Court of Appeal judgment closes business rates avoidance ‘box shifting’ loophole

A recent judgment may require property owners to reconsider rates mitigation arrangements for empty commercial property.

A recent Court of Appeal judgment in the case of City of London v 48th Street Holdings Limited [2026] has overturned many years of case law in England which previously allowed owners of commercial buildings to claim rates relief on empty properties through the application of ‘box schemes’.

The Court ruled that the practice of ‘box shifting’ or storing boxes containing items of low or no value in vacant offices to no commercial purpose did not meet the required definition of genuine occupation and that, as a result, rates exemptions can no longer be claimed by owners undertaking this practice.

What is ‘box shifting’?

Box shifting is a tactic aimed at allowing property owners to mitigate or avoid business rates for empty properties. The practice typically involves the granting of a short-term lease or sublease to a specialist rates mitigation operator (a business that helps the property owner to mitigate its rates liabilities). The tenant then stores boxes of worthless items in the property for a short period of typically six weeks, before terminating the lease, removing the boxes and enabling the property owner to claim a period of three months’ empty property rate relief. The process of box shifting can be repeated to significantly reduce rates liabilities over a long period.

Why is this case important?

This judgment overturns a previously accepted and fairly widespread practice of tax avoidance for commercial property owners. Prior cases had suggested that occupation required no purpose other than the occupation itself.  This case makes clear that “occupation for, in effect, the sake of it, and which has no use, value or benefit other than rate saving does not amount to occupation for the purpose of the statutory [non-domestic rating unoccupied property] scheme”.  The case makes clear that the Court should consider the purpose of the legislative provision (in this case the aim being to encourage property owners to bring vacant properties back into productive use) and whether the transaction now being proposed was intended to be caught by the provision, ‘viewed realistically’.  The Court concluded that occupation by way of storage merely to achieve a financial benefit was not in line with the purpose of the legislation here, and as such the exemption from rates should not be triggered by such use. 

Businesses that utilise properties for genuine storage needs, such as holding records or archives will still be able to claim relief. However, they will need to be prepared to carefully evidence that their usage in this way has some practical utility beyond the rates saving.

What do property owners that rely upon box schemes or box shifting need to do now?

It will be important for commercial property owners to review any current agreements they might have in place, and to potentially reconsider any that are underway, as the tax mitigation previously achieved may not be possible in light of this case going forward.  They may need to consider how otherwise empty buildings can be put to a use with a true purpose.  There may be options for community use or charitable use etc, which might not have much rental value, but might achieve some true utility.  The case is also likely to mean that local authorities may scrutinise similar arrangements more carefully in the future, potentially meaning owners will be liable for increased rates liability as a result.

If you would like to discuss any aspect of this article further, please contact the Property team on 0113 244 6100.

You can also keep up to date by following Wrigleys Solicitors on LinkedIn.

The information in this article is necessarily of a general nature. The law stated is correct at the date (stated above) this article was first posted to our website.

Specific advice should be sought for specific situations. If you have any queries or need any legal advice please feel free to contact Wrigleys Solicitors.