Box Shifting Scheme Exposed: £1bn Tax Loophole Closed

A prominent tax avoidance scheme, known as "box shifting," has been brought to an end following a court case involving a London office block. For nearly two decades, companies utilized a loophole in business rates rules, starting in 2008, to avoid paying taxes on unoccupied commercial properties. This practice involved moving boxes into empty spaces to reset a three-month rate holiday, reducing liabilities by up to 67%.

Principled Offsite Logistics (POLL), a major provider of "empty business rates mitigation" services, claimed to have saved clients £500 million by 2021. Despite earlier high court rulings in favor of such schemes, a recent court of appeal decision has overturned these, stating that "occupation" solely for rate saving is not valid under the statutory scheme. The City of London Corporation has welcomed this ruling, which is expected to safeguard public revenue and fund vital local services.

The scheme's impact has been substantial, with one London council reportedly losing an estimated £35 million annually since the pandemic. The government has acknowledged concerns about the misuse of Empty Property Relief and stated its commitment to addressing tax avoidance. The ruling against POLL and its client, 48th Street Holdings Ltd, signifies a crucial win for local authorities, closing a widely exploited loophole and restoring fairness in business rates.