information. 

Respondents who did not support the proposal either were concerned about the administrative burden for businesses or were of the view that it would duplicate the parallel duties to report information to the VOA. Some respondents made similar comments about clarity and communication as those who supported the proposal.

Question 10: Do you agree with the proposals to impose financial penalties for failure to comply with the duty and providing false information?

This question was answered by 24 respondents, of which 18 agreed with the proposals and 6 did not. Those in favour of the proposals were billing authorities, 5 professional or representative bodies, 2 rating agents, and businesses, whilst those against were 2 professional or representative bodies, businesses and individuals. Specific comments were made by 14 respondents.

Views in favour of proposals highlighted the need for penalties to deter non-compliance, if they are applied fairly in the context of clear and reasonable expectations for ratepayers. Some respondents emphasised the view that repeated non-compliance and the deliberate provision of false information should be the particular focus of penalties. It was also noted that penalties should be treated as a last resort, would have administrative implications for billing authorities and would generate appeals. 

The primary concern from respondents who did not support the proposals was that providing clear guidance and support for ratepayers to encourage compliance would be more effective than penalties. There were also concerns that penalties could penalise ratepayers who had made honest mistakes. Some more general opposition to the proposed duty was also reiterated.

Question 11: Do you agree with the proposal to remind ratepayers about the requirements of the duty in annual demand notices?

This question was answered by 22 respondents, of which 19 agreed with the proposal and 3 did not. Those in favour of the proposal were billing authorities, professional or representative bodies, rating agents and businesses, whilst those against were a business and individuals. Specific comments were made by 14 respondents.

Most of the respondents in favour of the proposal were of the view that wider steps should also be taken to raise awareness of the requirements. Billing authorities and some other respondents suggested that information should be provided on their own and Welsh Government websites, as well as through communications by third party stakeholders. It was noted that owners who are not themselves ratepayers may otherwise be unaware of the new requirements and be caught out if their properties fell empty. 

The respondents who did not agree with this proposal were against the proposed duty to provide information more generally. 

Welsh language

Question 12: What, in your opinion, would be the likely effects of the proposals on the Welsh language? We are particularly interested in any likely effects on opportunities to use the Welsh language and on not treating the Welsh language less favourably than English.

• Do you think that there are opportunities to promote any positive effects?

• Do you think that there are opportunities to mitigate any adverse effects? 

Almost half of respondents (11) provided comments relevant to this question, of which 8 were of the view that the proposals would have no effects upon the Welsh language. The other comments did not directly relate to the specific proposals set out in the consultation. 

Question 13: In your opinion, could the proposals be formulated or changed so as to:

• have positive effects or more positive effects on using the Welsh language and on not treating the Welsh language less favourably than English

• mitigate any negative effects on using the Welsh language and on not treating the Welsh language less favourably than English?

Comments relevant to this question were provided by 4 respondents, of which 3 were of the view that there were not any ways the proposals could be formulated to further support the use of the Welsh language. The remaining response highlighted the importance of clear bilingual guidance to support the proposals. 

Final comments

Question 14: we have asked a number of specific questions. If you have any related points which we have not specifically addressed, please use this space to record them. 

Related points were made by 15 respondents. The most common view from professional or representative bodies, rating agents, businesses and individuals focused on concerns about the overall level of non-domestic rates liability. These comments generally stated that, if the multiplier was lower or more relief was provided for empty properties, there would be reduced incentives for avoidance. 

A small number of billing authorities highlighted ways in which greater support could be provided through increased funding for staff, local retention of revenue to incentivise tackling avoidance, as well as the potential for increased collaboration and partnership working. It was also noted that the proposals are welcomed and would increase billing authorities’ abilities to address avoidance without incurring significant legal costs. Some suggestions were also made for wider changes to the non-domestic rates system which could support billing authorities with collection and enforcement.

Other comments suggested evaluation of the effectiveness of the range of measures introduced since they were announced in 2018, simplification of the non-domestic rates system, and reiterated concerns that some of the proposals may capture arrangements made for reasons not related to avoidance. 

Government response

The Welsh Government acknowledges the range of views put forward in response to this consultation. We remain committed to delivering the full package of legislative measures to address non-domestic rates avoidance announced in 2018, to ensure that the efforts of the majority to pay what it due and the associated vital revenue stream for local services are not undermined. The imposition of liability on empty properties and the level of the multiplier are not considered to be reasonable excuses or justifications for avoidance.

Artificial avoidance arrangements

The primary concern raised by respondents opposed to the proposals to define artificial avoidance arrangements is that they could, in some cases, capture arrangements which do not result in avoidance or have not been made for that purpose. There are important safeguards inherent in the anti-avoidance framework and design of the proposals in this regard, as set out in the consultation. Firstly, an arrangement of a type specified in regulations will only meet the definition of an artificial avoidance arrangement if it results in an advantage (i.e. the avoidance or reduction of non-domestic rates liability). Secondly, a billing authority may determine that a particular arrangement is not artificial, having regard to all the circumstances of an individual case. Finally, a review and appeals process will also apply.

