The latest Court of Appeal judgement may signal uncertain times ahead for property owners.
Regarding a mitigation strategy whereby empty relief was retriggered by a third party using commercially worthless boxes simply to ‘plant a flag of occupation’ for the required period, The Mayor and Commonalty and Citizens of the City of London v 48th Street Holdings Limited & Anor the court overturns POLL v Trafford and finds that a property is not in fact occupied if:
- the sole aim is to generate occupation for the purposes of relief
- there is no commercial or business purpose save for rate mitigation
- the putative occupation is “beneficial” only due to the claimed rate mitigation benefits
The good news is this case very specifically considers occupation with absolutely no purpose other than to claim relief. It does not overturn decisions like Makro or PHE v Harlow where the goods stored had some commercial purpose to the ratepayer; and don’t let your Billing Authority tell you it does!
However ratepayers will likely now need to be able to prove there is some commercial/business value in their occupation.
So does this mean you are safe with existing strategies involving:
- Genuine storage of goods or documents?
- Charities on low or peppercorn rents?
- Meanwhile use pop-ups/art installations?
Yes… for now.
The judgement ends on an ominous note, directly encouraging local government authorities to take it a step further and see how far this slippery slope can go:
“It is a well-established part of the Ramsay principle that a commercially irrelevant contingency or condition included in a scheme in order to secure a fiscal advantage can be ignored”
In short, if they can disregard occupation if it has no commercial value, the obvious next question is whether an occupation that only has a little commercial value should count? Future cases may ask how valuable those documents actually are? Why are you storing the furniture here rather than there? Does that charity actually need all that space? What if it is commercially valuable, but not worth as much as the business rates? Does the main purpose need to be avoiding the rates bill, or is it enough for avoidance to merely be a contributing factor?
The English government have long discussed and consulted on general anti-avoidance rules (GAAR) and are clearly, rightly, cautious about how they design a framework for this. This decision sets the stage for the courts to implement GAAR by the back door, avoiding all of that tedious research, impact assessment and democratic oversight! Instead we may soon have a system imposed upon us in which your Billing Authority routinely adjusts your property tax based on the purity of your motives.
The irony is that in attempting to limit ratepayers discretion over the definition of the word ‘occupied’, the court risks granting Billing Authorities astonishing discretion over the application of Non-Domestic Rating legislation in it’s entirety. Was that the intention of Parliament?
We wait to see whether an appeal to the Supreme Court is granted approval.
