Business Rates - A Case for General Anti Avoidance Regulations in England

INTRODUCTION

In England, avoidance of liabilty for national non-domestic rates (known more widely as 'Business Rates') is a topic which comes up quite frequently. 

There are currently (at least) 3 things happening in this area:

(1) 48th Street - reformulation of 'beneficial interest' in the Laing 4 ingredient.

(2) Ramsey principles' application to Business Rates;

(3) new General Anti Avoidance Rules in Scotland and Wales. 

This article will focus on avoidance, on General Anti Avoidance Rules:

(1) first, as they appear in Scotland and Wales; and then 

(2) some thoughts on General Anti Avoidance Rules for England.

This article will consider this, in light of:

(1) HM Treasury / Department for Levelling Up, Housing & Communities - Business Rates Avoidance and Evasion - Consultation - July 2023 ('2023 Consultation');

In relation to Scotland:

(2) Non-Domestic Rates (Scotland) Act 2020 asp 4 (Scottish Act) ('NDR(S)A 2020')

(3) Non-Domestic Rates (Miscellaneous Anti-Avoidance Measures) (Scotland) Regulations 2023/92 (Scottish SI) ('2023 Scotland Regs'), which came into force on 1.3.23 (see reg.1);

(4) Scottish Government - Local Government Finance Circular No. 5/2023 ('5/2023 Circular'), issued c.29.3.23 (the full extract can be found in a footnote[2]);

(4) Heptagon Portfolio Abroath Limited v Angus Council [2025] CS0H 76 ('Heptagon 75'), Outer House, Court of Session (Lord Lake) on 12.8.25;

(5) Dunston Dunfermline Nominees Ltd [2025] CSOH 76 ('Dunston'), Outer House, Court of Session (Lord Braid) on 12.8.25;

(6) Heptagon Portfolio Abroath Limited v Angus Council [2026] CSIH 22 ('Heptagon 22'), Extra Division, Inner House, Court of Session (Lord Matthews, Lord Armstrong Lord Clark) on 1.5.26 (Judgment given by Lord Clark);

In relation to Wales:

(1) Local Government Finance Act 1988 ('LGFA 1988'), Part III, heading 'Anti-avoidance: Wales' - sections 63F to 63K, which came into force on 17.11.24;

(2) Non-Domestic Rating (Artificial Avoidance Arrangements) (Local Lists) (Wales) Regulations 2026/43 (Welsh SI) ('2026 Welsh Regs'), which came into force 1.4.26 (sae for reg. 7(3); see reg.1(2));

Note, as at the date of this article, there are no reported cases on:

(1) LGFA 1988 'Anti-avoidance: Wales' - sections 63F to 63K;

(2) 2026 Welsh Regs (unsurprisingly, as they only came into force on 1.4.26); 

A few matters:

(1) I am not qualified in Scottish Law. So while there is some discussion in this article about Scottish Law, it is written from a person not qualified in Scottish Law. 

To jump to the following sections, just click:

(1) Scotland 

(2) Wales 

SCOTLAND 

OVERVIEW 

The 5/2023 Circular, put the position this way:

'From 1 April 2023, local authorities have powers to prevent or minimise advantages arising from known non-domestic rates avoidance practices. Within prescribed circumstances, councils can make the owner, rather than the occupier, liable for the payment of rates, or disregard deliberate physical changes to the state of the property solely for the purposes of avoiding or reducing the rates liability.

The key legislation is The Non-Domestic Rates (Miscellaneous Anti-avoidance Measures) (Scotland) Regulations 2023.'

The Origins 

The genesis for Scotland's NDR anti avoidance provisions, is a report written by the former chair of the Royal Bank of Scotland. Lord Clark in Heptagon 22 explained, at paragraph 4: 

'In 2016 the Scottish Ministers approached Mr Kenneth Barclay, former chair of the Royal Bank of Scotland, to conduct a review into the system of non-domestic rates in Scotland. On 22 August 2017 Mr Barclay’s review was published. The Non-Domestic Rates (Scotland) Act 2020 followed his recommendations. One area of particular focus was about combating the avoidance of paying non-domestic rates'

NDR(S)A 2020

In Scotland, there is the NDR(S)A 2020, which is split into parts. The relevant parts, for present purposes, are:

(1) Part 4, entitled 'Anti-Avoidance Regulations', containing 5 sections, namely, sections 37 to 41 inclusive;

(2) Part 5, entitled 'Final Provisions', containing, in particular, s.42, entitled 'Interpretation'. 

