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Empty Rates – Avoidance and Evasion Gordon Heath BSc IRRV (Hons) IRRV National Council Member Honorary Member of the Rating Surveyors Association.

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Presentation on theme: "Empty Rates – Avoidance and Evasion Gordon Heath BSc IRRV (Hons) IRRV National Council Member Honorary Member of the Rating Surveyors Association."— Presentation transcript:

1 Empty Rates – Avoidance and Evasion Gordon Heath BSc IRRV (Hons) IRRV National Council Member Honorary Member of the Rating Surveyors Association

2 Gordon Heath Ltd2 Empty Rate - History City of London Sewers Act 1848 - half the general rate, not the poor rate, hence about 10%, no free periods, City of London only Local Government Act 1966 - discretionary 50% empty rate, with 3 months free period and various exemptions 1974 – discretion increased to 100% empty rate 1974 - Rating surcharge – soon abolished 1983 - industrial exemption, 50% limit on empty rate 1990 - compulsory 50% empty rate with exemptions 2008 - compulsory 100% empty rate, exemptions changed 100% in England and Wales only but still 50% in Scotland

3 Gordon Heath Ltd3 Purpose of 100% Empty Rate? Meanwhile Project set up in 2009 by last Government Meanwhile uses of otherwise empty buildings for socially beneficial purposes DCLG guidance on suitable sub-leases Also planning changes to make change of use easier Is it about empty rate revenue or encouraging use? What will be the effect of local rates retention on local authorites’ attitudes?

4 Gordon Heath Ltd4 Local Government Finance Act 2012 Part of the localism agenda - Local Business Rates Retention No changes to rate setting Localisation of a 50% share of NNDR Starting point fixed by Government Some authorities will not receive Government grant Some authorities will pay a tariff while some will receive a top up Local authorities will keep 50% of any growth in local rate income BUT local authorities will suffer from 50% of any reduction Subject to a safety nets and levies

5 Gordon Heath Ltd5 Unoccupied Liability Section 45(1)(d) - the class of hereditaments subject to empty rate charges is in regulations SI2008/386 the Non-Domestic Rating (Unoccupied Property) (England) Regulations Must be a building (or part), or a building (or part) plus any land used for the purposes of the building (or part), except the 13 exemptions in regulation 4 S45A - zero empty rate charge for charities where NEXT IN USE for the purposes of that charity

6 Gordon Heath Ltd6 Unoccupied Liability 100% of occupied charge from 1/4//08 Previously 50% of occupied charge to 31/3/08 Charities - if it appears that when next in use, it will be wholly or mainly used for charitable purposes of that or that and other charities - zero charge Ratepayer - owner of the whole hereditament - person entitled to possession of the whole hereditament - lowest leaseholder Initial rate free period None of the hereditament occupied

7 Gordon Heath Ltd7 Unoccupied Liability Land - not subject to empty rate Not an exemption - just outside the definition - treat as exempt Advertising rights - right cannot be empty - if unused then refer to VO Land used for storage and surface car parks - can be empty - entrance needs to be closed or blocked off Telephone masts - can be empty - not a building - no empty rate

8 Gordon Heath Ltd8 Unoccupied Liability Unoccupied up to 3 months Further rate free period if reoccupied for at least 6 weeks Can claim repeatedly London Borough of Brent v Ladbroke Rentals Ltd 1980 - empty property divided without structural alterations - no entitlement to a fresh 3 months rate free By implication new hereditaments created by structural alterations are entitled to a fresh 3 months rate free

9 Gordon Heath Ltd9 Unoccupied Liability Owner prohibited by law from occupation or allowing it to be occupied Applies where occupation would lead to action by a local authority to end the occupation Tower Hamlets 1982 - exempt because it did not have a satisfactory fire escape Westminster 1990 - exempt during works to remove asbestos Westminster 1986 - not exempt - lack of planning consent did not prevent occupation

10 Gordon Heath Ltd10 Unoccupied Liability Action taken by the Crown, local authority or a public authority with a view to prohibiting occupation or acquiring it Usually compulsory purchase order by the Local Authority as part of a re-development project

