B e f o r e :
Mrs Justice O'Farrell DBE ____________________
____________________
Nicholas Trompeter KC, (instructed by Addleshaw Goddard LLP) for the Appellant Alex Worthington, (instructed by Greenhalgh Kerr Solicitors) for the Respondent Hearing date: 25th November 2025 ____________________
HTML VERSION OF JUDGMENT APPROVED ____________________
Crown Copyright ©
This judgment was handed down remotely at 10.30am on Monday 12 th December 2026 by circulation to the parties or their representatives by e-mail and by release to the National Archives.
Mrs Justice O'Farrell:
This is an appeal by way of case stated against the Judgment dated 5 September 2024 of District Judge (Magistrates' Courts) Alex Boyd ("the Judge"), upholding a complaint by the respondent council and making a liability order against the appellant company in respect of unpaid non-domestic rates in respect of property at 65/73 North Street, Keighley, West Yorkshire BD21 3RZ ("the hereditament").
The central issue raised by the appeal is the test to be applied to determine whether a person is the owner of a hereditament for the purposes of sections 45(1) and 65(1) of the Local Government Finance Act 1988 ("the 1988 Act").
In particular, a question has arisen as to whether the principles established by the Supreme Court in Rossendale Borough Council v Hurstwood Properties (A) Ltd and Others [2021] UKSC 16 give rise to a single, composite test or raise two separate questions.
Legislative framework
Non-domestic rates are charged by relevant authorities against: (a) the occupier of a property which is not a domestic property; or (b) the owner of the property if the property is unoccupied.
Under section 41(1) of the 1988 Act, the valuation officer (an official of HMRC in the Valuation Office Agency) is under an obligation to compile and maintain local non-domestic rating lists for billing authorities.
Section 42(1) prescribes that a local non-domestic rating list must show each "hereditament" which fulfils certain conditions on any particular day, including that at least some of it is neither domestic property nor exempt from local non-domestic rating.
Section 51 provides for exemptions from non-domestic rates as set out in Schedule 5 of the 1988 Act. These include an exemption in respect of places of religious worship at paragraph 11 of Schedule 5:
The relevant certification of a place of religious worship is made, following an application, by the Registrar General under section 2 of the Places of Worship Registration Act 1855 (the "1855 Act").
Section 43 of the 1988 Act provides for liability for non-domestic rates in respect of occupied hereditaments:
Section 45 of the 1988 Act deals with liability for non-domestic rates in respect of unoccupied hereditaments:
Section 65(1) of the 1988 Act defines the owner of a hereditament for the purpose of section 45(1)(b):
The relevant regulations for the purpose of section 45(1)(d) of the 1988 Act are the Non-Domestic Rating (Unoccupied Property) (England) Regulations 2008/386 (the "Regulations"). Regulation 3 provides that the class of non-domestic hereditaments prescribed for the purposes of s.45(1)(d) consist of "all relevant non-domestic hereditaments" (subject to exceptions that are not material in this case).
Factual Background
The appellant was registered as the proprietor of the freehold of the hereditament on 12 February 2021 and remained so until it was sold on 8 September 2023.
The hereditament has appeared in the rating list since 1 April 2017. At some point in 2022, the property, which had been used as a bank, became vacant.
The appellant instructed Verity Commercial Services Limited ("Verity"), a company specialising in business rates mitigation, as managing agents of the hereditament in an attempt to mitigate its liability for non-domestic rates.
The scheme devised by Verity, as part of its rates mitigation strategy, involved the following steps:
i) Verity set up two companies, namely, Room for Faith Limited ("RFFL"), incorporated on 4 March 2022 in England and Wales, and Local Faith Limited ("LFL"), incorporated on 14 July 2022 in Hong Kong.
ii) On 7 October 2022 a lease was granted by the appellant to RFFL for a period of 5 years with an annual rent of £1.
iii) On the same date a sub-lease was granted by RFFL to LFL, incorporating most of the terms of the lease (but excluding any right to sub-let the property).
iv) The intention was that LFL would use the hereditament for the purpose of religious worship so as to engage the exemption from non-domestic rates in paragraph 11 of Schedule 5 to the 1988 Act.
It is common ground that the lease and sub-lease were valid. The lease contains the following terms:
i) Under clause 2.1, the landlord lets the property to the tenant for a contractual term of five years.
ii) Under clause 8.1, the tenant must pay all rates, including non-domestic property business rates.
iii) Under clause 12.1, the tenant may underlet the whole of the property without the consent of the landlord.
iv) Under clause 18.1, the tenant must not use the property for any purpose other than other than the permitted use. The permitted use includes any use for, or in connection with, public worship or religious instruction.
v) Clause 25 contains a landlord's covenant for quiet enjoyment.
vi) Under paragraph 1 of Schedule 1, the landlord grants to the tenant all the necessary rights required in order to occupy the property for the permitted use.
It is common ground that no certificate under section 2 of the Places of Worship Act 1855 was obtained in relation to the hereditament.