NDR(S)A 2020 - Sections 

Section 37 of the NDR(S)A 2020 is entitled 'Anti-avoidance regulations' and reads:

'(1) The Scottish Ministers may by regulations ("anti-avoidance regulations") make such provision as they consider appropriate with a view to preventing or minimising advantages (see section 38) arising from non-domestic rates avoidance arrangements that are artificial (see sections 39 and 40).

(2) The Scottish Ministers may not make anti-avoidance regulations unless they consider that it is appropriate to do so.

(3) Anti-avoidance regulations-

(a) may modify any enactment (but not this Part),

(b) may make different provision for different purposes,

(c) may make incidental, supplementary, consequential, transitional, transitory or saving provision.'

Section 38 of the NDR(S)A 2020 is entitled 'Meaning of "advantage"' and reads:

'(1) An "advantage" , in relation to non-domestic rates, includes in particular-

(a) avoidance of a possible assessment,

(b) remission,

(c) relief (or increased relief),

(d) repayment (or increased repayment),

(e) deferral of a payment or advancement of a repayment.

(2) In determining whether a non-domestic rates avoidance arrangement has resulted in an advantage, regard may be had to the amount of non-domestic rates that would have been payable in the absence of the arrangement.'

Section 39 of the NDR(S)A 2020 is entitled 'Non-domestic rates avoidance arrangements' and reads:

'(1) An arrangement (or series of arrangements) is a non-domestic rates avoidance arrangement if, having regard to all the circumstances, it would be reasonable to conclude that obtaining an advantage is the main purpose, or one of the main purposes, of the arrangement.

(2) An "arrangement" includes any agreement, transaction, undertaking, action or event (whether legally enforceable or not).'

Section 40 of the NDR(S)A 2020 is entitled 'Meaning of "artificial"' and reads:

'(1) A non-domestic rates avoidance arrangement is artificial if Condition A or B is met.

(2) Condition A is met if the entering into or carrying out of the arrangement is not a reasonable course of action in relation to the non-domestic rates provisions in question having regard to all the circumstances, including-

(a) whether the substantive results of the arrangement are consistent with-

(i) any principles on which those provisions are based (whether express or implied), and

(ii) the policy objectives of those provisions,

(b) whether the arrangement is intended to exploit any shortcomings in those provisions.

(3) Condition B is met if the arrangement lacks economic or commercial substance.

(4) Each of the following is an example of something which might indicate that a non-domestic rates avoidance arrangement lacks economic or commercial substance-

(a) the arrangement is carried out in a manner which would not normally be employed in reasonable business conduct,

(b) the legal characterisation of the steps in the arrangement is inconsistent with the legal substance of the arrangements as a whole,

(c) the arrangement includes elements which have the effect of offsetting or cancelling each other,

(d) transactions are circular in nature,

(e) the arrangement results in an advantage that is not reflected in the business risks undertaken.

(5) The examples given in subsection (4) are not exhaustive.

(6) Where a non-domestic rates avoidance arrangement forms part of any other arrangements, regard must also be had to those other arrangements.'

Section 41 of the NDR(S)A 2020 is entitled 'Procedure for anti-avoidance regulations' and provides for how the (draft) anti-avoidance regulations are laid before the Scottish Parliament, following consultation etc. by the Scottish Ministers[10].

Section 42 is entitled, as stated, 'Interpretation' and contains (amongst other things) the following defintions:

'"lands and heritages" is to be construed in accordance with section 42 of the 1854 Act,'

'"non-domestic rates" means non-domestic rates levied under section 7B of the 1975 Act,'

Heptagon 22 summary of salient NDR(S)A 2020 sections

In Heptagon 22, Lord Clark set out what he considered to be, the most salient parts to the above statutory provisions (as least, for the purposes of the case before him). Lord Clark said, at paragraphs 5 to 7:

'Section 37 of the 2020 Act empowers the Scottish Ministers to make regulations preventing or minimising the advantages arising from non-domestic rates avoidance arrangements that are artificial. In terms of section 39, an arrangement is a non-domestic rates avoidance arrangement if:

“(1) …having regard to all the circumstances, it would be reasonable to conclude that obtaining an advantage is the main purpose, or one of the main purposes, of the arrangement.