11 Gordon Heath Ltd11 Unoccupied Liability Listed building of historic or architectural interest and anything attached to it List maintained by Government - Grade I, II and IIA Includes any object or structure attached to the building Includes any object or structure within the curtilage since before 1st July 1948 Westminster 1986 - 2 linked buildings, 1 listed, not exempt Birmingham 1999 - large extension - not exempt

12 Gordon Heath Ltd12 Unoccupied Liability Schedule of ancient monuments Schedule compiled by central Government of monuments that are of public interest by reason of historic, architectural, traditional, artistic or archaeological interest

13 Gordon Heath Ltd13 Unoccupied Liability Low Rateable Values Below £2,200 before 2009, £1,900 before 2005, £1,500 before 2000, £1,000 before 1995 Below £15,000 for 2009/10 only and below £18,000 for 2010/11 only Below £2,600 from 2011/12

14 Gordon Heath Ltd14 Unoccupied Liability From 1/4/08 industrial premises empty less than 6 months - no second rate free period if reoccupied for less than 6 weeks - Industrial premises - premises other than retail - used in the course of a trade or business or - for the manufacture, repair or adaption of goods or materials or subjection of goods or materials to a process - for the storage of goods in course of distribution - processing of minerals - generation of electricity

15 Gordon Heath Ltd15 Unoccupied Liability Personal representative of a deceased person Bankruptcy Deed of arrangement Winding up order In Administration (from 2008) Liquidator

16 Gordon Heath Ltd16 The Right to Minimise Tax Liability The Westminster Principle Inland Revenue Commissioners V Duke of Westminster 1936 (H. of Lords) Payments to domestic employees by deed of covenant that amounted to renumeration House of Lords refused to disregard the character of the deeds merely because the same result could be brought about in another manner Principle applies to any form of direct taxation

17 Gordon Heath Ltd17 The Right to Minimise Tax Liability Lord Tomlin “Every man is entitled if he can to order his affairs so as that the tax attaching under the appropriate Acts is less than it otherwise would be. If he succeeds in ordering them so as to secure this result, then, however unappreciative the Commissioners of the Inland Revenue or his fellow taxpayers may be of his ingenuity, he cannot be compelled to pay an increased tax.” Lord Atkin “It has to be recognised that the subject whether poor and humble or wealthy and noble has the legal right to dispose of his capital and income as to attract upon himself the least amount of tax” BUT this case only involved a single avoidance step

18 Gordon Heath Ltd18 The Right to Minimise Tax Liability The Ramsay Principle W.T. Ramsay Ltd v Inland Revenue Commissioners 1982 (H. of Lords) Company made a large capital gain and entered into a series of self cancelling transactions to generate an artificial capital loss and avoid CGT Where a transaction has pre-arranged artificial steps which serve no commercial purpose other than to save tax, then the proper approach is to tax the effect of the transaction as a whole – referred to as the Ramsay Principle BUT it is limited to a series of self cancelling financial steps

19 Gordon Heath Ltd19 The Right to Minimise Tax Liability Furniss (Inspector of Taxes) v Dawson D.E.R., Furniss v Dawson G.E., Murdoch v Dawson R.S. 1984 (H. of Lords) Selling family company shares – a pre-arranged plan to exchange shares for shares in a newly formed investment company that immediately sold the family shares at an agreed price. CGT exemption applies to company amalgamation and there was no gain or loss by investment company Steps inserted in a preordained series of transactions with no commercial purpose other than tax avoidance should be disregarded for tax purposes, notwithstanding that the inserted step had a business effect Significant extension to Ramsay Principle Now applies to a linear series of financial transactions

20 Gordon Heath Ltd20 Empty Rate Avoidance Most empty rate avoidance either relies on a series of occupations for six weeks or the granting of an exemption The Westminster Principle establishes a right to minimise tax The Ramsay Principle, as extended, enables artificial financial transactions to be ignored. Can the Ramsay Principle be extended to occupying premises ? Perhaps, but it goes beyond the existing decisions It requires a High Court decision We already have case law on rateable occupation

