Occupation and Makro Schemes : An Update

Image: Robert Horvick/bubbafat/Unsplash
Image: Robert Horvick/bubbafat/Unsplash

The Queen (on the application of the Secretary of State for Health and Social Care on behalf of Public Health England) v Harlow District Council.


Public Health England (“PHE”) employed a Makro scheme in respect of a building located in the Harlow area (“the Hereditament”) by intermittently placing crates of documents and the belongings of former employees into the Hereditament for two separate 6-week periods.

PHE subsequently claimed three-month empty rates exemptions following each 6-week period.

Harlow Council rejected this position and billed PHE in respect of NDR for the 3-month periods pursuant to the following two grounds:

  1. The crates of documents moved into the Hereditament for the two 6-week periods were de minimis and/or of no benefit to PHE; in the alternative
  2. If PHE occupied the Hereditament for two 6-week periods then PHE was also in occupation during the subsequent 3-month periods as there remained a boardroom table and chairs, a tea/coffee machine and cleaning products in the Hereditament during the 3-month periods.

PHE challenged the refusal by way of judicial review.

The Law:

Section 45(1)(a) Local Government Finance Act 1988 (“LGFA 1988”) deals with unoccupied hereditaments.

  • A person (the ratepayer) shall as regards a hereditament be subject to a non-domestic rate in respect of a chargeable financial year if the following conditions are fulfilled in respect of any day in the year—
  1. on the day none of the hereditament is occupied,
  2. on the day the ratepayer is the owner of the whole of the hereditament,
  3. the hereditament is shown for the day in a local non-domestic rating list in force for the year, and
  4. on the day the hereditament falls within a [F1class] prescribed by the Secretary of State by regulations.

Regulation 4(a) Non-Domestic Rating (Unoccupied Property) (England) Regulations 2008 (“the 2008 Regulations”) – A hereditament will not be subject to empty rates for NDR purposes pursuant to s45(1) LGFA 1988 where the hereditament has been unoccupied for a continuous period not exceeding three months.

Regulation 5 of the 2008 Regulations – “A hereditament which has been unoccupied and becomes occupied on any day shall be treated as having been continuously unoccupied for the purposes of regulation 4(a) and (b) if it becomes unoccupied again on the expiration of a period of less than six weeks beginning with that day.”

The Makro Scheme is used to mitigate liability for empty rates by intermittently occupying property (most recently reconsidered in R (Principled Offsite Logistics Ltd) v. Trafford Council [2018] EWHC 1687 (Admin)).

The Decision:

Mr Justice Kerr rejected the two grounds presented by Harlow Council (as set out in the background section above). A decision was made in favour of PHE; it was ordered that Harlow Council must repay the money paid by PHE following Harlow’s rates demand and PHE’s costs.

The first ground presented by Harlow Council was rejected on the basis that PHE was in occupation of the Hereditament for the two 6-week periods.

In reaching this decision, Mr Justice Kerr provided clarification in respect of occupation pursuant to the Makro scheme:

The use of the property, even minimal use as in this case, combined with an intention to occupy it is sufficient for occupation, whether the motive is rates mitigation or any other motive. The use need not be substantial…need not be legally required…it must serve a purpose of the occupier but that purpose can be obtaining a future rates exemption.” [64]. Further, “if the possessor’s motive is to mitigate rates liability, its intention must be to occupy the property in question…” [66].

“It does not matter that the goods in the crates did not precisely match PHE’s description of them; nor whether they were of value to PHE beyond being papers and other items yet to be disposed of and which needed to be somewhere until disposed of.” [72].

The second ground presented by Harlow Council was rejected on the basis that the items present in the Hereditament during the 3-month periods did not amount to rateable occupation and did not present an intention to occupy.  

Mr Justice Kerr concluded that:

“The floor polishers and cleaning equipment are clearly for maintenance and upkeep of the property. It was common ground that contractors would come onto the site to maintain it. The upkeep and maintenance of a building does not amount to rateable occupation, as shown in cases such as Arbuckle [(Arbuckle Smith & Co Ltd v Greenock Corpn [1960] AC)].” [78].

“The use of the boardroom for meetings, also featuring tea and coffee making facilities, [and] the evidence of Mr Allen…that these were “held to discuss the future development and promotion of the site”… is a use not amounting to rateable occupation; it is preparation for future exploitation of the property, as in the Arbuckle case. Operational use of the site as PHE’s headquarters must require the building to be prepared and adapted first…Holding those discussions in the building and serving tea or coffee during them does not make the use present rather than contemplated.” [79-80].

This decision is crucial to consider in circumstances where a Makro scheme is present. The clarification provided by Mr Justice Kerr in respect of occupation in relation to Makro schemes is vital to ensure correct billing by a local authority in respect of empty rates; the use by the occupier need not be substantial; it can be minimal and of a benefit to the occupier even if that benefit is simply rates mitigation.

Emily Davison August 2021

Greenhalgh Kerr
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Smithy Brook Rd,
Wigan WN3 6PR

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