Tax Avoidance – the lawful avoidance or reduction of tax by arranging one’s affairs in order to minimise the amount of tax payable

Failed to appoint a liquidator

Set up for holding leases and the landlord claimed an exemption from NNDR

The court found that such a scheme was contrary to the public interest

“The Service now has reason to believe that a variation on this arrangement has emerged, allowing landlords to avoiding paying rates. A number of cases have been brought to The Service’s attention of instances where an insolvency practitioner has been appointed as liquidator of a company in a members voluntary liquidation, shortly after the company has entered into a lease, for premises it appears to have no legitimate use for. These instances have been characterised by features such as an extremely short period of time between the company entering into the lease and entering members voluntary liquidation, and peppercorn rents.”

• “The Service now has reason to believe that a variation on this arrangement has emerged, allowing landlords to avoiding paying rates. A number of cases have been brought to The Service’s attention of instances where an insolvency practitioner has been appointed as liquidator of a company in a members voluntary liquidation, shortly after the company has entered into a lease, for premises it appears to have no legitimate use for. These instances have been characterised by features such as an extremely short period of time between the company entering into the lease and entering members voluntary liquidation, and peppercorn rents.”

“In light of the court’s decision to wind up the 13 companies on the grounds the arrangement was held to be contrary to the public interest, The Service is of the opinion that in cases where a practitioner takes an appointment in a members voluntary liquidation, in which the main aim of the arrangement is to facilitate the non-payment of rates, such an arrangement would also be contrary to the public interest.”

• “In light of the court’s decision to wind up the 13 companies on the grounds the arrangement was held to be contrary to the public interest, The Service is of the opinion that in cases where a practitioner takes an appointment in a members voluntary liquidation, in which the main aim of the arrangement is to facilitate the non-payment of rates, such an arrangement would also be contrary to the public interest.”

“As such, if The Service is made aware of practitioners participating in these types of arrangements, it will consider reporting the matter to his/her Recognised Professional Body.”

• “As such, if The Service is made aware of practitioners participating in these types of arrangements, it will consider reporting the matter to his/her Recognised Professional Body.”

•  Any enquiries regarding this article should be directed towards Gareth Allen, Intelligence & Enforcement Services, 4th Floor, 21 Bloomsbury Street, London WC1B 3QW  

• telephone: [phone]? 

• e-mail: [e-mail]

Empty rate avoidance is legal – Westminster principle

• Empty rate avoidance is legal – Westminster principle

• The Ramsay Principle/Furniss case is a “red herring”

• De minimis occupation can be ignored unless it is beneficial

• Actual and Beneficial Occupation are the key issues

• Blue tooth occupation – can be rateable occupation if beneficial

• Blue tooth occupation by charities – not entitled to mandatory relief

• Inspecting occupation by boxes is difficult but vital

• Government is looking at avoidance

Announced by Chancellor in the Autumn Statement on 5 December 2012

• Announced by Chancellor in the Autumn Statement on 5 December 2012

• All newly built commercial property in England completed between 1 October 2013 and 30 September 2016 to be exempt from empty rates for the first 18 months, up to state aid limits

• Purpose – stimulate construction

Temporary measure

• Temporary measure

• No change to rules on empty rate exemptions

• Discretionary relief under s47 LGFA 1988

• Fully funded by central Government by a grant under s31 LGA 2003 for relief granted in specified circumstances up to State Aid de minimis limits

Does not apply to properties completed before 1 October 2013

• Does not apply to properties completed before 1 October 2013

• First 3 or 6 months exemption, then balance up to 15 or 12 months discretionary relief

• Runs with the property, not the owner

• May apply again if occupied for a short period

• Applies to all unoccupied hereditaments that are wholly or mainly qualifying new structures

• Structures means foundations and/or permanent walls and/or permanent roofs

• New means completed less than 18 months ago and

• between 1 October 2013 and 30 September 2016

Completed means ready for occupation for intended purpose or a date specified in a completion notice

• Completed means ready for occupation for intended purpose or a date specified in a completion notice

• Wholly or mainly means more than half

• Includes refurbished properties using existing foundations or a retained facade

• Splits, mergers, alterations – wholly or mainly new structures completed within the specified period

• Does not apply to all splits and mergers – new hereditament must be wholly or mainly new structures

• Hence if the extension or new part in a merger is less than half, it will not qualify

State Aid is support from public bodies which has the potential to distort competition and effect trade between member states of the EU

• State Aid is support from public bodies which has the potential to distort competition and effect trade between member states of the EU

• Discretionary relief may amount to State Aid

• State Aid is generally prohibited, but there are exceptions and aid is allowed under the “de minimis” rules