21 Gordon Heath Ltd21 Rateable Occupation John Laing & Son Ltd v Kingswood Area Assessment Committee 1949 (Court of Appeal) London County Council v Wilkins 1956 (House of Lords) Four elements of occupation 1. it must be actual 2. it must be exclusive to the occupier 3. it must be of some benefit to the occupier 4. it must not be for too transient a period SI 2008/386 reg. 5 prescribes that no further rate free period applies if occupation is less than 6 weeks

22 Gordon Heath Ltd22 Rateable Occupation Rateable occupation is a question of fact Further periods of relief are allowed There is nothing in the regulations that prevents a ratepayer from repeatedly occupying for 6 week periods to claim repeated empty periods Key test is probably beneficial occupation My question “Ignoring the empty rate saving, would the ratepayer be prepared to pay a rent to obtain that benefit from the occupation?” Paramount Occupation – Legal occupier is not always the same as the actual occupier

23 Gordon Heath Ltd23 De Minimis Occupation There is no “de minimis” rule in the legislation Wirral BC v Lane 1979 Empty House undergoing building works - No overnight stays Most goods removed but use of telephone Cumming-Bruce LJ “the magistrates …….. decided to apply the maxim de minimis non curat lex to these valuable chattels.” “on the facts found by the magistrates, they could have very well come to the opposite conclusion” “I am not prepared to hold as a matter of law that the magistrates were not entitled thus to relegate these objects to a lowly grade of value or importance”

24 Gordon Heath Ltd24 Plant, Machinery and Equipment LGFA 1988 s 65(5) - “Plant, machinery and equipment….which was used…. or is intended for use…” can be ignored Sheafbank Property Trust PLC v Sheffield MDC 1988 A disused sports ground and premises was held to be unoccupied because it only contained plant, machinery and equipment that were last used on the premises Items included a snooker table, music facilities, tables, chairs, the bar and associated equipment, freezer, dishwasher, kitchen items, TV, refrigerator, settee, grass cutting equipment

25 Gordon Heath Ltd25 The Makro Case Makro Properties Ltd and Makro Self Service Wholesalers Ltd v Nuneaton and Bedworth BC 2012 Decision given on 29 June 2012 Appeal by case stated against liability order granted in the Magistrates’ Court on 14 April 2011 Former cash and carry warehouse used for temporary storage Rowleys Green, Coventry 0.2% of floor space of 140,000 sq.ft. Storing 16 pallets of documents Between November 2009 and January 2010 Sufficient to trigger a further 6 months rate free period

26 Gordon Heath Ltd26 The Makro Case Two questions for the opinion of the High Court Whether on the facts found by the court about the level, purpose and benefit to the ratepayer of the storage occurring on the hereditament, the court was correct to decide that the hereditament was not in rateable occupation between 25 November 2009 and 12 January 2010 and after 23 July 2010. In the event that the court was not correct so to decide, whether the court was correct to consider (a) that rateable occupation would continue throughout the period 12 January 2010 to 23 July 2010 and (b) that the occupier would be Makro Properties Limited

27 Gordon Heath Ltd27 The Makro Case Makro Properties Ltd (MPL) was the freeholder Makro Self Service Wholesalers Ltd (MSSWL) held a lease until 31 December 2009 Both part of the Makro Group Ltd MSSWL occupied as a self service warehouse until 1 June 2009 when it was cleared and vacated MSSWL stored 16 pallets of company paperwork which it was obliged by law to retain, between 25 November 2009 and 12 January 2010 Occupied 0.2% of over 13,000 sq. metres

28 Gordon Heath Ltd28 The Makro Case After the surrender of the lease there was an informal intra-group permission but no written agreement Premises empty between 12 January and 23 July 2010 Intention to sell but a reserve plan to reoccupy to a minor degree for a short period 40 pallets of MSSWL paperwork were delivered on 23 July 2010 17 pallets removed on 17 August 2010 Up to 60 pallets delivered on 21 September 2010 Rates were paid for the periods of occupation

29 Gordon Heath Ltd29 The Makro Case The billing authority charged empty rates from 1 December 2010 and obtained liability orders. The District Judge in the Magistrates’ Court accepted that only part needed to be used and that the determining factor was whether the goods were of value The High Court referred extensively to the case law District Judge accepted that the goods were of value but considered “de minimis” and decided 0.2% did not amount to actual occupation Concluded that there was no benefit other than avoiding empty rate and applied the principle in Furniss v Dawson that the steps had no business value other than avoiding empty rate

