Occupation or not? Court of Appeal ruling raises the bar for business rates mitigation schemes

A judgment has provided important guidance on when the use of an otherwise empty property amounts to genuine occupation for business rates purposes.

In City of London v 48th Street Holdings Ltd [2026], the Court of Appeal rejected a business rates mitigation arrangement involving the temporary storage of boxes at vacant premises.

The judgment is significant for property owners, landlords and local authority billing teams because it makes clear that simply arranging for something to take place within an empty building may not be enough to establish rateable occupation. The use must provide a genuine benefit, value or utility beyond the business rates saving that the arrangement is designed to achieve.

How the scheme worked

The case concerned vacant premises owned on a leasehold basis by 48th Street Holdings Ltd. Working with Principled Offsite Logistics Ltd, the company adopted a business rates mitigation scheme involving boxes containing redundant items being placed in the premises for periods of six weeks.

The purpose was to establish a period of occupation before the property became empty again. Under the relevant business rates rules, this was intended to trigger a further period during which empty property rates would not be payable.

The City of London Corporation, the billing authority, challenged the arrangement. Its position was that the activity did not amount to genuine rateable occupation.

The scheme initially succeeded before a Deputy High Court judge. The Court of Appeal, however, reached a different conclusion.

What counts as genuine occupation?

At the heart of the dispute was a deceptively simple question: when is a property truly occupied for business rates purposes?

Rateable occupation has a long-established meaning in rating law. One important element is that occupation must be “beneficial”. In practical terms, there needs to be some real benefit, utility or value arising from the occupation.

The Court of Appeal concluded that an arrangement cannot satisfy that requirement merely because occupying the building produces a saving in business rates.

That distinction is particularly important for mitigation arrangements.

The placement of items inside a building does not automatically make it rateably occupied. The court must look at the reality of what is happening and ask whether the occupation itself provides genuine utility or benefit independently of the rates advantage.

On the facts of this case, temporarily storing boxes with redundant contents did not provide the necessary independent benefit.

Substance matters more than form

The judgment therefore emphasises the difference between genuine use of property and activity engineered principally to create a rates consequence.

It is not enough for a mitigation arrangement to reproduce the outward features of occupation. The underlying activity needs to amount to beneficial occupation when viewed realistically.

The Court of Appeal’s reasoning drew on a purposive approach associated with A line of tax cases. Rather than examining individual steps of an arrangement in isolation, legislation is interpreted according to its purpose and the transaction is considered realistically.

Applied to business rates, that meant considering whether Parliament intended the concept of occupation to encompass an arrangement whose asserted benefit was essentially the rates saving generated by that arrangement. The court concluded that it did not.

Previous authority overturned

The judgment is also important because it overruled a previous case that had supported the effectiveness of a similar approach to occupation and had consequently been important to this type of mitigation scheme. All cases need to be looked at on their own facts and legal reasoning.

What does the ruling mean for landlords?

For owners of vacant commercial property, the judgment increases the importance of demonstrating the real-world purpose and benefit of any temporary occupation.

A landlord considering a rates mitigation arrangement should expect questions such as:

• What is actually being done at the property?
• What goods, equipment or other items are being stored there?
• Why do they need to be stored?
• Does the occupier obtain a genuine commercial or operational benefit from using these particular premises?
• Would there be a reason for carrying out the activity if the business rates saving were removed from the equation?
• What documentary or other evidence demonstrates the purpose of the occupation?

Simply paying a third party to undertake activity at a property will not, by itself, turn that activity into beneficial occupation. That means arrangements need to be judged on their substance, rather than on whether they have been structured to meet a particular timetable.

What does it mean for councils?

For billing authorities, the decision provides stronger grounds for looking beyond the physical fact that goods or other items are present in a building.

Where an authority suspects that occupation has been engineered principally to obtain an empty-property rates exemption, the factual investigation is likely to become particularly important.

Authorities may need to examine not just whether a building was being used, but why it was being used and what genuine benefit the occupier obtained from that use. Evidence about the contents of the premises, their purpose, the commercial relationship between the parties and the reason for selecting the property could therefore prove decisive.

Not the end of rates mitigation

The judgment should not necessarily be read as bringing all business rates mitigation to an end. There remains an important distinction between an artificial arrangement that fails the legal test for occupation and genuine commercial activity that happens to produce a favourable rates consequence.

A business may have perfectly legitimate reasons for using premises for a relatively short period. The critical issue following 48th Street Holdings is whether that use amounts to beneficial occupation in its own right.

The practical question has therefore shifted away from simply asking “Was something happening inside the building?” The more important question is “What genuine benefit did occupying the building provide?”

Summary

This is a significant decision for the commercial property sector. The central message of the case is straightforward: an arrangement cannot manufacture rateable occupation merely by creating activity within a property when that activity has no meaningful benefit independent of the rates saving.

For landlords and their advisers, that makes the commercial substance and evidence behind any mitigation arrangement more important than ever. For billing authorities, it provides a clearer basis for challenging arrangements where physical activity at a property appears to exist principally to generate a rates exemption.

For the wider commercial property sector, the decision is a reminder that, when determining whether a property is occupied, the courts will look beyond how an arrangement has been structured to the practical reality of what the premises are actually being used for.

Should you wish to discuss a Commercial Property legal matter, feel free to contact a member of our team by calling your local office on 0800 011 1195 or emailing .