COMPANIES that use “legal but unethical” schemes to avoid paying their business rates create a huge strain on Council budgets, Councillors have been told.

Martin Stubbs, assistant director of Revenue and Benefits at Bradford Council, said the authority faced huge challenges in collecting all the business rates owed, from companies going bust owing hundreds of thousands of pounds to others that use avoidance schemes to get out of paying what they owe.

He was addressing members of the Council’s Corporate Scrutiny Committee last night. A report to the committee had revealed the Council wrote off £2.9 million in unpaid business rates last year.

Bradford Council collects rates from all businesses in the district, and keep 49 per cent. Fifty per cent is paid to central government, and one per cent is paid to the West Yorkshire Fire Authority.

Last year the Council was due to receive over £140.7 million in business rates, although over 2.4 per cent of this went uncollected.

Discussing collecting the rates, Mr Stubbs said: “It can be really difficult. Just a couple of companies going bust can effect the amount of business rates we get by millions of pounds. Council tax collection rates remain roughly the same, but if one or two businesses go bust and leave a big debt outstanding, it can really effect our budgets.

“Business rates are a very different beast than Council Tax, sometimes we end up having to write hundreds or thousands off. Ultimately if a business goes bust there is not much we can do to get that money back.”

Members heard that avoidance schemes were also hampering the Council’s ability to collect business rates. The A report said; “Increasingly, some businesses are turning to avoidance techniques to remove or minimise their liability, or seek to evade paying their business rate bill altogether. Using the ‘system’ to avoid or minimise business rate liability is not illegal, but it does reduce the amount of business rates the Council is able to collect. There are companies that specialise in assisting owners in arranging for avoidance schemes to take place on their premises. In addition, rating agents and property management companies are increasingly using avoidance techniques to save their clients money.”

Mr Stubbs told members a huge amount of officer time was spent challenging these techniques, which he described as “not illegal, but unethical.”

He added: “We spend a lot of time challenging these, it is quite pricey in terms of resources. Avoidance techniques are the single biggest challenge we face in collecting business rates.”

The City Ward was the biggest contributor to business rates, bringing in almost £31 million last year. The next biggest contributor was Tong, bringing in £13 million.