30 Gordon Heath Ltd30 The Makro Case On appeal the Council submitted that the intention found in this case was to give a “semblance” of occupation Mr Glover QC (for Makro) observed that the state of mind may more properly be described as motivation rather than intention Judge Jarman did not accept the Council’s submission finding that it “necessarily included an intention to occupy and not just give a semblance of occupation” Judge Jarman went on to dismiss the district judge’s reliance on Furniss v Dawson which concerned financial transactions, stating “that principle in my judgement is of no assistance in considering the question of intention in this case”

31 Gordon Heath Ltd31 The Makro Case The district judge had accepted there was actual occupation, but argued that it was “de minimis” Judge Jarman examined this in some detail Judge Jarman considered that the proper approach was to consider both use and intention In this case, there was an intention to occupy and the storage of 16 pallets of documents which are required by law to be stored cannot be said to be trifling

32 Gordon Heath Ltd32 The Makro Case Actual occupation does not amount to rateable occupation unless it is also beneficial Abandoned goods do not amount to rateable occupation (LCC v Hackney BC [1928] 2KB 588) Goods of small value to the ratepayer has been held to amount to beneficial occupation (Appleton v Westminster Corporation [1910] AC 7)

33 Gordon Heath Ltd33 The Makro Case Judge Jarman said that by relying on Furniss v Dawson, the district judge misdirected himself by disregarding the steps taken to occupy the warehouse The district judge found that the documentation stored was of benefit which MSSWL were bound by law to retain Judge Jarman concluded “it cannot be properly said that the storage was of no practical benefit” He emphasised the point by stating “The fact that this storage could have been continued at other venues does not render storage at the warehouse of no practical benefit”

34 Gordon Heath Ltd34 The Makro Case Judge Jarman found that the first question in the case stated must be answered in the negative There should have been a finding that there was rateable occupation while the pallets were stored on the premises

35 Gordon Heath Ltd35 The Makro Case The district judge found that if there was occupation, then it continued between January and July 2010 The Council tried to support this conclusion on the basis that it had been used for storage and that it remained ready for use

36 Gordon Heath Ltd36 The Makro Case Mr Glover QC (for Makro) argued that when MSSWL removed the goods on 12 January 2010, there was nothing to show that MPL resumed occupation or intended to let space The intention was that it would not be occupied before July The intention to re-occupy in July, if the property was not sold, does not amount to an intention to occupy between January and July.

37 Gordon Heath Ltd37 The Makro Case Judge Jarman preferred Mr Glover’s arguments The second question in the case stated must also be answered in the negative because there was no intention amounting to occupation or use from January to July 2010 It follows that the liability orders must be quashed. The Council submitted that such an outcome means that a scheme to avoid paying rates for six months has succeeded and that could not have been foreseen when the 2008 reforms were made

38 Gordon Heath Ltd38 The Makro Case Judge Jarman said “Insofar as that may be relevant I cannot accept the latter submission. It has been recognised for a considerable amount of time that ratepayers or potential ratepayers can and do organise their affairs as to avoid paying rates. In Gage, Alverstone CJ dealt with this question and stated that if the ratepayer thought that she would not be within the charging act by going out of possession, she was quite entitled to do so. In my judgement the same applies to going in and then out of occupation. It has often been emphasised that the court is not a court of morals, but of law. If the outcome of this case is seen as unacceptable then it is for the legislature to determine whether further reform is needed”

39 Gordon Heath Ltd39 The Makro Case – My Conclusions Actual occupation is established if there is a clear intention to use the premises, however small that the actual use might be. By contrast a slight use without any intention to occupy does not amount to rateable occupation. The latter would include chattels of little value as in Wirral v Lane 1979 or abandoned goods Beneficial occupation requires the use of the premises to provide some benefit, however small, to the ratepayer. The fact that the goods could be stored by the ratepayer elsewhere does not render the storage to be of no practical benefit