Taking account of the comments made in response to the consultation, the Welsh Government will include in the regulations a non-exhaustive range of circumstances which a billing authority may consider when making a determination that an arrangement is not artificial. These circumstances may include (but are not limited to):

• whether the occupier is or was operating a business whose predominant purpose is or was not related to reducing non-domestic rates liability
• the proportion of the hereditament that is or was being occupied to conduct the business operated by the occupier
• the period for which the hereditament is or was occupied
• whether the characteristics of the hereditament are compatible with the predominant purpose of the business it is or was being used to conduct

This approach would be expected to improve clarity and promote consistency between billing authorities, without eroding their ability to consider other relevant factors or risking unintended consequences. It also responds to the primary concern raised through the consultation, by emphasising and strengthening the safeguard that is intended and was supported by the majority of respondents. 

A range of known methods of avoidance were highlighted. The majority of these will either be captured by the proposals or fall outside the scope of the anti-avoidance framework (e.g. exploitation of exemptions, as explained in the consultation). The Welsh Government has considered the further potential arrangement raised by a billing authority, in which different parts of a property are sub-let to separate occupiers, but a single hereditament is shown in the relevant rating list. 

This situation should be capable of resolution under the existing legislative framework. Where the separate occupiers are in rateable occupation (meeting all relevant tests), the VOA will be required to split the property into multiple hereditaments and amend the rating list accordingly. In contrast, where separate rateable occupation is not established, the owner or main leaseholder remains the ratepayer for any or all of the original hereditament which is not split. The potential issue arises due to the time it may take for all relevant facts to be made available to the billing authority and the VOA.

A billing authority should become aware that a ratepayer seeks to argue they are not liable, when they refuse to make payment required by a demand notice (if it has not been made aware previously). Billing authorities and the VOA will be able to rely on their existing powers to request information relevant to determining whether a sub-let constitutes separate ratable occupation. The proposed duty to report changes of circumstances to billing authorities, together with the parallel duty to provide information to the VOA (which is focussed on the existence, extent and valuation of hereditaments), will help ensure any changes to rating lists and ratepayers are considered in a timely manner. The Welsh Government will continue to work with billing authorities and the VOA to monitor the prevalence of any issues arising from the time taken to consider and resolve relevant cases.  

Finally, some respondents questioned the capacity and expertise of billing authorities to apply the anti-avoidance framework. Billing authorities already invest considerable time and resources in dealing with avoidance activity where it arises, as part of their core administrative responsibilities for the collection and enforcement of non-domestic rates. The action they are able to take is, however, often limited by the tools available to them, outcomes of previous case law, and costs and risks associated with attempting to address individual cases of avoidance through the courts. As acknowledged by some consultation responses, these proposals have been developed in collaboration with billing authorities with the intent of reducing those barriers and increasing the effectiveness of their efforts to address avoidance. The Welsh Government is confident that billing authorities have the expertise required to identify and address avoidance of non-domestic rates, given the necessary tools.

Duty to report change of circumstances to billing authorities

The Welsh Government agrees with the prevailing view among respondents, whether they agreed with the proposals or not, that the duty for ratepayers to report changes of circumstances to billing authorities should be clearly and widely communicated to ensure awareness. To complement the annual reminder in statutory demand notices proposed in the consultation, we will work with billing authorities to ensure a range of other opportunities are taken to raise awareness about the obligations. These are intended to include updates to the information provided on Business Wales and billing authority websites, supported by more targeted communications.

Another common comment related to the potential for overlap with the separate duty to provide information to the VOA. These parallel duties have been designed to complement, rather than unnecessarily duplicate, each other (as set out in the consultation). It is equally necessary for billing authorities and the VOA to be notified of changes of ratepayer in a timely manner and the duties otherwise focus on separate matters directly related to their respective roles in the non-domestic rates system. The Welsh Government remains content that both duties are appropriate and does not consider it necessary to make any changes to duty proposed in the consultation, following consideration of the responses.

The Welsh Government will bring forward the regulations required to give effect to the proposals, taking account of the changes set out above. Subject to the approval of those regulations by the Senedd, the proposals will take effect from 1 April 2026.

Responses were received from the following:

• Caerphilly County Borough Council
• Chartered Institute of Taxation (CIOT)
• Co-op Group
• Colliers
• Cornerstone Mobile
• Denbighshire County Council
• Flintshire County Council
• Institute of Revenues, Rating and Valuation (IRRV)
• Isle of Anglesey County Council
• Langley Estates Limited
• Roberts Vain Wilshaw
• Royal Institution of Chartered Surveyors (RICS)
• The Association of Convenience Stores
• The Rating Surveyors’ Association
• The Shopkeepers’ Campaign
• Valuation Tribunal for Wales (VTW)
• WSP GL Hearn

8 respondents wished to remain anonymous (including 3 additional billing authorities and a professional body).