(2) An ‘arrangement’ includes any agreement, transaction, undertaking, action or event (whether legally enforceable or not).”

Section 38 sets out the meaning of “advantage”:

“(1) An ‘advantage’, in relation to non-domestic rates, includes in particular-

(a) avoidance of a possible assessment,

(b) remission,

(c) relief (or increased relief),

(d) repayment (or increased repayment),

(e) deferral of a payment or advancement of a repayment.

(2) In determining whether a non-domestic rates avoidance arrangement has resulted in an advantage, regard may be had to the amount of non-domestic rates that would have been payable in the absence of the arrangement.”

Section 40 provides that an arrangement is “artificial” if either condition A or condition B, set out in that section, is met. In this case, condition B and part of section 40(4) are of relevance:

“(3) Condition B is met if the arrangement lacks economic or commercial substance.

(4) Each of the following is an example of something which might indicate that a non-domestic rates avoidance arrangement lacks economic or commercial substance(a) the arrangement is carried out in a manner which would not normally be employed in reasonable business conduct…”'

(As stated, these are the salient bits to Heptagon 22; for instance, it does not mention Condition A as a instance of something being 'artificial')

2023 SCOTLAND REGS 

The Scottish Ministers duly made the 2023 Scotland Regs

The 2023 Scotland Regs are split into 3 Parts, containing a total of 9 individual regulations. The 2023 Scotland Regs Parts are:

(1) Part 1 - Introductory and interpretation;

(2) Part 2 - Treatment of owners as liable to pay non-domestic rates;

(3) Part 3 - Disregarding of changes leading to reduction in rateable value. 

A helpful starting point, is the Explanatory Note, accompanying the 2023 Scotland Regs. The Explanatory Note commences with:

'These Regulations make provision to prevent or minimise advantages arising from artificial avoidance arrangements in relation to non-domestic rates. Artificial avoidance arrangements in relation to non-domestic rates are defined in sections 38, 39 and 40 of the Non-Domestic Rates (Scotland) Act 2020.

These Regulations prescribe the circumstances in which the owners of lands and heritages, rather than the occupiers, are to be treated as liable to pay non-domestic rates and the circumstances in which any relief (reduction or remittal) in relation to nondomestic rates for those lands and heritages is to cease to be available (Part 2). They also prescribe the circumstances in which changes to lands and heritages causing a reduction in rateable value are to be disregarded (Part 3).'

The Explanatory Note then considers Part 2 in more detail:

'Part 2 provides that, where a tenancy or other arrangement is in place in respect of lands and heritages, such that the occupier would ordinarily be liable to pay non-domestic rates in respect of them, a local authority must treat the owner as liable where it is satisfied, in all the circumstances, that the tenancy or other arrangement has as one of its main purposes the gaining of an advantage and is an artificial non-domestic rates avoidance arrangement. The provisions only apply in respect of a tenancy or other arrangement entered into on or after 1 April 2023.

The circumstances in which a local authority may be satisfied that a tenancy or other arrangement is an artificial non-domestic rates avoidance arrangement include that the lands and heritages are not occupied on a commercial basis, that the body liable to pay non-domestic rates has been, or is being, wound up voluntarily yet the property is still occupied, and that the occupier of the lands and heritages names as the person liable for payment of the rates someone falling within certain prescribed categories. Regulation 5 sets out the process for notification of the owner where a local authority intends to treat them as liable to pay nondomestic rates, which includes an opportunity for the owner to make representations to the local authority.

Regulation 6 makes provision regarding the date from which any treatment of an owner as liable for payment of non-domestic rates is to have effect, which can be an earlier date than it would otherwise be if the owner has received a similar notice in the past. Regulation 7 makes provision for the removal of non-domestic rates relief (reduction or remittal) where the owner of lands and heritages is treated as liable to pay non-domestic rates under regulation 4. Regulation 7 also requires the owner or tenant to demonstrate, to the satisfaction of the local authority, that the making of any subsequent application for relief is not part of an artificial non-domestic rates avoidance arrangement.'

