Should I be worried about new partner's business rates dodge scheme?

I am currently looking at taking the lease of a large room in a shop. This will mean going into partnership with the existing longstanding tenant as it is an antiques shop and we propose to take it in turns to run the shop which will mean selling one another's stock through the same till with money going through the same account and then being split at the end of the month. There are three rooms in the shop each with their own separate lease. One will be mine outright, the other will be my prospective partner's outright. The third room is more complicated as it is currently in the joint name of my prospective partner (Call him Mr R) and another individual (Mr S). I queried this with Mr R and he told me that Mr S has no involvement whatsoever in the running of the shop but is in fact an elderly friend who agreed to put his name on the lease of the third room in order that Mr R can avoid paying business rates (due to the premises being over a certain number of square feet). Each month Mr R pays a standing order of rent into Mr S's account which is then debited out by the landlord - in effect therefore Mr R pays the landlord with the money passing through Mr S's account. Furthermore Mr R informed me that during the coronavirus lockdown the local council provided a grant of £10,000 to local businesses but that because Mr S is also on the lease he also received £10,000 which Mr R promptly appropriated - so in effect Mr R gained a £20,000 coronavirus grant relief whereas everybody else got £10,000. I should add that I have met Mr S and, although elderly, he is in perfect control of his faculties, is well aware of the arrangement and was perfectly happy for Mr R to have his grant so is therefore not being exploited in any way however it is very clear to me that Mr R is 'playing smart' with the local council. My question is whether or not Mr R is acting legally. Is he really allowed to use such a ploy to get out of paying business rates? Was Mr S really entitled to the local council's handout? I would not go into business with somebody who is acting illegally not least because I would imagine that should Mr R not be entitled to the money he has both received and saved he would most likely have to repay the grant as well as being hit with numerous financial charges which would as likely as not cause him severe financial difficulty which would have a knock on effect on my business. I should further add I am not looking to 'grass Mr R up' - as far as I am concerned this is none of my business, it would simply mean I would not go into partnership with him. 

Comments

  • richardw
    richardw Posts: 19,458 Forumite
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    Does each part have their own entrance  and electric meters ? If not, are they really separate?
    Posts are not advice and must not be relied upon.
  • lincroft1710
    lincroft1710 Posts: 17,612 Forumite
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    So you suspect someone of defrauding the council and want to go into business with him?

    Your civic duty would be to enquire of the council if this individual's actions were unlawful.
    If you are querying your Council Tax band would you please state whether you are in England, Scotland or Wales
  • monewden
    monewden Posts: 10 Forumite
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    So you suspect someone of defrauding the council and want to go into business with him?

    Your civic duty would be to enquire of the council if this individual's actions were unlawful.
    No, I suspect somebody of defrauding the council and am seeking clarification on whether their actions are indeed illegal. I suspect somebody of defrauding the council and am thinking of not going into business with them because of it. If these actions are illegal I will not go into business with them. If they are exploiting a tried and tested loophole there's not very much I can say.
  • monewden
    monewden Posts: 10 Forumite
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    richardw said:
    Does each part have their own entrance  and electric meters ? If not, are they really separate?

    Not at all seperate as the two rooms are a continuation of Mr R's business with the same sort of items being sold, accessed through the same front door but with seperate electric meters.
  • tacpot12
    tacpot12 Posts: 7,929 Forumite
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    The arrangement is fraudulent as the council is being duped out of collecting rates that it is entitled to collect. If/when the arrangement is discovered, R and S (and possibly yourself if you go into business together) will find yourself having to repay all the rates that were not paid, which would likely bankrupt all of you. Mr S. should consider his relationship with Mr. R as his friend (R) is not behaving as a friend should.

    The Coronavirus relief would have been obtained fraudulently and will be repayable immediately. When you see council services being decimated in your area, you now know that some of the blame rests on locals rather than central government or the councillors. 

    My advice is that you should tell R the reason why you are not entering to partnership with them, but that you will not shop them. Then shop them in about 18 months time when R will not connect it with yourself. 
    The comments I post are my personal opinion. While I try to check everything is correct before posting, I can and do make mistakes, so always try to check official information sources before relying on my posts.
  • Mistral001
    Mistral001 Posts: 5,349 Forumite
    First Anniversary Name Dropper First Post I've been Money Tipped!
    I would have thought that it is illegal.  If it wasn't, then every small shop in the land would divide their premises up like this so as not to pay business rates.  It is a bit like dividing a business up into sections so that each section fall below the VAT registration threshold, which is illegal.   
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