40 Gordon Heath Ltd40 The Makro Case – My Conclusions Exclusive occupation was not an issue in this case except insofar as MSSWL continued to occupy after the end of the lease. However as MPL took no steps to occupy, there was no competing occupation, although the judgement did consider the degree of control exercised by MPL Transience was not an issue because the nature of the hereditament was not transient

41 Gordon Heath Ltd41 The Makro Case – My Conclusions The principles established in Furniss v Dawson [1984] STC 153 concerning a series of financial transactions are of no assistance in deciding whether a hereditament is occupied See my article in March 2012 Valuer for more information on this

42 Gordon Heath Ltd42 Chiltern Case – Storage Boxes Chiltern District Council v Principled Partnership Ltd and Heathcote Distribution Ltd 2012 Magistrates’ Court – NOT a legal precedent Decision date 22 November 2012 19 separate office units at Chiltern Court, Ashridge Road, Chesham Empty rate 9 Sept. to 5 th Nov. 2011 Total rates £10,680 Council billed empty rate for the period Ratepayers maintain they were occupied by storage boxes

43 Gordon Heath Ltd43 Chiltern Case – Storage Boxes Ratepayers provide short term storage facilities for companies Principle aim is to provide 6 week occupation of vacant premises in order to mitigate landlord’s rate liabilities Less than 10% of their income is derived from storage itself Most income derived from landlords Entitles to use premises and therefore liable Inspection by Council concluded that some boxes were empty and the rest contained items of no value – sham business – no meaningful occupation

44 Gordon Heath Ltd44 Chiltern Case – Storage Boxes Ratepayers maintain that they are a legitimate business providing bona fide storage solutions for companies requiring storage All the units contained storage boxes provided by Atlas Supply Solutions Ltd – believed it to be confidential material Revenue from Atlas offset against transport costs Boxes contained items of value to clients of Atlas District Judge “benefit must derive to the occupier and not from the abatement of tax due”

45 Gordon Heath Ltd45 Chiltern Case – Storage Boxes Not practical for the Council to inspect all the boxes individually Council only found some empty boxes and only inspected the contents of one box Evidence of ratepayers was largely un-contradicted Ratepayers did not hide the fact that their income was derived from the landlords Beneficial occupation – valid storage facilities on behalf of Atlas Not a sham company Very few boxes examined by Council Liability Order for empty rate refused – premises occupied Costs awarded against the Council £30,000

46 Gordon Heath Ltd46 6 weeks Occupation – Blue Tooth Occupation by a small electronic box broadcasting messages on blue tooth Not in occupation if it is just a “ to let” advertisement !! Occupied - if the occupier is paying a rent and is being paid to broadcast messages - appears to be beneficial, actual and exclusive It does not matter if it is a lease, licence or an easement Does it matter if no rent is passing? Paramount control remains with the landlord if he controls the use of the hereditament - not merely the access

47 Gordon Heath Ltd47 6 weeks Occupation – Blue Tooth Could it be valued it as a communication station? - 6 weeks is probably too transient Is the occupation “de minimis”? - probably not if the ratepayer is obtaining benefit by broadcasting It’s not the size of the equipment that determines if a benefit is being obtained from the occupation If the only benefit is avoiding empty rate, that is not beneficial occupation There must be a beneficial use

48 Gordon Heath Ltd48 Letting to a Charity Letting to a charity only works if they occupy or intend to occupy it for charitable purposes (of that charity or that charity and others) If there is no intention for the charity to use it for a charitable purpose, the charity will be liable for 100% charge If it is occupied, it must be wholly or mainly used for charitable purposes to qualify for relief

49 Gordon Heath Ltd49 Letting to a Charity – Edinburgh Case English Speaking Union Scottish Branches Educational Fund v City of Edinburgh Council 2009 Judicial review of refusal of mandatory relief Tenants of whole building - 8 floors Only used the ground floor Ratepayer - wholly used for charitable purposes Council - only partially used Council’s argument is consistent with the ordinary meaning of the language used in the legislation

