Author: Matt Pugh, Partner 
Originally published in Estates Gazette 

Entrepreneurs have devised increasingly imaginative ways of reducing business rates liability for owners of empty properties. Despite an instinctive scepticism from local authorities as to the legitimacy of some of these schemes, many have been upheld by the courts.

Whether a mitigation scheme succeeds will often depend on a surprisingly simple question: who is in “rateable occupation” of the property?

Subject to certain exceptions and reliefs, anyone in “rateable occupation” of non-domestic property is liable to pay business rates. If a landlord has let the premises, liability for business rates falls to the occupying tenant.

The legal test for rateable occupation is not new and was established in the leading case of John Laing & Son Ltd v Assessment Committee for Kingswood Assessment Area [1949] 1 KB 344:

• There must be physical presence or possession.
• The occupier must have the sole right to use the property (ie exclusive occupation).
• The occupation must have some benefit or value to the occupier.
• The occupation must have a sufficient degree of permanence.

The courts have taken a relatively broad approach to what constitutes a benefit. R (on the application of Principled Offsite Logistics Ltd) v Trafford Council [2018] EWHC 1687 (Admin); [2018] PLSCS 125 confirmed that merely mitigating one’s rates can be sufficient to confer benefit to the occupier.

That does not mean that every mitigation arrangement will survive scrutiny – local authorities frequently defeat shame schemes, often relying on the Ramsey principle, devised by the House of Lords in WT

Ramsay Ltd v Inland Revenue Commissioners [1982] AC 300. This requires the courts to consider whether the transaction under consideration achieves a legitimate commercial outcome or is simply a pretext for avoiding tax.

Snail farms 

Not every non-domestic property attracts business rates. For example, if a premises consists of agricultural land or buildings (as defined in paragraphs 1-8 of Schedule 5 of the Local Government Finance

Act 1988), then it is exempt from business rates. The statutory definition includes where a building is used solely for agricultural operations or for keeping or breeding livestock. This can include snails if kept or bred for food production.

In recent years, landlords across the UK have sought to claim the benefit of this exemption by installing snail farms in otherwise empty properties.

One such case was considered by the High Court in Isle Investments Ltd v Leeds City Council [2021] WWHC 345 (Admin); [2021] PLSCS 40. In that case leases were granted for 21 weeks at nominal rent with a restriction that the premises were only used for snail farming. It was held that the arrangement was a sham with the sole purpose of avoiding tax.

However, there was no finding that a snail farm could never fall within the exemption, or that such arrangements are automatically a sham. The case turned on its own facts – the premises were offices and the judge held that snail farming was impossible. The occupier was also unable to provide convincing evidence that snail farming was actually taking place. This does not close the door to genuine snail farming in empty industrial premises.

Places of worship

Buildings registered for public religious worship under the Places of Worship Registration Act 1855 are also exempt from business rates. The registration process involves submitting a simple one-page form and signing a declaration.

Some property owners, with the assistance of scheme operators, are advertising their commercial premises as being available for booking as places of worship. These premises are not always furnished, and it is often unclear whether sacred texts or other religious artifacts are provided. Bookings are often taken via publicly accessible websites.

Such arrangements are open to challenge if they are a sham. This year, in A&P68 Ltd v Bradford Metropolitan District Council [2026] EWHC 27 (Admin); [2026] EGCS 6 the court found no evidence of actual occupation, worship or meetings, and the premises did not even have lighting.

Property guardians

These schemes were particularly popular during the pandemic. They involve the property owner contracting with a scheme operator who grants rights individuals (guardians) short-term licences to live in empty commercial properties, ostensibly to protect against squatters. The idea is that that property is treated as residential, attracting council tax payable by the guardian, rather than business rates.

However, in Southwark London Borough Council v Ludgate House Ltd and another [2020] EWCA Civ 1637; [2020] EGLR 3, the Court of Appeal effectively put an end to property guardianship schemes as a means of business rates mitigation. The court held that the building owner retains “general control” of the building and that is enough to leave them liable for business rates, despite the presence of guardians.

Intermittent occupation schemes

These schemes involve the property owner granting six-week leases (or, since April 2024, 13-week leases) to a mitigation company, which places items in the premises (such as storage boxes) in order to break the period of non-occupation and to trigger a fresh three-month exemption, before repeating the cycle.

A popular variation of this scheme involves the mitigation company placing small Bluetooth devices in the premises instead of storage boxes. These devices push paid advertising onto the smartphones of passers-by.

These schemes have repeatedly been held to be valid.

Liquidation schemes

These schemes involve the owners granting a lease to a special purpose vehicle at a low rent, making the SPV liable for business rates. The SPV is then placed into a members’ voluntary liquidation or dissolved, making them exempt from empty rates liabilities.

However, in the landmark case of Rossendale Borough Council v Hurstwood Properties (A) Ltd [2021] UKSC 16; [2021] 3 EGLR 28, the Supreme Court ruled these schemes unlawful. While the leases themselves were legitimate, they did not result in the transfer of “possession” of the buildings.

Anti-avoidance on the agenda

To combat intermittent occupation schemes, the government increased the required period of continuous occupancy before a further period of empty property relief can be claimed from six weeks to 13 weeks, with effect from April 2024.

The government is also considering implementing a “general anti-avoidance rule” for business rates that would provide them with greater flexibility to tackle emerging avoidance schemes as they materialise.

While many mitigation schemes remain lawful if properly implemented, the direction of travel is clear: arrangements that lack genuine commercial substance are likely to face increasing scrutiny.