Thinking outside the box - considering rates mitigation schemes and intermittent occupation

The  case of The Mayor and Commonality and Citizens of The City of London (“COL”) v 48th Street Holding Ltd and another [2025] EWHC 1130 (KB) considered the legality of a rates mitigation scheme involving placing boxes in the premises. 

Since the tightening of non-domestic rates (NDR) relief rules in 2008, an entire industry has sprung up offering mitigation schemes to fill otherwise vacant commercial properties – whether the occupier is a charity, property guardian, or a more imaginative setup such as a company placed in intentional voluntary liquidation or even a ‘shell company’ snail farm.

A recent case of The Mayor and Commonality and Citizens of The City of London (“COL”) v 48th Street Holding Ltd and another company [2025] EWHC 1130 (KB), considered the legality of a scheme involving the relatively simple act of placing boxes within the premises.

The question was whether storing those boxes constituted “occupation” of the premises, thereby entitling the ratepayer to an exemption from NDR.

The law

Under the Local Government Finance Act 1988, as amended by the Non-Domestic Rating Act 2023, liability for NDR arises either through occupation (s.43) or ownership of unoccupied property (s.45).

The four classic “ingredients” of rateable occupation, as set out in John Laing & Son v Assessment for Kingswood Assessment Area [1949] and more recently endorsed in the seminal judgment in Cardtronics UK Ltd v Sykes [2020], are:

1. Actual occupation;
2. Exclusive occupation for the particular purpose of the possessor;
3. The possession must be of some value or benefit to the possessor; and
4. The possession must not be for too transient a period. 

Relief from NDR is available for empty commercial properties, but only for three months, after which full rates apply.

However, the 2008 Regulations also state that a break in the property being vacant for more than six weeks resets that exemption period, allowing the ratepayer to continue to benefit from relief. It is worth noting that this break period was extended to 13 weeks by further regulations in 2023, but the claim in this case related to the earlier rules.

The scheme

The main arguments in this case were not made by the first defendant, 48th Street Holdings Ltd, but by the company it had employed to manage its liability for business rates – the second defendant, Principled Offsite Logistics Ltd (“POLL”).

POLL’s business model involves the use of “intermittent occupation schemes”, where a lease is granted to POLL and, at the same time, a break notice is served, meaning that the occupation is limited – in this case, to six weeks only. During the term of the lease, boxes are placed in the premises, meaning that POLL is liable for (and required to pay) occupied rates during that period. Once the lease ends, a further three-month exemption period arises.

POLL has inevitably been involved in various legal disputes with billing authorities in England, but the case of R (POLL) v Trafford Council (2018) had already found that their business model constituted beneficial occupation for rating purposes.

The case

The defendant, 48th Street Holding Ltd, leased vacant office premises and employed the services of POLL to mitigate their rates liability.

The Local Authority sought to recover £111,475.30 in unpaid NDR, arguing that the scheme was an artificial tax avoidance device and that the storage of boxes at the premises did not constitute rateable occupation. It was common ground that the placing of boxes in the premises served no commercial or business purposes other than rate mitigation.

The judgment

The judge found that POLL’s scheme did not involve illegality or sham transactions. In particular, the court focussed on the purpose of the legislation.

The key argument in POLL’s favour was that the 2008 and 2023 Regulations preserved the definition of “occupation” - notwithstanding it was aware of the various mitigation schemes used by ratepayers, Parliament had chosen not to amend that definition or to “address the mischief”.

The court therefore found no compelling reason not to follow the previous decision in POLL v Trafford – its general role is to interpret the existing legislative framework and consider its statutory purpose.

On that basis, the scheme was of value or benefit to POLL and did constitute occupation for POLL’s business purpose i.e. rates mitigation. The occupation therefore reset the three-month exemption period each time – meaning that 48th Street Holding Ltd was not liable for NDR, nor was the Local Authority entitled to obtain declaratory relief.

Sophie Tracey, Property Litigation Principal Associate and a rating expert at Shoosmiths, comments: “This judgment is a useful reaffirmation that lawful, albeit strategic, occupation remains valid for rating purposes.

“It underscores that the courts will assess the substance of use over the motive behind it, providing clarity for landlords and advisers navigating the fine line between mitigation and manipulation. While local authorities may wish to close the loophole, it would ultimately be a matter for Parliament to consider.”