A tax avoidance scheme, widely known as 'box shifting', has been brought to an end by a landmark Court of Appeal ruling last month. The practice, which involved placing stacks of boxes in unoccupied commercial buildings to claim business rates relief, is believed to have cost local authorities more than £1bn over nearly two decades.
The scheme emerged in 2008 following changes to business rates rules, which allowed occupiers of vacant buildings a three-month rate holiday at the end of each tenancy. Companies would then move boxes into the empty space for six weeks, resetting the clock and allowing another three-month rate-free period.
The recent case was brought by the City of London Corporation against 48th Street Holdings Ltd and Principled Offsite Logistics Ltd (POLL), a company providing 'rate mitigation' services. Lady Justice Falk ruled that 'occupation' solely for the purpose of rate saving, without any other use or benefit, does not amount to beneficial occupation under the statutory scheme.
A spokesperson for the City of London Corporation welcomed the decision, stating it represents a significant victory for local authorities across England and helps safeguard revenues for essential public services.