In Rossendale v Hurstwood Properties (A) Limited the owners of empty business premises challenged the payment of business rates by creating an arrangement whereby the liability to pay business rates would become vested in the Crown instead.
This was achieved by granting leases to special purpose vehicles (SPVs), legal entities created to fulfil certain objectives, so that the SPV became liable to pay future business rates for the premises instead of the owners. The SPV would then permit itself to become dissolved so that all of its assets become bona vacantia, the term given to ownerless property, and belong to the Crown. This would also pass the business rates liability to the Crown until it served a notice of disclaimer to re-vest the premises in the owner.
The local authority sought a declaration from the High Court that this arrangement was ineffective and the owners should remain liable for business rates.
They put forward two main arguments, either it was a sham arrangement, or the separate existence of the SPV should be disregarded as the SPV is set-up and acts in accordance with the owners’ instructions.
The High Court held that this was not a sham arrangement as the leases were genuine and a transaction cannot be challenged just because it was entered into to obtain an advantage. However, the High Court ruled that the issue of whether the local authority could pierce the corporate veil and disregard the existence of the SPV would be required to go to trial for a final determination.
Whilst there were glimmers of a new hope when the business rate regime was overhauled, this case shows that the rates payer is striking back. The concluding chapter of this saga is yet to come.