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The Administrative Court has issued its decision in The Queen (on the Application of Principled Offsite Logistics Limited) v Trafford Borough Council and Others (2018) EWHC 1687 (Admin), an application for judicial review in respect of the effectiveness of a scheme of business rates mitigation operated by Principled. This concerned non-domestic rates liability in respect of a retail property at 124-125 Stretford Mall. The owner of that property was liable for empty rates in respect of it and entered into an agreement with Principled whereby they would occupy it for a sufficient period (at least six weeks) so as to trigger a new rates-free period. The billing authority refused to treat the use by Principled as representing rateable occupation and to grant the new rates-free period.
The litigation took an unusual form as such disputes are normally decided in the Magistrates’ Court when the billing authority issues a summons for non-payment of rates. But in this case, because other similar disputes existed elsewhere with Trafford and other billing authorities, Principled made an application to the Administrative Court for judicial review challenging the issuing of a summons in respect of the particular property and seeking a number of declarations, that Trafford’s approach was based on a misunderstanding of the law as it related to beneficial occupation.
There was considerable dispute over the facts behind the particular case, and over the form that the litigation should take, with Trafford contending that judicial review was inappropriate as the matter could be determined in the Magistrates’ Court. Principled submitted that there were numerous other similar cases stayed and because of this judicial review was appropriate. The Court’s judgment contains an extensive review of case law relating to beneficial occupation, some of it dating back to the 19th Century.
Principled contended that the law regarding rateable occupation, both the older cases and more recent decisions, showed that the motivation of the occupier was not relevant to whether or not there was rateable occupation, nor was the question of whether the purpose of the occupation was rates mitigation. All that was necessary was to show that Principled was the occupier and that the property was populated with goods of some sort.
Trafford contended that the occupation by Principled was not beneficial occupation as its sole purpose was for rates mitigation. If that motivation was ignored there was no purpose, and hence no benefit, to storing the goods. This could not represent beneficial occupation by Principled for rating purposes.
The Administrative Court determined that it was appropriate to grant permission for judicial review because of the number of other related cases and because the evidence was capable of generating a decision that went beyond the immediate dispute. The substantive question of whether the occupation by Principled was beneficial occupation sufficient to represent rateable occupation was determined in favour of Principled. These were not sham transactions and the issue of morality of rates avoidance. If questions of morality and ethics were ignored, as they had to be, the thing of benefit to the occupier could be the value of the occupation itself. The occupation was therefore beneficial to Principled and the approach adopted by Trafford was based on a misunderstanding of the law.
We understand that there is likely to be an application for leave to appeal against this decision and the matter may not, therefore, end here. What the case shows most clearly is the oddities that can result from trying to use non-domestic rates, which is a tax on the occupation of property, to tax unoccupied property. It is time for a proper review of unoccupied property rates as recommended by the Lyons Review, rather than the pretence of a review that was carried out in 2008 when the current system was introduced.
