Recovery position

In a poor economic climate where many premises are not put to full use, there is more incentive than ever for businesses to attempt to minimise the amount of rates they are paying.

Many of these attempts are entirely uncontentious. However, some attempts are more likely to be resisted by billing authorities who will have to tackle them in the Magistrates’ Court. This article gives some tips for dealing with three common situations:

1. Temporarily ‘occupied’ premises.
2. ‘Charitable’ occupation.
3. ‘Late’ service of demand notices.

One tip which applies in all cases is to request consideration of the matter by a district judge rather than a lay bench of magistrates once it is clear that the case will raise more issues than a run-of-the-mill ‘liability order list’ case. District judges are better able to grasp the complex legal framework for rates recovery than lay magistrates who are accustomed to dealing with criminal matters.

Example one: temporarily ‘occupied’ premises

It used to be the norm that ratepayers would be anxious to establish that premises were not occupied and therefore were not liable for rates.

That changed with the introduction of unoccupied rates coupled with the exemption periods following occupation. These have created an incentive for ratepayers to occupy premises temporarily and then vacate so as to claim the exemption. This process can in theory be repeated.

The case of Makro Properties Ltd v Nuneaton and Bedworth BC [2012] EWHC 2250 has given added impetus to such schemes. In particular it establishes that slight acts of user can amount to ‘actual’ occupation if coupled with an intent to occupy (whatever the motivation for that intention may be). In that case, the paperwork stored covered only around 0.2% of the area of the hereditament.

Makro does not grant blanket approval for all such schemes however. The following points should still be investigated:

1. The occupation must still be beneficial; storage of items which are of no value to the occupier is therefore unlikely to amount to rateable occupation.
2. There is support in some older authorities for an argument that a hereditament must be occupied according to its nature. On this logic, using an office building for storing sporting equipment, for example, would not create rateable occupation.
3. Occupation must also be “exclusive” and “not for too transient a period”. It is worth checking that these criteria are met, although they are unlikely to cause issues in this sort of case.

Example two: ‘charitable’ occupation

One way of gaining a partial or complete exemption from liability to rates is of course to let the premises to a charity to use for charitable purposes. The charity’s occupation may in fact be physically limited, however, causing billing authorities to seek to enforce liability for rates.

The following points may prove worthwhile for billing authorities to investigate:

1. Liaise with the Valuation Office Agency to see if it is appropriate to list the area occupied by the charity as a separate hereditament.
2. Consider whether the hereditament is “wholly or mainly used” for charitable purposes: how much use is actually being made of the hereditament? Billing authorities can argue that such premises are ‘mainly’ unused, and the Scottish case of English Speaking Union v City of Edinburgh Council [2009] CSOH 139 may assist them in that argument. It should be noted that the High Court is due to consider the application of the “wholly or mainly used” test in early 2013 in a series of cases brought by local authorities against the Public Safety Charitable Trust; one of the issues is whether and to what extent the quantity of use is relevant.
3. Consider whether the use that is being made is in fact charitable. Not all the activities of a registered charity are charitable; raising money for the charity, for example, is not a charitable activity for rating purposes (except in the specific case of charity shops, which benefit from a statutory exemption from this rule).    

Example three: ‘late’ service of demand notices

The requirement is to serve demand notices “on or as soon as practicable after” 1 April in the relevant year. In complex cases demand notices may not always have been served on or before 1 April. Ratepayers are apt to argue in these circumstances that the demand notice has been served late so they should not have to pay the demands in it. Contrary to what is sometimes supposed, Magistrates’ Courts do have jurisdiction to decide on such matters.

Billing authorities have two lines of defence to such an argument.

First, they can demonstrate with evidence that although the demand notice was served after 1 April, it was nevertheless served as soon as “practicable”. Evidence would include a chronology of the inclusion of the hereditament in the list and of the billing authority’s attempts to identify the owner/occupier. Essentially an explanation must be provided of the prima facie late service of the notices.

Second, they can argue that no prejudice has been caused to the ratepayer. The caselaw has now (in North Somerset DC v Honda Motor Europe [2010] EWHC 1505) established fairly conclusively that some substantial prejudice must be shown by the ratepayer if liability is to be avoided.

Conclusion  

Billing authorities face a number of attempts to reduce the amount of rates that can be collected. If recovery is pursued then the matters are tested in the Magistrates’ Court. It is often possible for billing authorities to defeat such attempts, provided that they clearly identify the legal issues involved and focus their evidence and argument on those issues.

Cain Ormondroyd is a barrister at Francis Taylor Building, Temple, London. He regularly acts for billing authorities, ratepayers and the VOA. He appeared for Makro in the magistrates’ court and is due to represent the local authorities in the Public Safety Charitable Trust case in the High Court.