Boxing Clever
A recent case from the Court of Appeal may stop box shifting schemes from successfully reducing business rates liabilities in England. Box shifting schemes involve placing boxes in otherwise unoccupied premises on a recurrent basis, the aim being to reduce business rate liabilities.
The intention behind such schemes is to occupy a property for a period of sufficient duration to count as a rateable occupation. This period was previously six weeks for non-domestic property but has been extended to 13 weeks and is known as the “reset period”. This is important to qualify for an exemption from business rates which applies for the first three months (or six months for industrial property) after non-domestic premises become unoccupied. This is known as empty property relief. If the period of occupation is for less than the reset period, it is disregarded for the purposes of empty property relief, and the property is deemed to have been continuously unoccupied.
The scheme that was being considered by the Court involved a rates mitigation scheme provider called Principled Offsite Logistics Limited (POLL). Once a property had been unoccupied for the first three months, POLL would be granted a six-month lease at a peppercorn rent. At the same time as the lease was completed, a break notice was served to terminate the lease after six weeks (being the relevant reset period at the time) pursuant to a break right in the lease. POLL placed boxes and their contents in the property for the reset period and claimed to be the occupier and accepted liability for business rates. On the expiry of the reset period the lease ended and the boxes were removed. The property owner, 48th Street Holdings Limited (48th Street), then claimed empty property relief for a further three months and the cycle was repeated for so long as necessary. A separate contract obliged 48th Street to pay POLL a fee equal to a percentage of the savings achieved. If the scheme failed, POLL’s fee would be refunded. 48th Street was obliged to pay for utilities and a non-refundable fee equal to the business rates paid by POLL for the property.
Promoters of box shifting schemes will be aware that there have been numerous cases in recent years which have confirmed that these types of schemes are effective – see Principled Offsite Logistics Ltd v Trafford Council [2018] EWHC 1687 (Admin) for one leading example. However, such cases are now considered to have been wrongly decided following a decision by the Court of Appeal in The Mayor and Commonalty and Citizens of the City of London v 48th Street Holdings Limited & Anor.
The case turned on the question of whether box shifting schemes constitute a rateable occupation of property, since that is the key determinant for business rates liability. It has been long established that there are four ingredients for occupation: first, actual occupation; second, there must be exclusive use of the property; third, the possession of the property must be of some value or benefit to the possessor, and fourthly, the possession must not be for too short a period.
This latest case focussed on whether the possession of the property was of some value or benefit to the possessor. It was agreed that the other three ingredients for occupation were satisfied.
The Court of Appeal has decided that box shifting schemes do not of themselves bring a value or benefit that qualifies them as a rateable occupation. The reasons were broadly that:
Something done for no purpose other than the avoidance of liability for rates will be ineffective in achieving that purpose (this is known as the Ramsay principle) and is a rule of interpretation binding the Court to look at the intention of legislation to ensure that it is achieved.
It was considered that the law has to evolve to ensure that it operates consistently with legislation. One of the purposes of business rate regulations is to seek to incentivise the active use of commercial property. This aim is undermined by allowing rates mitigation schemes to relieve the cost of leaving such premises empty for periods longer than would be required for the reletting of property.
Pure rate mitigation occupation has no utility, value or benefit independent of the statutory scheme, apart from to create an occupation after a period of non-occupation. Any benefit therefore comes from the operation of the relevant business rates legislation rather than from the actual occupation.
Placing items temporarily in a property in the hope that a rate-saving will be achieved means that any saving is dependent on the successful operation of the rates mitigation scheme. The saving is therefore conditional on future events – that there has been a reset period of occupation, that there will be a further period of non-occupation, and that the scheme will be effective to qualify the property for empty property relief. This is occupation for the sake of it, without use, value or benefit arising at the time of the occupation.
The widespread use of rates mitigation schemes means that local authorities are losing out on millions of pounds in revenue each year. The outcome of this case will be welcome to cash-strapped local authorities. However, it will surely only increase the call for reform of business rates.
This case may yet be appealed to the Supreme Court. However, in the meantime, it may be wise to review any box shifting schemes you have engaged with to assess whether they are affected by this recent case and the extent to which there may be a claim for backdated business rates.
It is also important to note that this case does not necessarily close the door on box shifting schemes where there is the genuine storage of items, as this goes to the heart of whether there is a value or benefit to the possessor of a property. It is for this reason that POLL may decide not to pursue a further appeal as the rates mitigation scheme it was utilising might be capable of adaptation so that there is a genuine storage of items – perhaps copies of its previous leases and business rate demands could be safely stored at such premises.
Notwithstanding that there may be a potential way to sidestep the outcome of this recent case, it may come as a surprise that the Courts have seen fit to intervene to stop a rates mitigation scheme that has previously been upheld as effective in earlier cases. Afterall, if the Government had wanted to stop such schemes, it could have introduced legislation to do so when it made amendments to the regime in the Non-Domestic Rating (Unoccupied Property) (England) (Amendment) Regulations 2024. However, the fact that the Government has chosen not to introduce any anti-avoidance provisions may be regarded as a tacit acknowledgment that the business rate regime is not operating fairly and effectively.
Whilst commercial premises are unoccupied they do still benefit from emergency services, so a blanket exemption from business rates for so long as they remain unoccupied would not be a balanced solution. Business rate mitigation schemes do serve to create a more equitable division of cost between local authorities and the owners of commercial premises in an environment where no one seems ready to undertake a more comprehensive reform of business rates.
For the full case report see The Mayor & Commonality and Citizens of the City of London v (1) 48th Street Holdings Limited (2) Principled Offsite Logistics Limited [2026] EWCA Civ 970.
Beth Margetson is a Partner at Davitt Jones Bould
Beth Margetson
Partner
T: 020 8050 5443
M: 07949 013663
E: beth.margetson@djblaw.co.uk
Beth Margetson is a Partner at Davitt Jones Bould specialising in commercial property matters. She advises clients on a wide range of property issues and brings extensive experience of the legal and commercial challenges facing owners, investors, occupiers and public sector organisations. Beth is particularly interested in the evolving legal landscape affecting commercial real estate and regularly provides commentary on significant developments in property law.