As a result, the exemption in paragraph 11 of Schedule 5 of the 1988 Act did not apply and a liability arose for non-domestic rating.
The Judge's decision
The respondent instituted a complaint, seeking a liability order against the appellant for non-domestic rates in respect of the hereditament between 24 June 2022 and 7 September 2023, in the sum of £14,348.90.
The final hearing took place before the Judge on 1 and 2 May 2024. The appellant's primary case was that for the relevant period, between 7 October 2022 and 7 September 2023, LFL was in rateable occupation of the hereditament; alternatively, if the court found that the property was unoccupied, LFL was the owner of the hereditament, as the person entitled to possession of it within the meaning of section 65(1) of the 1988 Act.
The Judge found that LFL was not in rateable occupation of the hereditament. There is no appeal against that finding.
Further, the Judge found that the appellant, as opposed to LFL, was the owner of the hereditament for the purpose of section 45(1)(b) of the 1988 Act and made a liability order for the non-domestic rates in favour of the respondent against the appellant. That is the subject of this appeal.
The Judge decided that Rossendale v Hurstwood (above) requires a purposive approach to be taken when considering who is "entitled to possession":
Against that test, the Judge's findings of fact and/or matters of common ground set out in his Judgment were:
i) The registered use of the hereditament for planning purposes remained a bank (its previous use).
ii) An inspection of the hereditament revealed no signs of occupation (for example, there was no electric lighting) and no evidence that it was used as a place of worship.
iii) The appellant produced no evidence from any officer of LFL or anyone authorised to give evidence on their behalf. There was no direct evidence from anyone who had any knowledge or experience of the hereditament.
iv) The hereditament had never appeared on LFL's website and had not been made available as a place of worship by LFL.
v) The contention of Mr Dresdner, of Verity, that LFL had a real and practical ability to occupy the hereditament or bring it into occupation was rejected as an unsupported assertion.
vi) Mr Dresdner's evidence that Verity provided some financial support for LFL was insufficient to infer that LFL has a real and practical ability to occupy the hereditament or put someone into occupation of it.
vii) Photographs and a prayer schedule were relied upon by the appellant in support of its case that there was actual occupation of the hereditament by LFL but it provided no evidence of who took the photographs, when they were taken, or where the prayer schedule had come from. Therefore, they were of no probative weight.
viii) During the relevant period the Judge found that LFL was a company upon which a legal right to occupy was conferred for no other purpose than the avoidance of liability to rates.
The Judge concluded that LFL did not have a real and practical ability to occupy the hereditament or put someone into occupation of it. The real and practical ability to occupy the hereditament or put someone into occupation of it remained with the appellant throughout the relevant period. Therefore, the appellant remained the owner.
Case stated
The questions stated by the Judge for determination are:
i) For the purposes of s.45(1)(b) and s.65(1) of the Local Government Finance Act 1988: (i) is there a single (purposive) test for identifying who is the owner of a hereditament; or (ii) does the test depend on whether the case ought properly to be categorised as "normal" or "unusual" (in the sense described in Rossendale BC v Hurstwood Properties Limited [2022] AC 690 )?
ii) If the test depends on whether the case is a 'normal', or 'unusual' one, was I correct to categorise this as an 'unusual' case?
iii) Depending to the answers to (a) and (b) above, in relation to the disputed issue in this case, did I apply to correct test?
iv) Was I entitled to conclude that during the relevant period and as it related to the hereditament: (i) LFL was a company upon which a legal right to occupy was conferred for no other purpose than the avoidance of liability to rates; and (ii) LFL did not have a real and practical ability to occupy the hereditament or put someone into occupation of it?
Ground 1 – the Rossendale test
The schemes considered in Rossendale (above) involved setting up a special purpose vehicle ("SPV") in the form of a company without any assets or business. The registered owner would grant a short lease of the unoccupied property to the SPV. The premise of the scheme was that the SPV would become the owner of the property for the purpose of the liability for non-domestic rates. The SPV would either immediately be put into members' voluntary liquidation or be left to be dissolved. If placed into liquidation, the SPV could take advantage of an exemption which applies where the owner of the property is being wound up. If dissolved, the lease and associated liability for rates would automatically be transferred by law as bona vacantia to the Crown.
In Rossendale it was common ground that the test case schemes had no business or other real world purpose and that their sole purpose was to avoid liability to pay business rates. The schemes were found to be an abuse of process but it was common ground that the leases granted to the SPVs were not shams so that, as a matter of the law of real property, they conferred an entitlement to possession upon the SPVs.
The Supreme Court adopted a purposive approach to the interpretation of the material provisions in the 1988 Act. Although the leases granted to the SPVs in question were not shams and created genuine legal obligations, the SPVs had no real or practical control over whether the relevant properties were occupied or not; such control remained at all times with the registered owners, who were persons entitled to possession within the meaning of section 65(1). It followed that they were the owners of the hereditaments for the purpose of section 45(1)(b) of the 1988 Act.