The Explanatory Note then considers Part 3 in more detail:

'Part 3 requires certain changes to lands and heritages, made on or after 1 April 2023, and which have been assessed as reducing their rateable value, to be disregarded where the local authority is satisfied that the making of the change has as its sole or main purpose the gaining of an advantage and is an artificial non-domestic rates avoidance arrangement. In order to disregard such a change, it must appear to the local authority that the change has been made for no reason other than to reduce the rateable value of the lands and heritages, or that there is no clear link between the change that caused the reduction in rateable value and an intention to make the lands and heritages the subject of economic activity. Regulation 9 sets out the process for notification of the person or body liable to pay the non-domestic rates that the local authority intends to disregard such a change, which includes an opportunity for the person or body to make representations to the local authority. If representations are received, the local authority must issue a final notice advising of its decision.'

2023 Scotland Regs - Part 2

It is now convenient to set out the wording to the 2023 Scotland Regs:

(1) from the Explanatory Note, the readers should have gained some familiarity with the main objectives for Parts 2 and Part 3 respectively;

(2) preference is given for setting out Part 2 first. Part 2 which contains 4 regulations, namely reg.4, reg.5, reg.6 and reg.7. These regulations, particularly, reg.4 and reg.5, are lengthy. Part 3 is then provided, as a footnote.

(3) for Part 2, reg.4 is the key regulation.

[1] Reg.4 - 'Circumstances in which owners must be treated as liable for non-domestic rates'

Reg.4 is entitled 'Circumstances in which owners must be treated as liable for non-domestic rates' and is substantial. It reads:

'(1) This regulation applies where-

(a) non-domestic rates are payable in respect of lands and heritages and,

(b) by virtue of a tenancy or other arrangement entered into on or after 1 April 2023, the occupier of those lands and heritages would, but for this regulation, be liable to pay non-domestic rates in respect of them.

(2) Subject to regulation 5(3), a local authority must treat the owner of lands and heritages as liable to pay non-domestic rates in respect of them where the local authority is satisfied, in all the circumstances, that the tenancy or other arrangement-

(a) has as its main purpose, or one of its main purposes, the gaining of an advantage within the meaning of section 38 of the 2020 Act, and

(b) is an artificial non-domestic rates avoidance arrangement within the meaning of sections 39 and 40 of the 2020 Act.

(3) In determining whether the condition in paragraph (2)(a) is met, the local authority may have regard to the amount of non-domestic rates that would have been payable in respect of the lands and heritages in the absence of the tenancy or other arrangement.

(4) A local authority may only be satisfied that the condition in paragraph (2)(b) is met where a tenancy or other arrangement was entered into on or after 1 April 2023 and at least one of the following applies-

(a) the tenancy or other arrangement on the basis of which the lands and heritages are occupied is considered not to be on a commercial basis (see paragraph (6)),

(b) the body liable to pay non-domestic rates in respect of the lands and heritages has been, or has begun the process of being, wound up voluntarily under the Insolvency Act 1986 within 12 months of the date on which the lands and heritages first became occupied under the relevant tenancy or other arrangement, and-

(i) the lands and heritages continue to be occupied, including by a person or body other than the body which has entered the tenancy or other arrangement, or

(ii) the body which has the liability is in receipt of a form of relief from liability to non- domestic rates under section 153 of the Local Government etc. (Scotland) Act 1994 or section 4(2) of the Local Government (Financial Provisions etc.) (Scotland) Act 1962,

(c) the occupier of the lands and heritages-

(i) fails to provide the name of a person who is liable for payment of the rates, or who is so liable on behalf of the occupier,

(ii) names as the person liable for payment of the rates, or liable on behalf of the occupier, a person who has no connection to the operation taking place on the lands and heritages,

(iii) names as the person liable for payment of the rates, or liable on behalf of the occupier, a person who is an employee or a contractor of the owner of the lands and heritages, or who is a partner or close relative of the owner, or

(iv) names as the person liable for payment of the rates, or liable on behalf of the occupier, a person falling within paragraph (5).

