The High Court in The Mayor and Commonality and Citizens of the City of London v 48th Street Holding Ltd and Principled Offsite Logistics Ltd [2025] EWHC 1130 (KB) provides support to commercial landlords' use of rates mitigation strategies through intermittent occupation with cardboard boxes.
The City of London ("Claimant") issued a claim against 48th Street Holding Limited ("First Defendant") and Principled Offsite Logistics Limited ("Second Defendant") to recover business rates.
Background
The First Defendant is the landlord of various commercial premises situated in London. When a premises became vacant, they claimed a three-month exemption from liability for unoccupied business rates.
Once the initial exemption expired, the First Defendant granted a short-term lease lasting (by immediate service of a break notice) six weeks to the Second Defendant, during which time the Second Defendant stored cardboard boxes at the premises.
Once the lease terminated, the boxes were removed. On the basis that storing boxes constituted occupation, the First Defendant claimed a right to a further three-month exemption.
This cycle was repeated on multiple occasions and ultimately reduced liability for unoccupied rates by 67%.
The Claimant argued that the occupation was artificial and served no genuine purpose beyond avoiding tax. Therefore, it was claimed, the First Defendant should not be entitled to any exemption from liability for unoccupied business rates.
Claimant's position
The Claimant sought to recover business rates and argued that: -
1) The scheme should be scrutinised under the Ramsay anti-avoidance approach (as applied in Hurstwood Properties Ltd v Rossendale), which requires the courts to respect the underlying intention of parliament. It was argued that parliament did not intend for occupation to be artificially generated to avoid business rates. Hence, storing boxes to avoid paying tax was contrary to the spirit of the legislation and was a deliberate attempt to avoid business rates liability.
2) In the alternative, the occupation in question failed to satisfy the "Laing Ingredients." i.e. the criteria required to be in rateable occupation. Occupation needs to be actual, exclusive possession, of beneficial use to the occupier with volition to occupy. The Claimant argued that the only occupational benefit arose from avoidance of rates, and that storing boxes in the property did not constitute a genuine or beneficial use.
The Decision
The Court rejected the Claimant's argument and held that whilst the scheme was undoubtedly motivated by the desire to reduce business rates, it still operated lawfully within the current legislative framework.
Furthermore, the Court found that the legal requirements for rateable occupation had been satisfied. The Second Defendant's use of the property to store boxes was found to be genuine, exclusive and beneficial – even if the purpose of occupation was to obtain a tax advantage.
This decision reinforces that the Court will give effect to the statue as written, since to deviate from this would generate "undesirable uncertainty". The Court took succour from Parliament considering schemes such as this one recently and not regulating against them. Legislators chose, instead, by The Non-Domestic Rating (Unoccupied Property) (England) (Amendment) Regulations 2024 to reduce the attractiveness of such schemes by extending the temporary occupation requirement from 6 weeks to 13 weeks.
In conclusion, the Court upheld such rates mitigation schemes as lawful and provides clarity to landlords when seeking to use temporary occupation to reduce business rates.
