The consultation, open until 12 August 2025, outlines legislative proposals that aim to close loopholes long exploited through schemes such as snail farms, box shifting, and other artificial uses of commercial property.
By refining the definition of what constitutes "artificial occupation," the Welsh Government intends to expand the reach of its anti-avoidance framework, originally established in 2018. Under this framework, local billing authorities would have the power to financially neutralise any benefit gained from tax avoidance schemes by imposing counteracting measures or penalties. In addition, the consultation proposes the introduction of a new statutory duty requiring ratepayers to inform billing authorities of key changes, including occupancy status and tenancy transitions. This would significantly improve the accuracy of local business rate billing, particularly in cases where current occupiers vacate without notifying authorities, a common tactic that leads to underreported liability and lower rates payments that fund their vital services.
For SMEs, these measures could be transformative. Historically, large landlords, corporations and even some government departments, advised by ruthless rates advisers, have been able to use legal technicalities to reduce or eliminate their business rates liability, disproportionately burdening smaller businesses that operate transparently. By closing these gaps, Wales is helping to level the playing field, ensuring that SMEs are not left to carry an unfair share of the financial load.
Furthermore, reducing avoidance will free up public funds that can be reinvested into local infrastructure and services-resources upon which many small businesses depend. The Local Government Association has previously estimated that councils in England lose around £250 million annually due to rates avoidance. These losses translate into higher council taxes and fewer local services, both of which place additional strain on small businesses.
The implications are not just financial. Empty commercial properties-often left unoccupied under avoidance schemes-undermine town centres, high streets, and local economies. They represent missed opportunities for thriving local enterprises and are frequently visual blights that discourage footfall and become a hub and haven for anti-social behaviour and squatters. A robust business rates system incentivises proper occupancy and discourages any unfair uses that trigger unintended tax shelters.
Ethical alternatives to empty rates avoidance already exist. Organisations like ASTOP, which partners with charitable organisations to temporarily occupy vacant properties, demonstrate how vacant space can be repurposed for social good. These arrangements qualify for charitable rate relief, giving landlords a legal, ethical route to reduce liabilities while supporting their communities. Wales's consultation framework strengthens the case for such mutually beneficial models by deterring exploitative behaviour and promoting legitimate alternatives.
The broader UK should take note. While Scotland has already enacted even tougher regulations, England continues to lag behind, despite growing evidence that avoidance is contributing to significant financial distress in some local authorities. Birmingham City Council's high-profile declaration of effective bankruptcy in 2023 highlighted just how urgent the need for reform has become. Councils cannot afford to continue losing millions due to legal grey areas that benefit only a few at the expense of many.
The Welsh proposals are pragmatic and enforceable. They offer a roadmap for business rates fairness that protects public funds, supports genuine business activity, and bolsters local economies. Most importantly, they provide SMEs with the assurance that the system will no longer reward those who opt out of it by closing the inadvertent loopholes being abused.
Wales has made its stance clear: property owners must either pay their fair share or utilise their spaces in ways that contribute positively to society. England and the rest of the UK would be wise to follow suit.