(5) The persons referred to in paragraph (4)(c)(iv) are those who, within the period of two years prior to the date on which the tenancy or other arrangement was entered into-

(a) carried out the business or exercised the borrowing powers of a public company which did not have a trading certificate, contrary to section 761(1) of the Companies Act 2006,

(b) have been declared by a court to be liable to make a contribution to the assets of a company, in the course of its winding up, as a result of-

(i) knowingly having been a party to the carrying on of business in the manner described in section 213(1) of the Insolvency Act 1986 (fraudulent trading) or section 246ZA(1) of that Act (fraudulent trading: administration), or

(ii) being or having been a director to whom section 214(2) of that Act (wrongful trading) or section 246ZB (wrongful trading: administration) of that Act applies,

(c) have had a disqualification order made against them, or a disqualification undertaking accepted, under the Company Directors Disqualification Act 1986,

(d) have been convicted of a contravention of section 216 of the Insolvency Act 1986 (restriction on re-use of company names),

(e) have been subject to a bankruptcy restrictions order, or a bankruptcy restrictions undertaking, under the Bankruptcy (Scotland) Act 2016, the Insolvency Act 1986 or the Insolvency (Northern Ireland) Order 1989, or

(f) have been issued a notice under section 20 of the 2020 Act (non-use or underuse of lands and heritages: notification) in relation to which the local authority has, following the expiry of the period mentioned in section 20(5)(b) or receipt of an explanation from the ratepayer, concluded that either of the conditions in section 20(3) or (4) of that Act have been satisfied.

(6) For the purposes of this regulation, a tenancy or other arrangement may only be considered by a local authority not to be on a commercial basis where at least one of the following applies-

(a) there has been no change to the occupation of the lands and heritages since the tenancy or other arrangement took effect,

(b) the lands and heritages are being occupied by a person or body other than the person or body named in the tenancy or other arrangement,

(c) payment of the rent for the lands and heritages is optional in terms of the relevant tenancy or other arrangement,

(d) the rent charged for the lands and heritages is significantly below the level of the rent which could reasonably have been obtained for the lands and heritages on the open market at the time the tenancy or other arrangement was entered into,

(e) payment of the rent for the lands and heritages is offset or cancelled, in whole or in part, by other transactions or arrangements, whether individually or as a whole,

(f) the arrangement has been identified in the tenancy or other arrangement as being for the purpose of mitigating rates liability,

(g) the occupier, or the person or body entering the tenancy or other arrangement, has no assets that are directly linked to the economic use being made of the lands and heritages.' [bold added]

[2] Reg.5 - 'Notification of owner of intention to treat as liable for payment of non-domestic rates'

Reg.5 is entitled 'Notification of owner of intention to treat as liable for payment of non-domestic rates' and reads:

'(1) Where a local authority intends to treat the owner of lands and heritages as liable to pay non-domestic rates, the local authority must inform the owner, by sending a notice to them in writing.

(2) A notice under paragraph (1) must-

(a) set out the local authority's intention to treat the owner as being liable to pay non- domestic rates,

(b) explain the basis, under regulation 4, on which the local authority proposes to do so,

(c) set out the date with effect from which the local authority proposes that the treatment will have effect, with an explanation of how this has been calculated in accordance with regulation 6,

(d) advise that, where an owner is treated as liable to pay non-domestic rates on a subsequent occasion, the liability will have effect from a date determined in accordance with regulation 6(2),

(e) advise that any relief from liability to non-domestic rates in respect of the lands and heritages which was previously available will cease to be available, with effect from whichever is the relevant date under regulation 6.

(3) Any owner who receives a notice under paragraph (1) may-

(a) make representations as to why they consider-

(i) that the tenancy or other arrangement under which the lands and heritages are occupied does not have as its main purpose, or one of its main purposes, the gaining of an advantage within the meaning of section 38 of the 2020 Act, and

(ii) that the tenancy or other arrangement is not an artificial non-domestic rates avoidance arrangement within the meaning of sections 39 and 40 of the 2020 Act, or

(b) agree a payment arrangement with the local authority in respect of the non-domestic rates for the relevant lands and heritages.