50 Gordon Heath Ltd50 Letting to a Charity – Preston Case Preston City Council v Oyston Angel Charity 2012 QBD Appeal by case stated from Preston Magistrates’ Court Oyston Mill owned by Denwis Ltd Oyston Angel Charity (formerly Oyston Angel Trust) - the “Trust” set up in 2005 Objects are “social relief, rehabilitation and the promotion of the welfare” of offenders, former offenders, disabled including addiction and persons under social or economic deprivation Registered as a charity 30 August 2011 Previously accepted as a charity for tax purposes

51 Gordon Heath Ltd51 Letting to a Charity – Preston Case 30.03.2011 – Denwis Ltd granted a licence to the Trust subject to: i.The Trust had the right to occupy and use the units ii.Permitted use for charitable purposes only iii.Trust could sublet but only for charitable services iv.Trust to pay all rates, if any Units below RV £2,600 were excluded No dispute that as licensee, Trust liable for rates

52 Gordon Heath Ltd52 Letting to a Charity – Preston Case All 8 units unoccupied for over 6 months One unit now sub-licensed to Methodist Action Northwest Ltd as a charity shop Application for 8 liability orders for 2011-12 Magistrates – Trust did not intend to occupy themselves, but when next in use each unit would be wholly or mainly used for charitable purposes – hence units zero rated while empty Liability orders refused – Preston appealed by case stated

53 Gordon Heath Ltd53 Letting to a Charity – Preston Case Local Government Finance Act 1988 s 45A(2) provides that empty properties are zero rated where - a)The ratepayer is a charity, and b)It appears that when next in use the hereditament will be wholly or mainly used for charitable purposes (whether of that charity or of that and other charities) Preston contended that it must be next used by that charity Trust submitted that it was not necessary to show that the owning charity would occupy

54 Gordon Heath Ltd54 Letting to a Charity – Preston Case Trust also contended that the words “whether of that charity or of that and other charities” meant “whether of that charity or other charities” The issue of the purposes of the charity occupying the charity shop was not considered The only issue was whether it had to appear that the owning charity would next occupy and use the property The Magistrates accepted the Trusts arguments

55 Gordon Heath Ltd55 Letting to a Charity – Preston Case Appeal by case stated posed the question “Whether the justices were right to conclude that the [Trust] had established that the [Trust] was under section 45A(2) of the Local Government Act 1988 exempted from liability for each of the applications for liability orders on the basis that the occupier/or user of each of the premises the subject of the said application would be charities other than the [Trust].”

56 Gordon Heath Ltd56 Letting to a Charity – Preston Case Judge concluded that Preston’s arguments would require the addition of the words “by that charity” after “wholly or mainly used” The words mean “used for the charitable objects of the owning charity, accompanied or not by other charitable purposes” “The requirement for it to appear additionally that, when the property is next used, the currently-owning charity will occupy and use the property cannot be read in”

57 Gordon Heath Ltd57 Letting to a Charity – Preston Case Hence the answer to the question posed is “Yes” the magistrates were correct “I stress that that answer is based upon the issues that were before the magistrates, before whom the possibility of charities sought as sub- licensees having charitable purposes entirely different from the wide charitable objects of the Trust was not in issue” Appeal dismissed

58 Gordon Heath Ltd58 Letting to a Charity – Blue Tooth Letting to a charity that occupies with a bluetooth box broadcasting charitable messages Occupation of all or part is sufficient to establish rateable occupation Everyone knows the 4 elements of occupation in the John Laing case - that’s not the point Charitable relief ONLY applies where it is wholly or mainly used by that or that and other charities

59 Gordon Heath Ltd59 Letting to a Charity – Bluetooth Could it be valued as a communication station ? 9 months would not be too transient RV £100 However it must be a separate occupation - not occupied by the same ratepayer as the main hereditament and for the same purpose Occupied rate on box, Empty rate on remainder Moving the box around might frustrate this

60 Gordon Heath Ltd60 Letting to a Charity – Bluetooth Chester and West Cheshire Council v Public Safety Charitable Trust 2012 Magistrates’ Court – NOT a legal precedent Substantial office in Chester 4 floors, RV £52,500 Landlord – Tameside MBC Vacant since 2010 PSCT had a leasehold agreement from December 2010 Installed 13 Bluetooth transmitters