Lord Briggs and Lord Leggatt JJSC (with whom Lord Reed PSC, Lord Hodge DPSC and Lord Kitchin JSC agreed) handed down the judgment of the Court.
The Supreme Court confirmed that the purposive approach to the interpretation of legislation as laid down in WT Ramsay Ltd v Inland Revenue Comrs [1982] AC 300 was of general application.
At [21] the Supreme Court stated that the rules to determine who is an occupier for rating purposes were set out by Tucker LJ in John Laing & Son Ltd v Assessment Committee for Kingswood Assessment Area [1949] 1 KB 344 at p.350, as affirmed in Cardtronics UK Ltd v Sykes (Valuation Officers) [2020] 1WLR 2184 at para. 13:
The Supreme Court stated at [25] that the purpose for which rates are charged in respect of unoccupied properties is to deter owners from leaving property unoccupied for their own financial advantage and to encourage them to bring empty properties back into use for the benefit of the community at large.
The Supreme Court considered the question of entitlement to possession as follows:
In considering the application of section 65(1) of the 1988 Act to the facts of the case before it, the Supreme Court stated:
At [61] the Supreme Court made the following comment:
Contrary to the appellant's submission in this case, for the purposes of sections 45(1)(b) and 65(1) of the 1988 Act, there is a single, purposive test to determine the person entitled to possession and therefore the owner of the hereditament. It was made clear by the Supreme Court at [49] and [59] that when considering this question, the issue was whether the person in question had a real and practical entitlement to possession. It was in that context that the Supreme Court gave illustrations as to the 'usual' case, where the answer would be obvious, and 'unusual' circumstances, where further investigation was required. But the central question remained, as a matter of purposive construction of the provisions, who was entitled to possession.
I note that this accords with the conclusion reached by HHJ Cadwallader (sitting as a Judge of the High Court) in Wigan Council & Ors v Property Alliance Group Limited [2025] EWHC 2336 (Ch) .
Shortly after the hearing of this appeal, the Court of Appeal handed down Judgment in another case, properly drawn to the Court's attention by the appellant, The King (on the application of Emeraldshaw Limited) v Sheffield Magistrates' Court [2025] EWCA Civ 1601 , in which Holgate LJ dismissed the legal arguments raised in this appeal at [44]-[47], clarifying the ratio in Rossendale at [43]:
Despite the valiant attempt by the appellant to distinguish the decision in Emeraldshaw on the facts, the applicable statutory test is set out clearly in the Court of Appeal Judgment.
It follows that the test identified by the Judge in this case was correct.
Question 2 – usual or unusual case
Regardless of whether the purposive test set out above could be categorised as a two-stage test, or separated into 'normal' and 'unusual' cases, the answer arrived at in this case would be the same.
The appellant contended that this was a 'normal' case and that the scheme could be distinguished from those in Rossendale . In Rossendale the schemes involved an abuse of the legal process, in that the leases were not granted with the intention of allowing the SPV to make any use of the property, or giving the SPV any role in bringing it back into use. In contrast, it is said that in this case, as a matter of the law of real property, the lease and sub-lease created an immediate legal right to actual physical possession of the hereditament, the purpose of LFL in taking the lease was to further its business activities and LFL are therefore the owners.
I reject the appellant's arguments. There is no challenge to the Judge's finding that the property was unoccupied by LFL. It was common ground that RFFL and LFL were incorporated by Verity, and the lease and sub-lease of the property were granted, with the sole purpose of avoiding business rates. On the facts of the case, as found by the Judge and explained in his Judgment, there was no evidence that LFL had any business activities that were connected with the sub-lease of the property. In those circumstances, the Judge was entitled to conclude that LFL did not have any real or practical entitlement to possession.
Question 3 – findings of fact
As set out above, the Judge identified the correct test and applied it correctly to the facts of the case as found by him on the evidence. It follows that the Judge was entitled to conclude that LFL did not have any real or practical entitlement to possession of the hereditament and therefore was not the owner of the same for the purpose of sections 45(1) and 65(1) of the 1988 Act.
Question 4 – RFFL
The appellant submits that, if the Judge was entitled to find that LFL did not have any real or practical entitlement to possession of the hereditament and therefore was not the owner of the same for the purpose of sections 45(1) and 65(1) of the 1988 Act, he should have held that RFFL was entitled to possession and therefore the owner.
It is fairly accepted by the appellant that this alternative case was not advanced at the hearing of the complaint. No evidence was put before the Judge on this question, it would require new evidence on the issue of whether RFFL had a real and practical ability to occupy the property, and there is no application to adduce fresh evidence. In any event, it is too late for this to be raised.
For the reasons set out above, the Judge was entitled to conclude that LFL did not have a real and practical entitlement to possession of the hereditament so as to fall within the definition of owner for the purpose of sections 65(1) and 45(1) of the 1988 Act.
Further, the Judge was entitled to find that the appellant remained the owner of the hereditament. The liability order made against the appellant, as owner of the hereditament, in respect of unpaid non-domestic rates was valid.
The appeal is dismissed.