(4) Representations under paragraph (3)(a)-

(a) must be in writing,

(b) must be sent to the local authority within the period of 28 days beginning with the day on which the notice under paragraph (1) is presumed to have been received, and

(c) may be sent by means of electronic communication.

(5) A notice under paragraph (1) is to be presumed to have been received 48 hours after it is sent.

(6) The owner of lands and heritages is not to be treated as being liable to pay non-domestic rates where the owner demonstrates, to the satisfaction of the local authority, that both of the conditions in paragraph (3)(a) are met.

(7) Unless paragraph (3)(b) applies, the local authority must, within the period of 28 days beginning with the day on which representations under paragraph (3)(a) are received or, where no representations are submitted, the last day on which any representations could be submitted, send to the owner a final notice advising-

(a) whether or not the owner is to be treated as liable to pay the non-domestic rates,

(b) the reasons for the decision, including a summary of consideration of any representations submitted, and

(c) where the owner is to be treated as liable to pay the non-domestic rates-

(i) the liability resulting from that, including a statement as to the relief, if any, removed in accordance with regulation 6, and

(ii) the date from which the treatment and, where relevant, the removal of relief has effect.'

[3] Reg.6 - 'Date from which owner treated as liable'

Reg.6 is entitled 'Date from which owner treated as liable'

'(1) Subject to paragraph (3), any treatment of the owner of lands and heritages as liable for payment of non-domestic rates under regulation 4 is to have effect from the date set out in the final notice issued under regulation 5(7).

(2) The date referred to in paragraph (1) must be no earlier than 28 days after the date on which the final notice is to be presumed to have been received.

(3) Where the owner has, within the period of five years preceding the date of a final notice issued under regulation 5(7) treating them as liable to pay non-domestic rates, previously received a final notice under the same regulation treating them as liable to pay non-domestic rates, outstanding liability will be transferred with effect from whichever is the later of-

(a) the date on which the tenancy or other arrangement in respect of the lands and heritages for which the owner is currently to be treated as liable to pay non-domestic rates was entered into between the owner and the occupier, and

(b) the date specified in the earliest final notice issued to the owner in respect of any lands and heritages, in accordance with regulation 5(7).'

[4] Reg.7 - 'Removal of relief and subsequent applications for relief'

Reg.7 is entitled 'Removal of relief and subsequent applications for relief'

'(1) Where the owner of lands and heritages is treated as liable to pay non-domestic rates under regulation 4, any relief in relation to those lands and heritages is to cease to be available, with effect from the date on which the transfer of liability takes effect in accordance with regulation 6.

(2) Where relief has ceased to be available under paragraph (1) in respect of any lands and heritages, any subsequent application for relief by the same owner, or a person or body that has entered into a tenancy or other arrangement with that owner, in relation to those lands and heritages, must demonstrate, to the satisfaction of the local authority, that the making of the application is not part of an artificial non-domestic rates avoidance arrangement within the meaning of sections 39 and 40 of the 2020 Act.

(3) Where the person or body fails to demonstrate the matters described in paragraph (2) to the satisfaction of the local authority, no relief may be awarded.

(4) In paragraph (2), "subsequent application" means an application for relief in respect of lands and heritages made after the date on which the transfer of liability in respect of those lands and heritages takes place in accordance with regulation 6.'

2023 Scotland Regs - Part 3

Part 3 of the 2023 Scotland Regs contains 2 regulations (set out in footnote[13]):

(1) reg.8, entitled 'Circumstances in which changes causing a reduction in rateable value are to be disregarded'; and 

(2) reg.9, entitled 'Notice of intention to disregard change'.

WALES 

Section 13 of the Local Government Finance (Wales) Act 2024 inserted into the LGFA 1988, sections 63F to 63M.

As explained in the Explanatory Note to 2026 Welsh Regs, paragraph 1, these sections '...make provision about counteracting advantages arising from artificial arrangements for the avoidance of non-domestic rates liability in relation to hereditaments in Wales.'

LGFA 1988 - Sections 63F to 63M

In Wales, within LGFA 1988, Part III entitled 'Non-domestic rating', there is, under the heading 'Anti-avoidance: Wales', 8 sections.

