Confirming the principles of business rates mitigation

On 15 May 2025, the High Court gave its ruling in the case of The Mayor and Commonality and Citizens of the City of London v 48th Street Holding Limited and Principled Offsite Logistics Limited. The Court ruled in favour of the defendants on the basis that Principled’s Rate Mitigation Scheme (RMS) was effective and qualified the property in question to an exemption for empty rates. 

Principled is a long-standing client of Mills & Reeve and is one of the most established rates mitigation specialists in the country, whose model had already been tested and validated by the High Court in 2018. 

Background

Where a premises becomes vacant, s.45(1) of the Local Government Finance Act 1988 and regulations 3 and 4a of the Non-Domestic Rating (Unoccupied Property) (England) Regulations 2008 provide that the premises is exempt from liability for unoccupied rates for three months. This case involved a mitigation scheme employing the storage of boxes. Principled would occupy a property for the statutorily-prescribed time before vacating, on a cyclical basis, hence triggering the unoccupied rates exemption. 

The first defendant was an owner of property and Principled, the second defendant, is an empty rates mitigation specialist. The claimant issued a claim for £111,475.30 on the basis that the Rate Mitigation Scheme (RMS) employed by Principled was not a valid trigger for the exemption as the placing of boxes did not constitute ‘occupation’ under regulation 5 of the 2008 Regulations.

The RMS adopted by Principled operated as follows:

1. Upon the expiry of the three-month empty rates period, 48th Street Holding Limited (48SHL) would grant Principled a lease of the premises, serving a break notice to terminate the lease 6 weeks later [NB this period should now be three months not 6 weeks, following legislative change].
2. During the 6-week term of the lease, Principled placed boxes and their contents in the premises, claiming liability for occupied rates for that period.
3. Upon termination, the boxes were then removed from the premises.
4. On the basis that the boxes created ‘occupation’ of the premises, 48SHL then claimed a fresh three-month exemption.
5. As a result, 48SHL benefitted from a 67% reduction in liability for unoccupied rates.
6. Principled then received a share of savings generated in return for operating the scheme.
7. The cycle would repeat for as long as the premises remained empty. 

There are certain aspects of this case to note:

1. In 2018, HHJ Kerr, sitting in the High Court, examined Principled’s model following scrutiny by Trafford Council. Principled brought a judicial review claim against Trafford. HHJ Kerr found that Principled’s method of occupation did constitute beneficial occupation and found in Principled’s favour.
2. Moreover, HHJ Kerr in R (Public Health England) v Harlow District Council [2021], looked again at such schemes and went to the trouble of drafting Propositions of Law and a Protocol for Resolution of Disputes as part of his judgment, with the aim of making these types of disputes “few and far between”.
3. Despite the fact that there are multiple mitigation companies employing box storage and multiple different schemes involving rates mitigation, this claim concentrated on an individual provider and on a narrow set of agreed circumstances.
4. There have been various Government consultations surrounding business rates reform over the past few years, which have looked at (amongst other things) rates mitigation. While timescales for generating empty rates relief have altered, general principles have not. 

The City of London’s arguments, as claimant

The claimant submitted that the RMS didn't exempt the property from unoccupied rates on the basis that R (Trafford) v Principled in 2018 – which is materially the same as this case – was wrongly decided. The judge in that case decided that beneficial occupation for the purposes of mitigating business rates doesn't require a purpose beyond the occupation itself. The Claimant argued that this was wrong for two principal reasons.

First, it didn't apply the principles of W T Ramsay v Inland Revenue, which the Supreme Court in Hurstwood Properties v Rossendale Borough Council held applied in the context of rating. The Ramsay principles provide that when interpreting statute you must:

1. Assess parliamentary intention behind the words chosen
2. Identify whether the relevant facts align with that intention

The claimant submitted that it couldn't be possible that the intention of Parliament under s.65(2) and/or Regulation 5 was to create an escape from the liability for rates imposed by the legislation. Therefore, occupation that was created solely for the purpose of avoiding the rates could not satisfy the definition of ‘occupation’ under the exemption.

Secondly, regardless of Ramsay, the claimant submitted that the Laing Ingredients of “beneficial occupation” and “volition to occupy” had been wrongly interpreted in Principled’s 2018 case. The claimant argued that Principled had not created rateable occupation, as the sole benefit and intention behind the occupation was securing a share of the RMS savings. Therefore, the intention/benefit did not exist independently of the effective RMS. As provided in S Franses v Cavendish Hotel, if the Laing Ingredients only exist because of the rating exemption, there cannot be rateable occupation.

Ruling

The Court dismissed the City of London’s claim. The judge cited the following key points:

1. The claimant was overly binary in its proposition that the intention of Parliament was purely to incentivise landlords to bring property back into occupation and prevent short term occupation from triggering the exemption. It is necessary to consider the 2024 Regulations and the lengthy consultation preceding them. As part of these, Parliament had the opportunity to address the use of such schemes, which were deemed effective under Trafford v Principled, and neglected to do so. Instead, Parliament opted to extend the period required to trigger relief to reduce the potential advantages of using RMS. This indicated its intention to bring unoccupied properties back into use but also to provide ongoing support, leaving the door open to the use of RMS. Parliament had an opportunity to prohibit the use of RMS and it consciously chose not to.
2. Franses does provide authority that a conditional intention is not sufficient for occupation. However, it can be distinguished on the basis that the intention in that case was truly conditional, as the landlord only intended to refurbish the property if an order for possession was secured and not if the tenant left voluntarily. In the current case, Principled had actually manifested its intention by placing the boxes in the premises. It was irrelevant that the benefit of rates mitigation would accrue at a later point and not immediately.
3. The Laing Ingredients don't solely depend on the occupation being of value/benefit to the possessor. However, if it were, occupation for the purpose of its own business is enough to provide value/benefit, which Principled did through the RMS.
4. Adopting the reversal of roles used by the judge in R (Makro Properties) v Nuneaton & Bedworth Borough Council, it's necessary to assess what the position would be if the current empty rates regime were to be abolished and the case were to be assessed using the previous regime, where only occupied properties were liable to rates. It must be established whether the premises would be deemed as occupied. Here, the presence of the boxes would be clear evidence of occupation. Therefore, this conclusion must be applied to the current empty rates regime which operates on the same understanding of occupation.
5. Makro also establishes that actual occupation can be met by slight occupation accompanied by an intention to occupy, as demonstrated by POLL placing boxes inside the property.
6. If the Court were to accept the claimant’s arguments, it would leave other forms of mitigation strategies in an unacceptable position. The Claimant, in its submissions, conceded that this case was solely about Principled’s model but left the door ajar to attack other forms of mitigation strategy. There would be a lack of clarity and precision were the Court to find in the claimant’s favour. 

In light of the points above, the Court ruled in favour of the defendants and dismissed the claim.

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