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Different interpretations of business rates rules "causing difficulties" for occupiers, says expert

Out-Law News | 03 Jun 2013 | 4:54 pm | 3 min. read

The latest contradictory decision involving a building occupier's liability to pay business rates illustrates the "difficulties" experienced by both billing authorities and ratepayers under the current regime, an expert has said.

Stuart McCann of Pinsent Masons, the law firm behind Out-Law.com, was commenting as the High Court allowed the landlord of an industrial warehouse and office space to claim empty property rates relief for six months after a tenant moved out. The fact that the tenant had only installed a small bluetooth transmitter on the property was enough to count as "rateable occupation", triggering the relief when the property was vacated, the judge said.

"The case is consistent with the High Court's decision in the Makro case last year, where it held that occupation of a minute fraction of a building amounted to rateable occupation for the purposes of claiming empty property rates relief when the occupation ends," he said.

"However, contrast both decisions with last month's Public Safety Charitable Trust cases, where the High Court held that qualification for mandatory rates relief for a charity in occupation depends on the charity making extensive use of the premises for charitable purposes, rather than leaving them mainly unused. The cases put together are mere examples of how the different interpretations placed by the courts on the relevant legislation are causing difficulties for billing authorities and ratepayers alike in assessing liability for business rates," he said.

Business rates are charged on most non-domestic premises including shops, offices, warehouses and factories. Premises are assigned a rateable value by the Valuation Office, which is part of HM Revenue and Customs (HMRC). This is used by the local authority to calculate how much the occupier of that property should pay.

Owners of industrial premises, including warehouses, receive a limited exemption from paying business rates on an empty property for six months after the property initially becomes vacant. Short-term occupation for less than six weeks is ignored for the purposes of the exemption. However, if the property is occupied for a period of more than six weeks during the exemption period, the relief ends and a new exemption period is triggered when the property is vacated again.

In this case the landlord, Stirling Investment Properties, had leased the premises to a tenant for 43 days at a nominal rent. During this period, the tenant installed a small Bluetooth transmitter that sent out marketing and public safety messages to Bluetooth-enabled devices within a 20 metre transmission range. When Stirling claimed the empty property exemption, the local authority argued that the premises had not been occupied as a warehouse or, alternatively, that the occupation was so minimal that it did not qualify.

Giving his initial ruling at the Magistrate's Court, the district judge said that the tenant had met the four factors needed for occupation. Regarding the usage of the property, although the tenant had not used the building as a warehouse it had used the premises for beneficial commercial means, he said. It was not up to a district judge to decide that it was not entitled to do so, he said.

In the High Court, Mr Justice Wilkie agreed. He said that the district judge was entitled to conclude that the tenant's use of the property "amounted to rateable occupation for the duration of the lease", he said.

"They occupied, exclusively, the hereditament for the purpose of the permitted user," he said. "They intended to use the premises for that purpose and, in the result, it was beneficial to them in the way described. In my judgment the fact that the nature of their undertaking was such that, once they had identified the optimum location for their equipment, they did not need to 'use' more than a minute fraction of the area encompassed within the premises did not prevent their occupation being rateable occupation."

Last month, the High Court ruled that installing similar transmitters in otherwise empty commercial properties could not be classed as 'occupation' for the purposes of triggering a mandatory exemption from business rates for registered charities. Mr Justice Wilkie noted this decision in his own judgment, but said that it was irrelevant.

"The issue in those cases was a different one: whether the appellant qualified for charitable status exemption on the basis that the premises were wholly or mainly used for charitable purposes ... none of the arguments, or the terms of the judgment, in that case are directly relevant to the issue I have to decide," he said.