• For most businesses, State Aid must not exceed €200,000 over 3 years from ALL sources

• Government will not fund relief that exceeds the de minimis limits

4 Characteristics of State Aid:

• 4 Characteristics of State Aid:

• State assistance from a public body or publicly funded body

• It favours certain undertakings or the production of certain goods

• It has the potential to distort competition

• It has the potential to affect trade between EU member states

• The potential to distort competition does not have to be substantial

• To affect trade between member states, it is sufficient that the product or service is tradeable between member states, even if the recipient does not export to the EU

• The only likely exceptions are single businesses with a purely local market

Member states must notify and seek approval from the European Commission before granting State Aid

• Member states must notify and seek approval from the European Commission before granting State Aid

• The Commission must order the recovery of any aid that has not been properly notified and approved, even if it makes the company insolvent

• Repayment is with interest

• Exemptions apply to Community objectives

• Aid must be notified and approved by the European Commission first

• The General Block Exemption Regulation (GBER) applies to a whole range of aid measures that are less problematic in competition terms

• The UK also has a number of different approved aid schemes in place that may be used by public authorities

Less than €200,000 to any undertaking over any rolling three year period is considered to be de minimis

• Less than €200,000 to any undertaking over any rolling three year period is considered to be de minimis

• €100,000 in the road transport sector

• This aid may be given without notification or approval but records of aid granted must be maintained

• All the terms of the De Minimis Regulation must be followed – it is easy to make a mistake where undertakings are not independent but linked to other undertakings, such as a parent company

The de minimis rule does not apply to:

• The de minimis rule does not apply to:

• Fishery and aquaculture sectors

• Agriculture

• Export related activities

• Aid contingent on the use of domestic goods

• Coal sector

• Road freight transport sector

• Undertakings in difficulties

Still important despite 18 months relief for some

• Still important despite 18 months relief for some

• if an authority is aware that the remaining work to be carried out on a new building can be reasonably expected to be completed within three months, the authority shall serve a notice on the owner of the building unless the valuation officer (VO) directs otherwise in writing

• if the building is complete then a notice may be served on the owner unless the VO directs otherwise in writing

Porter (VO) v Trustees of Gladman Sipps

• Porter (VO) v Trustees of Gladman Sipps

• Upper Tribunal (Lands Chamber)

• [2011] UKUT 204 (LC)

• 28 March 2011, London

• Re: Completion and inclusion in the list of 19 Office Units, Miller Court, Tewkesbury

Gloucestershire VT deleted all 19 entries

• Gloucestershire VT deleted all 19 entries

• No completion notices served

• Speculative office development – 20 units

• 19 units empty on 1 May 2006

• Plastered walls, suspended ceilings, lighting, air conditioning, raised floors with voids, WCs

• Some units had alarms, tea points, passenger lifts

• Power as far as the central core only

• External doors, double glazing, some fire doors

• No partitioning, data cabling or telephones

• Car Parking for each unit

VO contended that the remaining work was minor or de minimis and cabling, tea points, etc. were tenant’s fit out

• VO contended that the remaining work was minor or de minimis and cabling, tea points, etc. were tenant’s fit out

• VO felt the properties were complete and were hereditaments

• Ratepayer contended that the properties were not capable of occupation as offices without substantial work

• VO Rating Manual – property not a hereditament when substantially complete but without tenant’s fit out

• Completion notice required at that stage

Decision – building is a hereditament if it is ready for occupation

• Decision – building is a hereditament if it is ready for occupation

• Must be assessed in the light of the purpose for which it is designed to be occupied

• No scope for rating a building that is very nearly ready for occupation without a completion notice first

• Occupier would require more power points, tea points and some partitioning plus consequential fitting out

• VT correct – Appeal dismissed

Prudential Assurance Co Ltd v a Valuation Officer 2011

• Prudential Assurance Co Ltd v a Valuation Officer 2011

• VTE Surrey case – 24 May 2011

• Before Prof. Zellick

• RE:3 and 4 The Heights, Weybridge

• Validity of a completion notice can be challenged on a proposal in the VTE

• Challenge must be timely

Proposals to delete on ground hereditaments improperly entered as not complete

• Proposals to delete on ground hereditaments improperly entered as not complete

• Completion notices served but on developer not the owner

• Subsequent agreement between owner and BA as to completion day

VO argued the VTE had no jurisdiction to consider whether or not the notice was valid as:

• VO argued the VTE had no jurisdiction to consider whether or not the notice was valid as:

• There is a statutory right of appeal for completion notices

• VO in no position to defend validity of completion notice as he did not serve it

• President rejected VO’s submissions

• If no completion notice then properties not complete and entries unsound

• BA could be added as a party

• VTE did have jurisdiction

Did purported ‘agreement’ document change position?

