Relief for landlords as court upholds rates avoidance scheme


In a recent case the High Court held that where a company used a tiny percentage of a property for storage, this amounted to rateable occupation, triggering a new period of empty rates relief.

The decision confirms that landlords may enter into lettings of six weeks or more to trigger a fresh period of empty rates liability, even where the landlord’s intention is to trigger a period of relief.

Landlords must ensure that any occupation satisfies the definition of rateable occupation set out by the courts.

When does empty rates relief apply to non domestic properties?

  • Retail – 100% relief for a continuous period of three months.
  • Industrial and warehouse – 100% relief for a continuous period of six months.
  • If the property is reoccupied by a third party (usually a tenant) for six weeks or more during the above periods, then this triggers a fresh period of relief once that occupation has ended.

In order to trigger a fresh period of relief, there must be rateable occupation of the property which means:

  • actual use of the land/property;
  • exclusive occupation;
  • occupation that is of some value or benefit to the occupier; and
  • occupation that has a sufficient quality of permanence.

End of the lease

In the Makro case, the landlord owned a warehouse property and let it to a group company. On expiry of the lease the tenant vacated but then stored pallets of paperwork at the property for a period of over six weeks, five months later. The total area used comprised around 0.2% of the property.

The magistrates’ court ordered the landlord to pay rates for this six week period on the grounds that:

  • the occupation was so small it did not amount to actual occupation; and
  • the storage was simply a device to avoid rates liability and there was no benefit to the company in occupying.

Rateable occupation test satisfied

The High Court disagreed and held that there was rateable occupation of the property as follows:

  • Actual occupation – there was an intention to occupy by virtue of the fact the tenant company intended to incur a short period of rates liability to trigger a longer period of rates relief for the landlord company. The property was being used for a practical purpose (even if only a tiny proportion of that property was in actual use).
  • Beneficial occupation – these were not documents that were left behind; they were documents that the company needed to keep, and the ability to store them was a benefit to the company.
  • Occupation by a third party – occupation by the property owner will not trigger a further period of relief; there must be a genuine arrangement with a third party. In this case, the landlord company allowed the tenant company quiet enjoyment of the property which was held to be genuine occupation.

Watch this space

For now, landlords have the certainty of being able to enter into short term lettings (provided that the rateable occupation test is met) in order to trigger further period of rates relief. The High Court made it clear that its job was not to act as a moral watchdog, that it is a legitimate practice for companies to seek to minimise their tax liabilities; and if Parliament does not like this, then its recourse is to implement legislation to close the loophole. Landlords will need to wait and see if that is how Parliament responds.

For further information please contact:
Thekla Fellas, Partner, Fladgate LLP (
Alison Mould, Partner, Fladgate LLP (
Jonathan Hibberts, Partner, Fladgate LLP (

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