61 Gordon Heath Ltd61 Letting to a Charity – Bluetooth Lease for 1 year to December 2011 Rent of £1 per annum Reverse premium of £7,607.25 payable by landlord to PSCT Terminable at 7 days notice Second lease for 1 year to December 2012 PSCT has a contractural arrangement with Commercial Links to install and maintain Bluetooth equipment

62 Gordon Heath Ltd62 Letting to a Charity – Bluetooth PSCT applied for charitable relief in February 2011 PSCT is a registered charity formed in 2010 PSCT is non-profit making Charitable objects to promote the efficiency of the police and prevention and solution of crime Mandatory and discretionary relief granted About 60 similar applications by PSCT received June 2011 – Council removed discretionary relief August 2011 – removed mandatory relief

63 Gordon Heath Ltd63 Letting to a Charity – Bluetooth September 2011 – Council contacted VOA November 2011 - VOA created a new hereditament from 12 December 2010 for a “WiFi site at 1 Heritage Court” RV £100 Council granted mandatory relief on WiFi hereditament – accepting the charitable occupation New demands for empty rate on offices and liability orders sought It does not appear to the Council that when next in use it will be used for a charitable purpose

64 Gordon Heath Ltd64 Letting to a Charity – Bluetooth 13 Bluetooth boxes monitored remotely Communication Links visit the property no more than once a month to check and reposition equipment Need access throughout the building Each box needs an electricity supply There is one “WiFi hereditament” within the building but 12 other transmitters within the office building

65 Gordon Heath Ltd65 Letting to a Charity – Bluetooth Meets the 4 ingredients of occupation of the offices PSCT is a registered charity Council accepts the use is charitable Is it “wholly or mainly” used for a charitable purpose? - Yes Different from the Edinburgh case because regular access is required to the whole building Liability order refused and PSCT are entitled to mandatory relief and to ask the Council to reconsider discretionary relief Council to appeal Will be heard with 2 other cases in the spring

66 Gordon Heath Ltd66 Letting to a Company in Liquidation Insolvency Service guidance – dear IP March 2012 Issue 53 chapter 26, Companies Investigation Branch dearip/dearipmill/chapter26.htm#3 On 29 July 2011 The Insolvency Service’s Company Investigations successfully applied for the winding up of 13 companies Failed to appoint a liquidator Set up for holding leases and the landlord claimed an exemption from NNDR The court found that such a scheme was contrary to the public interest

67 Gordon Heath Ltd67 Letting to a Company in Liquidation “The Service now has reason to believe that a variation on this arrangement has emerged, allowing landlords to avoiding paying rates. A number of cases have been brought to The Service’s attention of instances where an insolvency practitioner has been appointed as liquidator of a company in a members voluntary liquidation, shortly after the company has entered into a lease, for premises it appears to have no legitimate use for. These instances have been characterised by features such as an extremely short period of time between the company entering into the lease and entering members voluntary liquidation, and peppercorn rents.”

68 Gordon Heath Ltd68 Letting to a Company in Liquidation “In light of the court’s decision to wind up the 13 companies on the grounds the arrangement was held to be contrary to the public interest, The Service is of the opinion that in cases where a practitioner takes an appointment in a members voluntary liquidation, in which the main aim of the arrangement is to facilitate the non- payment of rates, such an arrangement would also be contrary to the public interest.”

69 Gordon Heath Ltd69 Letting to a Company in Liquidation “As such, if The Service is made aware of practitioners participating in these types of arrangements, it will consider reporting the matter to his/her Recognised Professional Body.” Any enquiries regarding this article should be directed towards Gareth Allen, Intelligence & Enforcement Services, 4 th Floor, 21 Bloomsbury Street, London WC1B 3QW. Telephone: 020 7291 689. Email:

70 Gordon Heath Ltd70 Conclusions Empty rate avoidance is legal – Westminster principle The Ramsay Principle/Furniss case is a “red herring” De minimis occupation can be ignored unless it is beneficial Actual and Beneficial Occupation are the key issues Paramount Occupation – Legal occupier is not always the same as the actual occupier Bluetooth occupation by charities – position not clear yet Local Rates Retention may encourage more effort Government has helped with avoidance A reduction to 50% empty rate would not reduce avoidance


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