• Did purported ‘agreement’ document change position?

• VTE noted the agreement :-

• did not purport to be a CN,

• did not appear to be a CN and

• the parties thought they were signing an agreement

• BUT

• VTE saw ‘no impediment to concluding that, if not an agreement, it should be treated as a completion notice

• It contained all the information

• Not an essential precondition to an agreement for a

• CN to be served on the owner

President clearly unhappy about the ratepayer’s stance:

• President clearly unhappy about the ratepayer’s stance:

• “…unattractive argument by which a corporate body professionally advised at the time seeks to resile from an agreement freely entered into simply because it later discovers that a technical failure offered it a possible escape route.”

• Common ground between parties that naming and serving CN on developer rather than owner was fatal to its status. But:

• “Evidence as to the fate of that notice following its receipt would have been necessary to support any argument that it was indeed a valid completion notice and we leave open to another day the question when a notice incorporating mistakes may

• nevertheless be valid.”

Friends Life Company Limited v Alexander (Valuation Officer) and Huntingdonshire District Council 2012

• Friends Life Company Limited v Alexander (Valuation Officer) and Huntingdonshire District Council 2012

• Unit 1, Eaton Drive, St. Neots, Cambs.

• Developers - Miller Developments Ltd

• July 2006 Miller sold freehold to Friends Life

• April 2007 Completion notice served on Miller Developments Ltd

• November 2011 Friends Life made a proposal to delete from April 2010 because incomplete and no completion notice served

• Argued that Completion notice was defective and invalid

Council argued that:

• Council argued that:

• Completion notice correctly served because onus is on Friends Life to show Miller were not entitled to possession

• 2. Even if not correctly served, Miller were agents or representatives of the owner or were managers of the property

• 3. Even if not correctly served, VT had a discretion to withhold relief

• 4. Even if VT did not have discretion, Friends Life had waived their rights to impugn the notice

Appeal allowed - TOR from 1/4/10 because:

• Appeal allowed - TOR from 1/4/10 because:

• 1. Completion notice not served on correct person because owner (person entitled to possession) was Friends Life – it was for the billing authority to show another party was entitled to possession – billing authority not diligent

• 2. Service on Miller was not effective because no evidence of agency

• 3. VT had no discretion to withhold relief because there is no authority to support the contention that the VT has underlying discretion to do what was fair and just and “may” did not imply that discretion was intended

4. The contention that Friends Life had waived their rights was rejected because failure to seek judicial review and continued payment was not a waiver, Huntingdonshire insisted that it was correct to serve on Miller even when the error was pointed out and although excessive delay would create a presumption of validity, it was not excessive because the ability to challenge by a proposal was not generally realised until the Prudential case

• 4. The contention that Friends Life had waived their rights was rejected because failure to seek judicial review and continued payment was not a waiver, Huntingdonshire insisted that it was correct to serve on Miller even when the error was pointed out and although excessive delay would create a presumption of validity, it was not excessive because the ability to challenge by a proposal was not generally realised until the Prudential case

Valuation Tribunal case heard by Prof. Zellick

• Valuation Tribunal case heard by Prof. Zellick

• English Cities Fund (General Partners) Ltd and Standard Life Assurance Ltd (formerly Standard Life Investment Funds Ltd) v Mr D Grace (VO) and Liverpool City Council

• Appeal against the entries in the list of 2 new office buildings

• Validity of completion notices

5 St Paul’s Sq. - completion notice Aug 2008

• 5 St Paul’s Sq. - completion notice Aug 2008

• Correct owner not named – notice invalid

• Incorrectly served on Standard Life Investments Ltd

• Rates had been paid

• 4 St Paul’s Sq. - completion notices March 2012

• Unlawful to serve floor by floor – seeking one tenant

• Attempt to circumvent the 3 month limit – notice invalid

• Both hereditaments removed from the lists

Aviva Investors Property Developments Ltd and PPG Southern Ltd v Whitby (VO) and Mills (VO) 2013 Upper Chamber (Lands Tribunal)

• Aviva Investors Property Developments Ltd and PPG Southern Ltd v Whitby (VO) and Mills (VO) 2013 Upper Chamber (Lands Tribunal)

• [2013] UKUT 0430 (LC)

• 4 newly erected warehouse buildings in Reading and Milton Keynes – no completion notices

• Entered in the 2005 rating list from 1/4/05 and 3/7/06

• No small power distribution, no or limited lighting, no partitioning of office space, one unit having no gas supply

• Held – Not rateable hereditaments that can be entered in the rating list – appeals allowed

• Deleted from 2005 list

• Completion notice procedure important