Business rates mitigation – the wrong sort of storage

The Court of Appeal judgment in City of London v 48th Street Holdings Ltd & Principled Offsite Logistics Ltd [2026] EWCA Civ 970, has significant implications for business rates mitigation strategies.

Owners of commercial properties are generally liable for business rates on empty premises after an initial exemption period. However, the legislation provides for a fresh period of empty property relief following a period of occupation.

One of the various stratagems adopted to reduce business rates liability for owners of empty properties has been to grant short-term leases for storage purposes to a company specializing in rates mitigation solutions. Such arrangements have in the past survived legal challenge by local rating authorities, but in the present case, the company placed boxes containing worthless items on the premises then removed them.

The Court of Appeal — analysing the substance and purpose of the arrangement, concluded that Parliament did not intend empty property relief to be repeatedly obtained by using arrangements with no genuine commercial purpose other than rates mitigation. The ‘Ramsay principle’ requires courts to consider if the transaction has a legitimate commercial purpose or has just been adopted to avoid tax. The court specifically overruled a previous High Court decision R (Principled Offsite Logistics Ltd) v Trafford Council [2018] which had confirmed that rates mitigation was a sufficient benefit to constitute occupation for business rates purposes.

In this case, the arrangements failed that test, clarifying that unless goods are stored for a genuine commercial reason other than avoiding empty property rates, ‘box-shifting' schemes must now be treated with caution and the commercial benefit of existing arrangements should be reviewed against this more stringent standard.