Local authorities can now pursue revenue that rate mitigation firms and landlords modelled around for years, after the court of appeal held that short-term physical occupation of premises solely to secure relief is not lawful occupation for business rates.
The dispute revolved around 2 America Square, a seven-storey office block in the City of London leased by 48th Street Holdings Ltd, a Virgin Islands company. Much of the building was filled with stacked boxes rather than daily workers. The City of London Corporation sued 48th Street and Principled Offsite Logistics Ltd, known as POLL, which specialises in empty property relief services.
The tactic exploited a quirk born of a 2008 change in the business rates rules. The reform removed a 50% vacant property discount for empty buildings, while preserving a statutory three-month relief at the end of a tenancy. Rate mitigation operators organised short-term physical occupations, typically moving boxes in for the three-month window and out again, to reset the statutory period and reduce bills.
Councils say the practice has cost public coffers heavily. One London authority estimated losses of about £35m a year since the pandemic, when claims for empty property relief climbed. In the 2019 deal behind this case, 48th Street paid £27.6m for the lease and engaged POLL, which sought to save £111,475.30 in rates through a sequence of three-month occupations across 2022 and 2023. POLL has promoted itself as "the largest and most reliable" provider of empty business rates mitigation and by 2021 claimed to have saved clients "£500m".
The case overturned earlier favourable rulings for mitigation firms. In 2018 a judge accepted that short-term occupation could "plant the occupier’s flag" and added that "the morality of that is neither here nor there." In 2022 Charles Bagot KC, sitting as a deputy high court judge, found the scheme lawful, saying, "If the government does not like the position, it can amend it." The court of appeal has now reversed that position.
Lady Justice Falk delivered the decisive judgment, writing, "In my judgment, 'occupation' for, in effect, the sake of it, and which has no use, value or benefit other than rate saving, does not amount to occupation for the purpose of the statutory scheme."
The City of London Corporation welcomed the result, calling it "a significant victory for local authorities across England" and saying the judgment "closes one of the most widely used tax avoidance schemes in the country". A government spokesperson said officials "recognise concerns about the misuse of Empty Property Relief" and that "business rates avoidance is unacceptable".
The ruling resets the legal backdrop for empty property relief and leaves mitigation firms and property owners reassessing whether short-term occupations remain a viable route to cut bills. Legal commentators and councils are urging ministers to tighten rules, including proposals for a general anti-avoidance measure, though ministers have not yet announced specific steps.
