Liability for Business Rates in Insolvency Scenarios
The question of who becomes liable to pay business rates when the party concerned enters some type of insolvency is not always straightforward.
Set out below is a quick guide to some of the more common scenarios:
Where the liquidated company is in actual occupation, the rates must be paid as an expense of the liquidation. In other words they must be paid ahead of any sums to a secured creditor. However where the company is not in actual occupation, then it is not liable to pay any rates, even empty rates. One of the first tasks the liquidator will normally carry out therefore is to seek to reduce the exposure of the company by disclaiming any lease so that occupation is brought to an end and no rates liability accrues.
Where the company in receivership is in actual occupation, the receiver can account firstly to the lender who appointed him for the money owed to him before he has to consider paying rates. This will obviously depend if there is any excess available. However it may be the case that the receiver is deemed to be personally in occupation of the property, with rates being a personal liability. If the property is not occupied, the company receives the benefit of the normal rate free period, and after that the rates will accrue but the receiver will not be liable to pay them.
When in actual occupation, the rates must be paid as an expense of the administration, i.e. ahead of any sums due to secured creditors. Where a company in administration is the payee but not in actual occupation then:
I. If the administrators were appointed between 15 September 2003 and (if the property is inEngland) 31 March 2008, or (if the property is inWales) 31 October 2008, then the rates are payable as an expense of the administration;
II. if the administrators were appointed after 1 April 2008 (property inEngland) or 1 November 2008 (property inWales) the company is not liable to pay rates, not even empty rates.
Mortgagee in Possession
Although not strictly an insolvent scenario, mortgagees may have repossessed the property pursuant to the terms of a charge.
A mortgagee is not liable for rates unless and until they go in to possession. They can go into possession either by taking physical possession (in which case the mortgagee is liable to pay rates as occupier) or where the property is leased, by collecting the rents from the tenants direct in which case the person paying the rates or that property is going to be the tenant. If the tenant is not in actual occupation it is still the tenant who is liable to pay the empty rates (unless the lease provides differently).