£1bn Tax Loophole Closed

A court case has ended a tax avoidance scheme that cost local authorities over £1bn, where companies exploited a loophole to avoid paying business rates on unoccupied commercial buildings by using 'box shifting' to claim rate-free periods.

The scheme involved moving boxes into empty spaces to claim a three-month rate holiday, then removing them to reset the clock. This practice, which dates back to 2008, allowed companies to cut their rates by up to 67%.

The case was brought by the City of London Corporation against 48th Street Holding Ltd and Principled Offsite Logistics Ltd (POLL), with the building at 2 America Square being a key example. 48th Street paid £27.6m for a lease on the office block in 2019.

POLL saved 48th Street £111,475.30 in rates across a series of three-month periods in 2022 and 2023. The scheme has been costing one London council an estimated £35m a year since the pandemic.

## Why it matters The 'box shifting' scheme has significant implications for local authorities, which have been losing out on millions of pounds in revenue. The landmark ruling by three court of appeal judges has finally put an end to this tax avoidance scheme, which is expected to have a major impact on the commercial property industry.

The building at 2 America Square, leased by a Virgin Islands-based company, has been at the centre of the court case. The seven-storey office block, located near Tower Bridge, has been largely unoccupied, with stacks of black boxes arranged in neat lines instead of employees.

The end of the 'box shifting' scheme is a significant victory for local authorities, which have been fighting against tax avoidance for years. With the scheme now closed, companies will no longer be able to exploit the loophole to avoid paying business rates on unoccupied commercial buildings.