Some relief for property owners

Unless another party is liable for the business rates (for instance, a tenant), owners of business premises are liable even if their property stands empty.  Business rate reliefs are available in limited circumstances, including for the period of three months from the time the property becomes unoccupied.  After that, rates are payable in full.

A recent Court of Appeal case will, therefore, give rise to joy amongst property owners and will be viewed with dismay by local councils (Rossendale Borough Council v Hurstwood Properties (A) Ltd and others [2019] EWCA Civ 364).  To quote Lord Justice David Richards: “These appeals concern two schemes designed to avoid the payment of National Non-Domestic Rates (NDR) on properties which in most instances were unoccupied.  Both schemes involved the grant of leases of the properties to special purpose vehicle companies (SPVs) without assets or liabilities which, as part of the scheme in question, were then placed in voluntary liquidation or were allowed to be struck off the register of companies as dormant companies and thus dissolved.”

The property owners (the defendants) maintained that in fact the SPVs were ‘the owners’ of the properties for the purposes of liability for NDR during the term of the leases.  The local authorities agreed unless the SPVs could be disregarded as a matter of law.  The court said “The appeals raise two issues.  First is it arguable that the doctrine of piercing the corporate veil is applicable to the SPVs?  Second, is it arguable that the leases fall to be disregarded by the application of the principles established by the decisions in W.T. Ramsay Ltd v Inland Revenue Commissions [1982] AC 300 (Ramsey) and later cases?”  The judge at first instance had answered ‘yes’ in relation to the first issue and ‘no’ in relation to the second.  The defendants appealed the first decision and local authorities, the second.

The Court of Appeal held the answer to both issues is ‘no’: “it is not open to the courts to pierce the corporate veil of the SPVs”.  Further, there is no question of the SPVs being shams (the judge so held at first instance and leave to appeal was refused) and hence the relevant SPV alone is liable for the NDR.

Will the decision be appealed?  One can only wait and see.

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