1. Empty Rate presented by Gordon Heath BSc IRRV(Hons) for
IRRV West Midlands Association
July 2011
© Gordon Heath Ltd
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2. Empty Rate - History
City of London Sewers Act half the general rate, not the poor rate, hence about 10%, no free periods, City only.
Local Government Act discretionary 50%, 3 months free period, exemptions
discretionary 100% plus rating surcharge
surcharge abolished
industrial exemption, 50% limit
compulsory 50%, exemptions
compulsory 100%, exemptions changed
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3. Meanwhile Project Set up in 2009 by last Government
Led by Development Trusts Association
SQW Consulting - business case
Meanwhile uses of otherwise empty buildings for socially beneficial purposes
DCLG guidance on suitable sub-leases
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4. Empty Rate Avoidance and Evasion
A person is entitled to arrange their affairs so that their tax liability is minimised - tax avoidance - IRC V Duke of Westminster 1936 (H. of Lords)
Tax the effect of the transactions - Ramsay Ltd v IRC 1982 (House of Lords)
Tax avoidance is perfectly legal
Tax evasion is a deliberate attempt to evade payment of a tax which is legally due
Tax evasion is illegal
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5. Empty Rate Avoidance The following are legal tax avoidance:
Demolishing or soft striping a building
Delaying new starts
Not completing beyond shell and core
Occupation for six weeks - repeatedly
Section 44A relief for phased occupations and phased vacations
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6. Empty Rate Avoidance The following are legal tax avoidance:
Exempt because the building is listed or occupation is prohibited
Letting to a charity that actually occupies for a charitable purpose
Use for bluetooth broadcasting
Granting a lease to anyone else
Letting to a company that goes into liquidation?
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7. Empty Rate Evasion The following is potentially evasion:
Letting to a charity which has no intention of occupying for a charitable purpose - Charity could be liable for 100% charge
Claiming bluetooth broadcasting is charitable
Claiming 6 weeks occupation, without entering into beneficial occupation
Claiming posters on shop window are occupation by a charity
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8. 6 weeks Occupation
There is nothing in the regulations that prevents a ratepayer from repeatedly occupying for 6 week periods to claim repeated empty periods
Occupation means beneficial, actual, exclusive and not too transient occupation
Empty boxes are unlikely to be beneficial
Are a few boxes of company records or goods in an enormous hereditament is beneficial occupation?
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9. 6 weeks Occupation There is no “de minimis” rule in the legislation
Wirral BC v Lane 1979
“the magistrates …….. decided to apply the maxim de minimis non curat lex to these valuable chattels.”
“I am not prepared to hold as a matter of law that the magistrates were not entitled thus to relegate these objects to a lowly grade of value or importance”
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10. 6 weeks Occupation
Sheffield City Council v Metis Apartments Limited Magistrates’ Court
Not a legal precedent
13/8/09 - moved boxes of files from head office and storage to 3 empty properties
8 or 9 boxes in each property
2/10/09 - moved back to head office
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11. 6 weeks Occupation 12/2/10 - moved boxes back in
20 to 27 boxes in each property
27/4/10 - moved back to head office
Council informed at every stage
Claimed benefit - reducing storage costs, enabling access, freeing up office space
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12. 6 weeks Occupation
The District Judge said “I am of the view that in all the circumstances of this case, there has not been rateable occupation for the relevant periods when the boxes were placed at the three properties. There was no actual occupation. The use of the properties in the way described and photographed was so minimal. It is beyond slight in the sense that it is de minimis.
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13. 6 weeks Occupation
Beyond placing the boxes of files at the three properties, there is little evidence of the use to which they were put, or of the frequency of access or reference to them. They are boxes containing archived files. It occupied a very small percentage of the available floor areas.”
