The High Court has given important guidance on the test for rateable occupation among multiple occupiers in relation to liability for non-domestic rates.
- One of several occupiers of a single hereditament may be fixed with liability for non-domestic rates for the whole site if that occupier is in "paramount control" and the other occupiers are subordinate.
- A company or entity occupying part of a single hereditament is not the occupier of the whole of that site simply because it is controlled by the same individual who controls the other occupiers of that site.
- Where there are multiple occupiers of a particular hereditament and occupancy is strictly joint, for example by a partnership, liability for non-domestic rates may be joint and several between two or more occupiers.
- Where multiple persons occupy different physically separate parts of a single rateable hereditament (without holding the site jointly), none of the occupiers will be in actual possession of the whole and therefore none will be liable for non-domestic rates on either the whole or any part of the hereditament.
Tallington Lakes is a leisure park offering facilities for camping, climbing, activities and water sports. The park's operators have organised their business as a corporate group under the holding company Tallington Holdings Limited ("THL"). THL controls various wholly-owned subsidiaries and other entities also trading at the Tallington Lakes site, each responsible for discrete functions, facilities or activities. THL is described by the group as the overall financial entity, through which everything flows, and Mr Neil Morgan is the sole director of THL and of at least one of its subsidiary companies, Tallington Lakes Limited ("TLL").
Liability for non-domestic rates
The Tallington Lakes site is listed in the relevant local non-domestic rating list as a single hereditament, known as 'Tallington Lakes Leisure Park' (the "Leisure Park"). Responsibility for paying non-domestic rates in respect of a particular listed hereditament like the Leisure Park is determined by section 43(1) of the Local Government Finance Act 1988.
A person (the ratepayer) is liable to pay rates if, at the relevant time, he "is in occupation of all…of the hereditament". To be deemed to 'occupy' a hereditament, the potential ratepayer must meet four criteria for determining "rateable occupation". These are that:
- there must be actual occupation;
- the occupation must be exclusive for the particular purpose of the possessor;
- the possession must be of some value or benefit to the possessor; and
- the possession must not be for too transient a period.
Where there are multiple potential 'rival occupiers' of the same hereditament under these criteria, case law has established that the rateable occupier will be the party "whose position in relation to occupation is paramount". Alternatively, where two or more parties occupy the same hereditament jointly (for example as partners), liability for business rates may be joint and several between them. Except in these circumstances, a potential occupier can only be in "rateable occupation" of a single hereditament if he is in actual occupation of the whole site.
The Leisure Park rates dispute
The District Council invoiced TLL for non-domestic rates in respect of the Leisure Park for two financial years, 2008/09 and 2009/10, on the basis that it was in rateable occupation. When TLL refused to pay, the Council secured four liability orders against TLL for the unpaid sum of £132,784.12.
TLL contested these orders before a deputy district judge ("DDJ") on the basis that its parent company THL was the true rateable occupier of the entire Leisure Park site. When this argument was rejected by the DDJ, TLL applied for judicial review of the DDJ's decision, and the High Court directed that the appeal be heard by way of case stated. The Judge (Stephen Morris QC, sitting as a Deputy High Court Judge) was tasked with establishing whether the DDJ could reasonably have found that:
- TLL was in "actual occupation" of the entire Leisure Park; and
- all the companies or entities operating at the Leisure Park were in shared occupation, with TLL being in "paramount control" of the entire hereditament.
On the first issue, the DJJ had found that TLL was in actual occupation of the entire Leisure Park. However the Judge disagreed with this conclusion on the basis that TLL's evidence clearly stated that TLL occupied only part of the Leisure Park site, not the entire site.
On the second issue, the Judge held that there was no evidence before the DDJ to suggest that each THL group company or entity was in occupation of the entire site, as was required to support a finding of some form of joint occupation. There was no basis in law or in fact for the DDJ's finding that TLL was in "paramount control" of the entire Leisure Park. This concept only applied to cases involving rival or competing potential occupiers, which was not the case here.
The Judge also held that there could be no 'cross-attribution' of acts of occupation as between the various companies. In other words, an act of control by Mr Morgan when acting as the director of a particular THL group company in respect of a particular part of the Leisure Park site was attributable only to that company. It could not be attributed to any other company at the Leisure Park of which he was sole director. The Judge explained that any analysis to the contrary would disregard the essential principle of corporate identity, whereby the various THL group companies were independent legal entities, separate from physical persons like Mr. Morgan, from their shareholders, and from each other. No one company or entity was liable for non-domestic rates at the Leisure Park, because none occupied the whole site and therefore none was in "rateable occupation" of it.
The Tallington Lakes decision has confirmed the established principle that if a whole site or building is entered in the rating list as one rateable hereditament, no individual occupier will be liable to pay business rates on the whole if he is neither the occupier of the whole nor occupying the whole jointly with others. Nor can that individual occupier be required to pay rates in relation to the part he does occupy, since there is no way of determining the rateable value of that part.
The Judge's remarks regarding corporate identity are important because of their implications for operations whose functions are structured as corporate groups. Such operations may potentially be able to escape liability for business rates if they all occupy discrete parts of a single hereditament.
Similarly, following this case, local rating authorities will be mindful that they need to reflect the reality of occupation so far as possible when setting the boundaries of individual hereditaments. Large sites like the Leisure Park may, in future, be carved up by local rating authorities into multiple hereditaments to increase the likelihood of collecting business rates from the various occupiers of their constituent parts.
R (Tallington Lakes Limited) v Grantham Magistrates Court  EWHC 3403 (Admin)