Viewpoint - 12/04/2013

Empty rates avoidance: courts side with business

The trickle of case law precedent which underpins the rights of landlords and occupiers to avoid, in certain circumstances, the despised Empty Property Rate (EPR) liability, is in danger of turning into a flood.

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Businesses make a stand against EPR legislation

Last summer, the high profile Makro Properties case made a mockery of the de minimis principle of business rates. The firm successfully argued that a pallet of documents which covered just 0.2% of the floor space of a warehouse was sufficient to claim occupation, and therefore exercise rights under the existing EPR relief legislation.

In an unrelated case, the Oyston Angel charitable trust successfully argued under Section 45A of the Local Government Finance Act that, as its tenancy agreement with the owners of Oyston Mill expressly stated that the charity was responsible for business rates and excluded the sub-letting of space for non-charitable use, any empty units at the Mill under licence to the Trust ought to be zero-rated for rating purposes.

Technological occupation approved

There have also been a number of recent cases involving the use of Bluetooth short-wave mobile phone messaging services which employ small amounts of office space close to busy commercial centres. The services push marketing messages to mobile phone users as they roam nearby. In the most recent case, which is heading for the High Court in June, the owners of a building in Sunderland rented an office to a Bluetooth service provider for six weeks at a peppercorn rent. The service provider set-up a Bluetooth server on a windowsill and proceeded to deliver its service. On receipt of an EPR demand from the city council, the owners of the property successfully argued before a magistrate that the property was occupied.

Finding in favour of the owners, the magistrate absolutely rejected the council’s claim that ‘substantial use’ of the property was an occupying criterion, and accepted that the four recognised criteria for occupation had been met:

  • Actual occupation
  • Exclusive occupation
  • Beneficial occupation
  • Non-transient occupation

Businesses taunt the government over loopholes

Such cases illustrate that business rates appear to be unable to keep up with the application of new technology and the evolution of commercial business models. Further, the government’s rhetoric on the closure of business tax loopholes remains a paper tiger, succeeding only in further distancing businesses from actively supporting policy goals.

In a perverse role-reversal, local authorities are now just as likely to be seeking to prove non-occupation in the courts as they are to be seeking to prove occupation. They, and the government, cannot reasonably expect to win both sides of this argument.


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

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