Empty rates avoidance ruled OK

A landmark high court ruling has this week effectively legalised "imaginative" empty rates avoidance tactics.

The judgment will be welcomed by landlords and occupiers suffering with the burden of the so-called Bombsite Britain tax.

The case involved the use of just 0.2% of the floorspace of a 140,000 sq ft shed in Rowleys Green, Coventry, being used to store documents.

On Thursday, Judge Jarman QC ruled that cash and carry chain Makro's use of the warehouse to store 16 pallets of documents between November 2009 and January 2010 was enough to trigger a six-month empty rates grace period once the files were removed.

Gareth Buckley, a partner at WHR Property Consultants, which acted for Makro, said: "The decision reaffirms the legitimacy of the intermittent occupation strategy that has been implemented by law-abiding ratepayers to manage their empty rate liability."

CBRE's head of rating, Tony Dann, said the ruling would give landlords more confidence to use the mitigation tactics and that if councils tried to object they "wouldn't have a leg to stand on".

Gerald Eve's head of rating, Jerry Schurder, said the tactics could reduce a business's empty rates liability by up to 80% a year.

The ruling will be a blow to the government, which is handing out around £1bn in empty property rate relief a year as a result of avoidance tactics, and provides further ammunition for the tax to be repealed.

British Property Federation director of finance Peter Cosmetatos said: "Empty rates is an unfair and unproductive tax, so it is hardly surprising that businesses are taking legal, if imaginative, steps to mitigate its effects. What is really disappointing is the government's failure to implement even narrowly targeted ways to alleviate the harm caused by empty rates - until it does, many businesses will feel obliged to divert resources into limiting the damage."

There have been fresh calls in recent months for the government to scrap empty property rates. In May, an Estates Gazette investigation revelealed councils alone pay around £50m a year in empty rates.

Last month, chancellor George Osborne agreed to review empty rates legislation on the back of EG's investigation and tasked MP Julian Sturdy to work up proposals for how it could be changed.

For further information, contact Fiona Shorey fshorey@dohertybaines.com