Recently, we have seen a rise of business owners losing out in court due to signing up to rate mitigation schemes where they are not properly protected. Over the years, a wide range of schemes have popped up, offering landlords different techniques to mitigate their Business Rates. In this blog, our specialist team highlights what schemes to be wary of when considering reducing or mitigating your rates.
Leeds City Council has recently been awarded nearly £40,000 in costs after successfully challenging an investment company that used snail farming to mitigate their rates. The business owner entered into an arrangement with a rates mitigation company, signing leases allowing short-term tenants use of their empty property. The contracts they signed, stated that the premises should be used for ‘the purposes of heliciculture’, snail farming, despite the units being within an office block. It was believed that this would classify as a meaningful occupation and therefore the company would qualify for empty rates relief once the snails vacated. However, when challenged by the Council the leases were found to be a sham by the High Court. One of the main reasons for the decision was that the ‘intended’ use of the units was not possible due to them being offices, and therefore not suitable for snail farming. This case could therefore set a precedent that snail farming will not be seen as a viable option for the occupation of empty commercial property.
We recently published a blog covering a landmark ruling made by the UK Supreme Court allowing local councils to sue two companies regarding unpaid business rates. The scheme worked by using special purpose vehicle companies (SPVs) to take out leases on empty properties therefore taking on their business rates liabilities. However, these SPVS were quickly dissolved or put into liquidation resulting in no taxes being paid. The councils were successful in their appeal as the court found the whole purpose of the companies was to go into liquidation and avoid pay rates. They stated the businesses had no other purposes and therefore the council can sue for unpaid rates.
Earlier this year, a property development firm entered into an arrangement with a rates mitigation company to avoid paying rates on an empty office block. The company used ‘property guardians’ as a way to convert business rates to council tax. It worked by granting licenses to individuals, allowing them residence in the property at reduced rent. This converted the building from commercial to residential use. In theory, this should save the landlord a large chunk in empty rates payments. However, when challenged in court the scheme fell through and the firm was forced to pay their empty business rates. The Court of Appeal ruled that as the firm retained general control of the building, they are the ones liable for the empty rates. Many experts believe that this is the end of the property guardian schemes as most property owners will not want to transfer complete control of their buildings to the tenants.
What’s next for Rates Mitigation?
With so many schemes falling through, the best advice to give is to be transparent and consistent. Schemes do not have to be overly complicated as this is where things can go wrong. Unlike the ones described above, at FCS we have a simple, open and honest approach which can save you up to 100% on your Empty Property Rates. We have a 0% rejection rate from any Local Authority and promise to pay any fees if challenged by the council.
FCS are proud to offer our unique service, removing landlord liability in a risk-free, transparent and legal manner. Don’t just take our word for it, see what our clients have to say over on Trustpilot.
Do you have an empty commercial property you are liable for? Get in touch today and see how FCS can help.