A “box shifting” rates mitigation scheme did not amount to occupation for non-domestic rating purposes where the sole purpose of placing items in the premises was to secure a rates saving.

Published: 6 August 2026
Authors: Sophie Tracey

The Court of Appeal has allowed the appeal in The Mayor and Commonalty and Citizens of the City of London (CoL) v 48th Street Holdings Limited and Principled Offsite Logistics Limited (POLL), holding that a “box shifting” rates mitigation scheme did not amount to occupation for non-domestic rating purposes where the sole purpose of placing items in the premises was to secure a rates saving. The decision reverses the High Court ruling discussed in our earlier article, Strategic occupation or rates loophole?, which had found the scheme effective.

Legal position

Liability for non-domestic rates arises through occupation under section 43 of the Local Government Finance Act 1988, or ownership of unoccupied property under section 45. Empty property relief is available to the owner for the first three months after premises become unoccupied. At the time the facts in this case arose, a period of occupation of at least six weeks (the “reset period”, now 13 weeks) was required before that relief could be claimed again.

The leading test for rateable occupation, from John Laing & Son Ltd v Assessment Committee for Kingswood Assessment Area, requires: actual occupation; exclusive occupation for the occupier’s purpose; occupation of some value or benefit to the occupier; and occupation that is not too transient. The appeal focused on whether POLL’s occupation provided any real value or benefit.

What happened?

The case concerned empty office units at 2 America Square, EC3. After the initial empty rates relief period expired, POLL took a short lease at a peppercorn rent and simultaneously served a break notice ending the lease after six weeks. During that period it placed boxes in the premises, accepted liability for rates and claimed to be the occupier. Once the lease ended, the boxes were removed and the owner claimed a fresh period of empty property relief. POLL received a share of the resulting rates saving.

It was common ground that the boxes served no business or commercial purpose and were present solely to create occupation for rating purposes. The lease was not a sham; the dispute was whether the arrangement amounted to occupation to constitute a reset period.

What did the court decide?

At first instance, the High Court followed R (Principled Offsite Logistics Ltd) v Trafford Council and held that POLL’s scheme was effective. It accepted that the benefit of the occupation was the rates mitigation achieved by the arrangement.

The Court of Appeal disagreed and held that the Trafford Council case was wrongly decided. Relying on the Supreme Court’s reasoning in Rossendale BC v Hurstwood Properties, it emphasised that the empty rates regime is intended to discourage properties being left vacant and encourage productive use.

Applying a purposive interpretation, the Court held that Parliament cannot have intended temporary placement of items in an otherwise empty property to constitute occupation where there is no commercial or business purpose beyond rates mitigation. The Court described the arrangement as “pure rate mitigation occupation”.

The Court rejected the argument that the rates saving itself supplied the necessary benefit. That reasoning was circular. While storage can amount to occupation where the stored items have utility to the occupier, occupation must have some independent use, value or benefit. Activity undertaken solely to obtain a rates saving cannot satisfy that requirement.

The Court stressed this was not a motive test. Occupation may still qualify even where reducing rates is one objective, provided the occupation has genuine utility beyond the tax advantage. The difficulty for POLL was that the alleged benefit was the rates saving itself.

What next?

The judgment is a significant setback for intermittent occupation schemes that rely on minimal activity with no independent purpose. Owners, occupiers and advisers should review existing arrangements and consider whether the occupation has genuine commercial or practical utility. Rates mitigation remains possible, but only where occupation has a real use, value or benefit beyond securing a rate saving.

Sophie Tracey, Real Estate Litigation Principal Associate and a rating expert at Shoosmiths, comments: “This decision is likely to signal the end of many rates mitigation schemes based on token occupation. While the Court confirmed that occupation need not be wholly commercial in nature, it must provide a genuine use, value or benefit beyond the rates saving itself. Property owners and occupiers should therefore review existing arrangements carefully, as the courts are increasingly willing to assess such schemes against the underlying purpose of the rating regime.”