Court of Appeal closes the door on box shifting – but genuine storage schemes survive

A Court of Appeal ruling has closed off one of the most widely used empty rates avoidance schemes. Here is what happened, what it means for ratepayers, and what options remain.

Background: How Empty Rates work

When a commercial property becomes vacant, the person or organisation responsible for paying business rates (the “ratepayer”) is entitled to a period of relief from those charges, commonly referred to as “empty rates.” For offices, that relief period is three months. After that, full rates become payable on the empty building.

Over the years, a practice developed where a ratepayer would briefly re-occupy a vacant property for a short period, triggering a fresh relief period once they vacated again. This cycle could be repeated to generate successive windows of relief, significantly reducing the overall rates bill.

What the “Box Shifting” Scheme involved

One particular version of this approach, promoted by a third-party company called Principled Offsite Logistics Ltd (Poll), worked as follows. Poll took a licence over the vacant property from the owner. It then moved boxes of items described as redundant or worthless into the building for the minimum period required to count as occupation. Once the boxes were removed, a new empty rates relief period was triggered. The process was then repeated, generating successive periods of relief from empty rates liability.

What the Court decided

The Court of Appeal overturned an earlier High Court decision that had found in Poll’s favour, and ruled that this type of arrangement does not constitute genuine rateable occupation. As a result, it cannot be used to reset the empty rates relief period.

The Court applied a principle established in an earlier case called Rossendale, which requires courts to look at the purpose behind legislation, not just its literal wording. On that basis, the Court found that Parliament’s intention when introducing the empty rates regime was to discourage owners from leaving properties vacant and to encourage genuine occupation. The legislation was never intended to allow ratepayers to reduce their liability through artificial arrangements that created only the appearance of occupation.

The Court was clear that “occupation for occupation’s sake” is not enough where the sole purpose of that occupation is to obtain a rates relief benefit. The Poll model has therefore been ruled out.

What this does not affect: The Makro Distinction

Importantly, the Court of Appeal was careful not to overturn an earlier case called Makro Self Service Wholesalers Limited v Nuneaton and Bedworth Borough Council (2012). That case involved a ratepayer who went into occupation of a large warehouse in their own right, storing archive filing that they were legally required to retain. The space they occupied amounted to approximately 0.1% of the total warehouse area. When they vacated, they were awarded six months of empty rates relief, which is the relief period applicable to vacant warehouse space.

The Makro case is one that will be familiar to rating practitioners who worked on it at the time. Gareth Buckley, the author of this article, acted as the rating surveyor in that matter and has followed its subsequent treatment in the case law closely.

The Court of Appeal drew a clear distinction between the Poll scheme and the Makro situation. In Makro, the ratepayer was storing items that had genuine value and a real business purpose independent of any rates benefit. The occupation delivered a real benefit to the occupier beyond simply obtaining relief.

The City of London expressly confirmed it was not challenging Makro-style arrangements in this litigation, and the Court’s judgment recognises that where items are stored because the occupier genuinely needs or wishes to retain them, that storage has a utility and benefit that exists independently of any rates consequence.

What this means for ratepayers who store their own materials

This distinction matters directly for any ratepayer with vacant property. Where a ratepayer occupies a vacant property themselves by storing their own business records, archives, or operational materials, that arrangement remains distinguishable from the Poll model, provided the storage serves a genuine business purpose.

The strongest position is where a ratepayer can clearly demonstrate an authentic business need to store those materials in the property, as opposed to introducing items of no value purely to engineer a rates relief reset.

That said, the judgment does introduce a greater level of scrutiny across all rates mitigation strategies. The Court’s emphasis on substance over form signals a willingness to look beyond the surface of any arrangement and ask whether the occupation delivers a real commercial benefit. Billing authorities (the local councils responsible for collecting business rates) may now be more inclined to examine whether the stated purpose of any occupation is genuine, or whether it is merely a mechanism for obtaining rate savings.

What about other schemes?

The ruling raises questions about a range of other rates mitigation strategies, including those involving “Bluetooth boxes,” charitable occupation schemes, faith rooms, and similar arrangements. Where any such scheme is based on a transaction that has no genuine business purpose beyond removing an empty rates liability, it may now be vulnerable to challenge.

It remains to be seen whether Poll will seek to appeal to the Supreme Court. For now, third-party intermittent occupation strategies of the kind Poll operated are no longer viable.

The broader picture

It is worth stepping back to consider the wider context. When the Government amended the empty rates legislation in 2008, its stated aim was to discourage owners from leaving properties vacant and to encourage genuine occupation. In practice, ratepayers and property owners know that vacant properties are rarely left empty by choice.

The reasons a property remains vacant are well understood: weak market conditions, obsolescence, the need to assemble a larger site for redevelopment, banking covenants that restrict certain letting arrangements, and the need for refurbishment before a property can be seriously marketed. In many cases, a property will remain vacant until market conditions justify the investment required to bring it back into use.

Every pound extracted from a property owner through empty rates charges is a pound that is not available for refurbishment, redevelopment, or investment in the property. This is particularly relevant when considering town centres and high streets, where all sides of the political debate agree that investment and rejuvenation are urgently needed. That investment will only happen where market conditions allow and where finance is available. Aggressive pursuit of empty rates revenue by local authorities may bring in short-term income, but it risks depleting the private capital that could otherwise fund the regeneration those same authorities want to see.

Local authority chief executives and their teams should consider carefully what outcome they are actually trying to achieve. The financial pressures facing many councils are real and well understood. However, restricting a ratepayer’s ability to manage their rates liability in a legitimate way is, in the medium to long term, counterproductive.

What remains legitimate

The case law has not removed a ratepayer’s right to manage their tax affairs. Genuine Makro-style occupation, where a ratepayer stores their own business records or operational materials in a vacant property for a genuine business purpose, currently appears to remain effective. The key is that the occupation must deliver a real benefit to the occupier that exists independently of any rates saving.

It is also worth noting that the Government has had the option on multiple occasions to legislate against intermittent occupation strategies entirely, and has chosen not to do so. Instead, it has amended the minimum re-occupation period required to reset the relief window from six weeks to thirteen weeks, reflecting a recognition that this is a genuinely complex area.

Any rates mitigation strategy should be carefully considered in light of this ruling. The emphasis is now firmly on substance: does the occupation have a genuine purpose, and can that purpose be clearly evidenced?