Liability order granted
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14. 6 weeks Occupation
Nuneaton and Bedworth BC v Makro Properties Ltd and Makro Self Service Wholesalers Ltd Magistrates’ Court
Not a legal precedent
Former Cash and Carry used for temporary storage
Liability order granted
May be appealed
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15. 6 weeks Occupation
Ratepayers should tell the billing authority when they occupy for 6 weeks to enable inspection and makes sure it is occupied - then tell the authority when it is vacated
Under LGFA 1988 s65(5) plant, machinery and equipment that was used or is intended for use should be ignored
Includes shop fittings, counters and shelves
Could include desks and chairs
More than “de minimis”
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16. 6 weeks Occupation Occupation by empty boxes - not occupied
Occupation by a few boxes of files - might be occupied, despite Sheffield
Occupied by tents - where is the benefit?
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17. 6 weeks Occupation
Occupation by a small electronic box broadcasting messages on blue tooth
Occupied - appears to be beneficial, actual and exclusive
Could the VO value it as a communication station? - 6 weeks is probably too transient
Is the occupation “de minimis” - probably not if the ratepayer is obtaining benefit by broadcasting
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18. Occupation Prohibited
Occupation Prohibited By Law where an empty property contains asbestos ?
Asbestos surveys sent with the requests detailing varying levels and types of asbestos
Just because an empty property has asbestos in it this does not mean it can’t be occupied
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19. Occupation Prohibited
Not an issue when occupied but when empty it may be difficult to refurbish for a new tenant
Regent Lion Properties Ltd v Westminster City Council Notice under Health and Safety at Work Act refurbishment must cease until asbestos removed
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20. Letting to a Charity
Letting to a charity only works if they occupy or intend to occupy it for charitable purposes of THAT charity (or that charity and others)
If there is no intention for the charity to use it for a charitable purpose, the charity will be liable for 100% charge
If it is occupied, it must be wholly or mainly used for charitable purposes
All of the hereditament - not just all of the use made?
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21. Letting to a Charity
English Speaking Union Scottish Branches Educational Fund v City of Edinburgh Council 2009
Judicial review of refusal of mandatory relief
Tenants of whole building - 8 floors
Only used the ground floor
Ratepayer - wholly used for charitable purposes
Council - only partially used
To qualify, it must be wholly or mainly used for charitable purposes
Council’s argument is consistent with the ordinary meaning of the language used in the legislation
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22. Letting to a Charity
Letting to a charity that occupies with a bluetooth box broadcasting charitable messages
Occupation of all or part is sufficient to establish occupation
Everyone knows the 4 elements of occupation in the John Laing case - that’s not the point
Charitable relief ONLY applies where it is wholly or mainly used by that or that and other charities
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23. Letting to a Charity Could it be valued as a communication station ?
9 months would not be too transient
RV about £100 ? - or “de minimis” value ?
However it must be a separate occupation - not occupied by the same ratepayer as the main hereditament and for the same purpose
Moving the box around might frustrate this
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24. Letting to a Company in Liquidation
Just one of many examples:
5/8/ Company is formed
1/9/ Company takes 15 leases on empty property in two Boroughs
1/9/ Declaration of solvency
1/9/ Members voluntary liquidation later on the same day - Liquidator appointed
Liability falls on leaseholder in liquidation - exempt from empty rate
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25. Letting to a Company in Liquidation
The are only peppercorn rents and no rate liability - company remains solvent
No creditors to turn the voluntary liquidation into a compulsory liquidation
No pressure to disclaim the leases
No pressure to complete winding up
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26. Letting to a Company in Liquidation
Company wound up 3 months after notice from liquidator to Registrar at Companies House
Remaining leases revert to the Crown as “bona vacantia” - vacant goods
Treasury Solicitor Bona Vacantia Division
Crown accepts no liability - landlord not entitled to possession and therefore not liable
No one is liable
Within a year the Crown will disclaim the leases and the landlord will become liable from then
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27. Instant Rate Saver Plan
As advertised by articles in “Property Week”
Environmental charity - Healthy Planet
Healthy Planet sign a short term lease with a retail landlord to install posters advertising its work in shop windows in return for a donation of RV x 25p
Landlords benefit by avoiding empty rate
Charity said the initiative “would help landlords to cut their empty rates bills, improve the look of empty shops, and help the charity”
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28. Instant Rate Saver Plan
May improve the look of vacant shops
CLG has given money to some authorities to use vacant shops
Could ask VO to split assessment between shop and advertising right, BUT-
It is only a separate hereditament if there is a separate lease for the advertising right
Is the charity in beneficial occupation by virtue of the posters in the window? - not in my opinion
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29. Instant Rate Saver Plan
Charity exemption from empty rate only applies if it appears that when next in use it will be used by that charity or that charity and others for charitable purposes
If it is not the case - 100% liability remains
Are free standing advertising boards inside the windows occupation?
