Business rates: Box shifting mitigation scheme

The Court of Appeal has, in terms of rating, “opened the box”. The result is that billing authorities will be “taking the money”.

Occupation

Section 45, Local Government Finance Act 1988 (LGFA) imposes rating liability on the owner of a hereditament where “none of the hereditament is occupied”, subject to further detail in regulations. The current regulations exclude from unoccupied rates any hereditament which, subject to further detail, “has been unoccupied for a continuous period not exceeding three months”.

What do “occupied” and, hence, “unoccupied” mean in this context?

A box shifting appeal

The question came up in an appeal to the Court of Appeal concerning a box shifting mitigation scheme promoted by Principled Offsite Logistics Limited. This involved the placing of boxes with redundant contents in otherwise unoccupied premises on a recurrent basis. Rinse, repeat, as it were.

The Court held that Section 45(1) LGFA does not mean that placing items in an otherwise unoccupied hereditament amounts to occupation where:

• the sole aim of doing so is to generate occupation for the purposes of those provisions,
• there is no commercial or business purpose save for rates mitigation; and
• the putative occupation is “beneficial” only due to the claimed rates mitigation benefits.

The purpose of the statute

We must interpret statutes purposively. The purpose or aim of the unoccupied rates legislation is to deter owners from leaving property unoccupied and to encourage them to bring empty property back into use.

The fact that the use of property is not profitable, or indeed that the making of profit is prohibited, does not preclude beneficial occupation. However,the legislature cannot sensibly be taken to have intended that the LGFA and its regulations should have the effect that;

• the temporary placement of items in an otherwise unoccupied hereditament amounts to occupation where the sole aim of doing so is to generate occupation for the purposes of those provisions;
• there is no commercial or business purpose save for rates mitigation; and
• the putative occupation is “beneficial” only due to the claimed rate mitigation benefits.

Utility, value or benefit?

Pure rate mitigation occupation has no independent utility, value or benefit. The items temporarily placed in the otherwise empty premises are not there to be stored or for any other purpose apart from achieving “occupation” after a period of non-occupation.

Activity that has some utility, value or benefit, independently of rating legislation, can lead to occupation. Eccentric or whimsical use can amount to occupation. What matters is the utility, value or benefit of the activity from the perspective of the particular occupier. The storage of items that others may regard as having no intrinsic value, but which an occupier wishes to retain for his own reasons, has a utility or benefit for that occupier.

Conclusions

“Occupation” for the sake of it, and which has no use, value or benefit other than rate saving, does not amount to occupation for these purposes.

This decision relates to pure rate mitigation occupation. It does not challenge other forms of box shifting scheme. There was, however, a hint from the Court that where a commercially irrelevant feature was included in a scheme in order to secure a fiscal advantage, it might be ignored. This would need consideration in a case where that point arose.

60 years of hurt

Unoccupied property was first made rateable by legislation passed in 1966. This regime has become progressively stricter. For the moment, this decision seals 60 years of hurt for the owners of unoccupied, rateable properties.

Perhaps POLL will seek permission to appeal to the Supreme Court?

See City of London Corporation v 48th street The Mayor and Commonalty and Citizens of the City of London – and – (1) 48th Street Holdings Limited (2) Principled Offsite Logistics Limited [2026] EWCA Civ 970