A scheme to help owners of unoccupied properties avoid paying empty-property business rates came under scrutiny today at the Court of Appeal.
Under the arrangement, a ratepayer leases empty premises to a company specially set up to make it liable for the tax, not the original ratepayer.
It has implications beyond the named defendants and councils. According to an earlier ruling, at least 25 similar cases have been filed.
The case has gone to the Court of Appeal via a strikeout application made at a High Court hearing in Liverpool last year.
A council had sued the provider of the scheme, claiming the mechanism was impermissible. The provider responded with a strikeout application, saying that the council’s case should be disregarded.
‘Contrived creation’
The judge hearing the case in Liverpool ruled that “he was satisfied” that none of leases he examined as part of the case “can properly be characterised as a ‘sham’ document”, but there was an “arguable case” that the tax scheme was ineffective.
At today’s hearing, Robin Matthews QC for the council, said the scheme was an “artifice”.
“It is an artifice or a contrived creation of a situation where it can be argued that the transactions fall within the scope of a stated provision,” he said.
Various schemes operate to mitigate empty property rates.
Many of them exploit the rule that empty-property rates are not charged for the first three months that the property is unoccupied.
By switching the entity that is deemed to be the non-occupying owner at regular intervals, a property can remain hypothetically within the tax-exempt period indefinitely.
The case continues.
Rossendale Borough Council v Hurstwood Properties
Wigan Council v Property Alliance Group Limited
Court of Appeal (Richards LJ, Henderson LJ, Baker JL)