Is advertising a charitable purpose?
Is it mainly used for a charitable purpose?
Have some local authorities given relief?
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30. Section 44A It is at the Local Authority’s discretion
The discretion is exercised when the Local Authority applies for an RV apportionment
The VO must give it
The Authority must operate it
It must appear to the Authority that part is unoccupied and will remain so for a short period
Non-domestic rates: Guidance on rate reliefs for charities and other non-profit making organisations - updated June 2009
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31. Section 44A CLG Advice
It is not intended that section 44A be used where part of a property is temporarily not used or its use is temporarily reduced ….. Instead section 44A is aimed at situations, for example, where there are practical difficulties in occupying or vacating a property in one operation …. and it is phased over a number of weeks or months. In such cases it would be reasonable to reduce the liability on that part of the property which is unoccupied. Similarly, where a building or buildings on a manufacturing site become temporarily redundant it might be reasonable to take the unoccupied part of the property into account rather than levy full rates on the whole property.
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32. Section 44A CLG Advice
So, for instance, where the rateable value of the apportioned, unoccupied part of the property is below the relevant threshold no rates will be payable on that part until the end of the operative period (see further paragraph 8.2.7). It should be noted that the threshold has been increased from £2,200 to £15,000 for a one year period covering the 2009/10 business rates year …
Threshold £18,000 for 2010/11
Automatically reverted to £2,600 in 2011/12
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33. Section 44A Start and end Dates Applies while the RV is unaltered
Period begins on:
- the day it became partly unoccupied
- the day after a previous apportionment ends
Period ends on:
- occupation of the unoccupied part
- 31st March
- requiring a further apportionment
- becoming completely unoccupied
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34. Section 44A Further application is needed after 31st March
Further application if unoccupied area changes
Successive apportionments can be used for phased occupation or phased vacation
Eligibility depends on RV of the empty part - NOT the hereditament
If RV of empty part is below £2,600 relief can be 12 months to 31/3/2012
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35. Section 44A A second apportionment ends the first one
The charge under the first apportionment is purely an OCCUPIED rate charge
It is not wholly unoccupied during the first apportionment
Therefore s44A relief applies for the second apportionment on the basis that it would be exempt from empty rate charge for the first 3 or 6 months of that apportionment if wholly unoccupied
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36. Section 44A
Successive apportionments under section 44A generate successive periods of 3 or 6 months relief, whether they include some or all of a previous apportionment, or not
Can be used for phased occupations or vacations
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37. Telephone Masts Valued as “Communication Station (and Premises)”
Valued on rent for site plus any plant and machinery
VO will not TOR unless incapable of beneficial occupation
Entry in the list does not prove occupation
Not the same as an advertising right where the right is rated
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38. Telephone Masts Kennett v British Telecom. 1983 (H. of Lords)
Exchange in occupation as soon as some equipment moved in
LGFA 1988 s65(5) - can ignore plant and machinery
If equipment switched off and disconnected it can be ignored
No beneficial occupation - grant empty allowance
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39. Telephone Masts SI 2008/386 - unoccupied property regs.
Relevant hereditament - building (or part) or building (or part) plus land
Communication station is a structure not a building - outside the definition of hereditaments subject to empty rate
Similarly no empty rate on land including surface car parks and land used for storage
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