Labour vow crackdown on rogue American candy stores

The Labour Party today [26 December] has vowed to crack down on American-style candy stores that have blighted Britain’s high streets and avoided paying the business rates they owe. 

In recent years, Britain’s high streets have been blighted by the rise of US-themed sweet stores, including more than 20 that are currently open on London’s Oxford Street. Landlords facing the prospect of long-term empty shops choose the stores because they offer to pay minimal rents and take on the business rate liability. 

However, the stores are almost always run out of shell companies that have no assets and fabricated company directors, and they avoid paying business rates.  Westminster City Council is currently investigating unpaid business rates of around £9 million from 26 shops on Oxford Street. £1 million of counterfeit and illegal goods has been seized by the Council over the past 18 months, including unsafe vapes.  

As shoppers hit the high streets for the Boxing Day sales, Labour has promised to breathe new life to Britain’s high streets and called on the Government to clamp down on the tacky shops that are blighting our communities and ripping off the taxpayer. 

Shadow Financial Secretary James Murray has pledged that a future Labour government would work with councils to support local high streets and is calling on the Government to trial a ‘new shops bonus’ in Westminster for legitimate businesses opening-up on the high street.  

Under the proposals, shop owners would be offered a three-month business rates holiday for months seven to nine of their first year in new premises. Applying it for months seven to nine helps to make sure a new business is viable and legitimate before it benefits from taxpayer support. 

The business rate discount would be paid for by reallocating funding currently used to provide ‘empty property relief.’ Empty property relief currently applies for three months, starting from when the property becomes empty. However, this relief will almost always go entirely to the landlord, rather than helping new tenants. 

Labour has also pledged to use the powers under the Economic Crime Act to toughen up the identity requirements for someone setting up a new company to help councils chase down businesses that do not pay their bills. 

James Murray MP, Labour’s Shadow Financial Secretary for the Treasury, said: 

“Millions of us will be heading to the shops in the coming days to take advantage of the Boxing Day sales. However, the sharp rise in dodgy candy stores has been blighting high streets and ripping off the taxpayer. 

“We are calling on the Government to work with councils, including Westminster City Council, to incentivise legitimate businesses to open-up on the high street - rather than these shell companies that avoid paying their bills and commit other offences. 

“In government, Labour would replace business rates with a new system, and we would use powers in the Economic Crime Act to crack down on rip-off businesses and make sure there are proper checks in place when companies are being set up.” 

Cllr Adam Hug, Leader of Westminster City Council, added: 

“Like councils right across Britain, we want to restore our high streets as the proud centres of local shopping and social life they should be.  

“We have reduced candy stores on Oxford Street by a third, but there is only so much we can do without national government playing its part too.  

“That is why giving us these new powers would be a very welcome and important change to help us go much further, so we can make sure London’s West End has the buzz it deserves this Christmas and beyond.” 

Ends  

Notes

Rise in US-style candy stores 

• Oxford Street is Europe’s busiest shopping street and England’s biggest high street.  
• However, in recent years landlords facing the prospect of long-term empty shops have been letting premises to so-called American candy stores that offer to pay minimal rents and take on the business rate liability. 
• In practice, these candy stores frequently avoid paying business rates by registering a fake company with invented directors, and they are often suspected of being fronts for money laundering by international criminal gangs. 
• Westminster City Council is forced to pursue business rates liabilities through expensive court proceedings, but recovery of business rates is impossible, as the companies are shells. 
• The Council is currently investigating unpaid business rates of around £9m from 26 shops on Oxford Street and continues to pursue these debts.  
• British businesses who pay their rates are being undercut by international money launderers, and long-term damage is done to Oxford Street’s important contribution to the national economy. 

New shop bonus 

• Labour is calling on the Government to give Westminster the power to convert the existing ‘empty property relief’ into a ‘new shop bonus’ to give a boost to legitimate businesses setting up new shops. 

• Empty property relief currently applies for three months, starting from when the property becomes empty. This relief will almost always go entirely to the landlord, rather than helping new tenants. 

• Labour wants the Government to give councils, including Westminster City Council, the power to convert the relief into a ‘new shop bonus’. The bonus would deliver three months’ worth of rate relief that applies for months seven to nine of a new tenant’s first year in a premises. 

• Applying it for months seven to nine helps to make sure a new business is viable and legitimate before it benefits from the support. 

• Westminster City Council forecasts this change would be at least cost neutral, because there is no increase in the level of financial relief on offer. It is likely to fiscally positive overall, as it would increase the number of tenants with a track record of paying their rates, and it would remove the opportunity for landlords to abuse empty property relief. 

Using the powers in the Economic Crime Act 

• Labour is calling for tougher identity verification requirements for new companies, as this would strengthen councils’ ability to enforce against businesses who do not pay their bills. 

• Councils’ ability to recover public money is very challenging, as bad faith actors are exploiting the lack of enforcement from Companies House to set up shell companies with fake directors. 

• The Economic Crime Act creates two new powers to specify verification requirements for new companies with Companies House, and these powers are delegated by the Act to the Secretary of State. 

• Section 1110B of the Act enables the Secretary of State to set the verification requirements for company directors’ ID, and section 1110A(4) enables the Secretary of State to set requirements of a verification statement from a third party agent. 

• Labour is calling on the Secretary of State to immediately make use of these powers to set strong requirements that cannot easily be circumvented.