In a significant judgement, impacting property owners and occupiers with vacant space, the Supreme Court has ruled in the favour of Councils; against businesses who have used SPVs (Special Purpose Vehicle businesses taking control of business space and then dissolved or liquidated), to avoid Business Rates.

In Hurstwood Properties versus Rossendale BC, the Local Authority argued the SPV scheme used by the owner was a sham agreement and that the owner behind it was actually liable for the Business Rates. SPVs have been used widely to mitigate Business Rates and this was a test case, with many councils and owners waiting for the outcome.

Notably, the Supreme Court held ‘that neither the dissolution nor the liquidation scheme had any business or other ‘real world’ purpose – their sole purpose was to avoid liability to pay business rates. The SPVs had no assets or business, and it was never intended that the empty rate would ever be paid by the SPVs’.

The decision, by the Supreme Court, see the claims for unpaid Business Rates now revert back to the High Court, where the property owners will file formal defences to the claims. The development will be of concern to anyone who has used such schemes, who may in due course find they will need to pay backdated business rates bills.

Maughan Mitchell has never used SPV schemes, feeling that legitimate occupation for periods, followed by void periods, was the simplest and best way to minimise business rates tax, where businesses had empty / underutilised space. The four elements of Rateable Occupation have been long established – Actual occupation, Exclusive occupation, Of some value or benefit and Not for too transient a period – our advice has always been based on these principles.

For further advice in this area, please contact us at –

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