The High Court has today rejected arguments on behalf of Public Safety Charitable Trust Limited (PSCT) that it was entitled to charitable relief from business rates in respect of occupation of properties in which it had installed wi-fi and telecommunications equipment. The decision is expected to encourage billing authorities to challenge similar empty rates mitigation schemes used by charities and landlords.

Schemes to reduce or avoid liability for empty rates have become increasingly popular since the Rating (Empty Properties) Act 2007 removed (with certain exceptions, as now set out in Regulations of 2008) the relief from business rates that had previously been granted to landowners who were faced with empty properties. Under the 2008 Regulations, following an exemption period of three months for most properties (but six months for industrial or warehouse properties) after the property becomes unoccupied, the landowner must pay business rates at the same rate as if the property were occupied. Various schemes have been created to mitigate these costs. One of the most common is for the landowner to grant a lease of the property to a charity, which will enjoy an 80% mandatory discount from business rates under section 43(6) of the Local Government Finance Act 1988 where the property "is wholly or mainly used for charitable purposes (whether of that charity or of that and other charities)". A further 20% discount may be granted at the discretion of the billing authority. Such leases are usually granted at a peppercorn rent and allow the charity to occupy the premises for its charitable purposes. Generally, the landlord donates a sum equivalent to a portion of the saved empty rates to the charity as part of the scheme. The uses to which premises are put vary extremely widely under these schemes.

PSCT is a UK registered charity which installs communications equipment inside buildings to deliver messages and information to members of the public. On the Charity Commission website, the activities of PSCT are stated to include an intention "to promote, for the benefit of the public, the efficiency of the police in England and Wales and to promote good citizenship and greater participation in the prevention and solution of crime in the area." The question that came before the High Court was whether the installation of the necessary equipment to facilitate the public messages was an occupation that was wholly or mainly for charitable purposes. The billing authorities were seeking to argue that the premises remained essentially unoccupied.

In rejecting PSCT's arguments, the High Court has made it clear that it will look strictly at these schemes and assess, in each case, whether there is sufficient occupation and a genuine charitable purpose to the occupation. The decision today can be contrasted with that in Makro Properties Limited and another v Nuneaton and Bedworth Borough Council [2012] PLSCS 150 last year, where the court held that the presence of some boxes of documents in around 0.2% of the property for a six week period after the initial exemption from empty rates was sufficient for there to have been rateable occupation so that the landlord was entitled to seek a further six month exemption from payment of empty rates. In Makro, the court concluded that there was an intention to occupy the property by Makro and that the occupation was of benefit to it as the documents needed to be retained and, therefore, had to be stored somewhere. In that case it was held to be irrelevant that the occupation was deliberately intended to break the period during which the property was continuously unoccupied and trigger a new period of exemption.

Charities involved in schemes such as the PSCT scheme will need to review their position to ensure that, if they wish to continue to benefit from such arrangements, they can be certain that their right to obtain charitable relief cannot be challenged. Where landlords have used such schemes, it is likely that full liability for empty rates will resume in short order (either as part of the pass-through arrangements under the tenancy agreement or by early  termination of the tenancy where this is available to the tenant). Landlords will be well-advised to take advice and consider alternative mitigation measures.

Public Safety Charitable Trust Limited v Milton Keynes Council; Public Safety Charitable Trust Limited v South Cambridgeshire District Council; Cheshire West And Chester Borough Council v Public Safety Charitable Trust.