The government has taken the long-awaited step of protecting companies in administration from paying business rates on unoccupied properties.

The move reverses the effect of the Trident ruling, where the courts found that council business rates should be treated as a preferential creditors in an administration.

Insolvency experts warned that Trident had put back insolvency rules by 20 years and would cause many retailers to collapse.

The Insolvency Service has been mulling over the impact of Trident since March last year to see whether the decision ran against the government’s rescue culture.

‘We would certainly not want the rescue culture fostered by the new style administration regime to be jeopardised, if that indeed were to be the effect of the judgment,’ it stated at the time.

Since then, the government has decided that Trident does indeed pose a risk to the ‘rescue culture’ and before Christmas announced a partial reversal of the decision.

‘A permanent exemption will remove any potential for decisions about whether to enter administration to be distorted by differences in rates liability,’ says local government minister John Healey. ‘We are committed to the promotion of a culture that provides opportunities for insolvent companies that have viable underlying businesses to be rescued wherever possible.’

President of R3 Patricia Godfrey says the decision couldn’t have been better timed for retailers: ‘With the effects of the credit crunch increasingly likely to be felt in the New Year, this move will help administrators save business and jobs.’

Mercer & Hole business recovery partner Chris Laughton agrees, highlighting the credit crunch as likely to lead to more retail insolvencies. Removing the preferential treatment on business rates for unoccupied properties would save businesses.

‘The decision will help what will be a higher number of retail insolvencies than last year,’ Laughton says.

Before Trident administrators stopped paying business rates on any properties, unoccupied or not, during insolvency proceedings. Trident had tipped the balance too far against insolvency practitioners.