Empty Leeds businesses cost taxpayers more than £100m in five years

The owners of empty shops, offices and warehouses in England do not have to pay business rates for three months when they close down or move out.

In Leeds, this tax relief cost taxpayers £18.2m in the 2018/19 financial year alone.

In the past five years it has cost taxpayers a total of £102m, according to a BBC local news partnership report on the hidden cost of empty businesses.

More than 2,500 empty business units in Leeds are eligible for the tax relief, which is It expected to cost taxpayers a further £19m in the 2019/20 financial year.

Leeds City Council loses out on around four to give per cent of its business rates income as a result of the national policy.

The aim of the tax relief is to allow for property investment and give landlords time to find a new occupant.

The system pits councils' interests - who want stable income - against the business community, experts say.

The report found that some local authorities lose out on up to six per cent of their business rates income through the tax relief, with more than £1bn lost to local authorities across England and Wales.

There are calls for urgent reform to the system in the wake of closures of major high street retailers and businesses migrating from shop premises to operating solely online.

Some businesses can get extended empty property relief. Industrial premises, for example, are exempt for a further three months and listed buildings are exempt indefinitely.

Not all the potential income lost through empty rates relief would be retained by the local authority.

Under current legislation, around half of business rates collected is retained by the local authority and the rest is returned to the government for redistribution.

Dr Kevin Muldoon-Smith of Northumbria University, who has provided evidence to a select committee on business rates, said: "Business rates, along with council tax, will be very critical to the stability of local authority finances going forward because of central government grants being reduced.

“Unfortunately, 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.”

“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.”

A Treasury spokesperson said: “Empty property relief strikes a balance between incentivising property owners to put vacant properties to use, while not penalising those who lose a tenant at short notice.

“Whilst the rate of business rates collection varies between individual authorities, the local government finance system has been designed so that business rates income is redistributed across the country according to the needs of local areas.

“We will announce further details of the business rates review in due course.”