Viewpoint - 07/10/2013

Empty property: courts reward absolute compliance

Two increasingly popular routes to the legitimate avoidance of business rates tax are to exercise rights under Empty Property Rate (EPR) and charitable relief legislation.

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In the former case, businesses occupy and then vacate premises in order to take advantage of relief available during regular three or six month void periods. In the latter case, registered charities are statutorily entitled to 80% relief from business rates.

In order to make a successful claim, it is vital that the claimant is able to demonstrate absolute compliance with the letter of the law. Failure to do so provides local authorities, motivated by budget constraints, with the opportunity to argue in the courts that these applications ought to be set aside.

Unsuccessful claims risk complete business failure

In such an event, the impact upon a business or charity can be dramatic. The rejection of a claim by the charity ‘Kenya Aid Programme’ for 80% charitable relief on business rates for two warehouses has left the charity with a rates bill of £3.3m. With a reported annual income of just £81,000, the likely impact of the rejection appears clear.

There can often be confusion between two distinct areas of rates relief legislation. In the case of PSCT, a charity which places Bluetooth transmitters in offices and transmits public service information to local communities, the charity claimed 80% relief from a number of local authorities under charitable relief legislation. In the resulting process of appeal and counter appeal, the High Court has judged that PSCT failed to comply with the requirement that the offices be used “wholly or mainly” for the purposes of the charity or other charities. Even though the charity required access to the entire property in order to maintain the transmitters, their claim failed. They now face a combined rates bill of just under £2m, yet their accounts are reported to show a surplus of just £45,000.

Claim decisions rest on a knife-edge

On what appears on the surface to be a similar business, CMM, a Bluetooth marketing company, positioned its transmitters in offices, then vacated the premises after 42 days occupation and applied for EPR relief. At the end of the three month void period, it re-occupied the premises and planned to continue with this rates mitigation strategy, to the financial advantage of CMM and the landlord.

The CMM case echoes in many ways the recent Makro case (MSSWL vs Nuneaton and Bedworth BC) in which Makro successfully argued that a pallet of business-relevant documents held in a vast warehouse constituted beneficial occupation. Its claim for EPR relief was upheld. In the case of CMM, the Bluetooth transmitters were also deemed to constitute beneficial occupation. Their claim was also upheld.

Courts will uphold the law

There is little doubt that local authorities are frustrated at what they perceive to be the abuse of the system of rates relief. However, the courts are clear that their role is to uphold the law rather than offer opinion. Those businesses which seek good advice and comply absolutely with the letter of the law will clearly have the backing of the courts.


This article is part of the autumn 2013 edition of Rating in Brief.

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