(1) Section 63F - Artificial non-domestic rating avoidance arrangements: introduction;

(2) Section 63G - Meaning of "advantage";

(3) Section 63H - Meaning of "artificial";

(4) Section 63I - Liability to non-domestic rating: local lists;

(5) Section 63J - Liability to non-domestic rating: central lists;

(6) Section 63K - Liability to non-domestic rating: notification;

(7) Section 63L - Appeals to valuation tribunal;

(8) Section 63M - Penalties.

LGFA 1988 - Anti-avoidance: Wales' - Sections 

Section 63F, entitled 'Artificial non-domestic rating avoidance arrangements: introduction', reads:

'(1) This section and sections 63G to 63M make provision in relation to Wales about counteracting advantages, in respect of liability to non- domestic rating, from artificial non-domestic rating avoidance arrangements.

(2) For the purposes of this section and sections 63G to 63M, an arrangement is an "artificial non-domestic rating avoidance arrangement" if-

(a) in consequence of the arrangement, a person obtains or will obtain an advantage in relation to non-domestic rating (see section 63G), and

(b) the arrangement is artificial (see section 63H).

(3) For the purposes of this section and sections 63G to 63M, "an arrangement" includes (among other things) any action, event, agreement, operation, promise, scheme, transaction, understanding or undertaking (whether legally enforceable or not), and references to an arrangement are to be read as including-

(a) a series of arrangements, and

(b) any part or stage of an arrangement comprised of more than one part or stage.'

Section 63G, entitled 'Meaning of "advantage"', reads:

'For the purposes of sections 63F to 63M, "an advantage" means the avoidance or reduction of liability to non-domestic rating, by means of (among other things)-

(a) avoidance of an assessment;

(b) remission;

(c) relief (or increased relief);

(d) repayment (or increased repayment);

(e) deferral of a payment.'

Section 63H, entitled 'Meaning of "artificial"', reads:

'(1) For the purposes of sections 63F to 63M, an arrangement is artificial if-

(a) it is of a type specified by the Welsh Ministers by regulations, and

(b) where subsection (3) applies, no determination has been made in relation to the (particular) arrangement.

(2) The regulations may only specify a type of arrangement if making an arrangement of that type would not be a reasonable course of action in relation to the provisions of enactments relating to non-domestic rating, having regard in particular to-

(a) whether the substantive results of arrangements of that type are inconsistent with-

(i) any principles on which those provisions are based (whether express or implied), and

(ii) the policy objectives of those provisions;

(b) whether arrangements of that type are intended to exploit any shortcomings in those provisions;

(c) whether arrangements of that type lack economic or commercial substance (other than obtaining an advantage in relation to non- domestic rating).

(3) The regulations may provide that a particular arrangement of a type specified under subsection (1)(a) is not artificial if a determination to that effect is made, in accordance with the regulations and having regard to all the circumstances, by-

(a) a billing authority in Wales, in connection with the authority's local non-domestic rating list;

(b) the Welsh Ministers, in connection with a central non-domestic rating list for Wales.

(4) In this section "enactments relating to non-domestic rating" means-

(a) this Act,

(b) the Business Rate Supplements Act 2009 (c. 7), and

(c) any subordinate legislation (within the meaning of the Interpretation Act 1978 (c. 30)) made under those Acts.' [bold added]

Section 63I, entitled 'Liability to non-domestic rating: local lists', reads: 

'(1) Subsections (2) to (5) apply if, in connection with a billing authority in Wales' local non-domestic rating list, an artificial non-domestic rating avoidance arrangement has been made.

(2) The billing authority must, from the relevant date-

(a) treat the ratepayer as liable under section 43 or 45 to pay the chargeable amount for a chargeable day that would have been, or would be, payable in respect of that day in the absence of the arrangement, or

(b) treat as liable the person who would have been, or would be, the ratepayer in the absence of the arrangement (and treat them as liable under section 43 or 45 to pay the chargeable amount for a chargeable day that would have been, or would be, payable in respect of that day in the absence of the arrangement).

(3) The provisions of this Act apply in relation to the persons mentioned in subsection (2)(a) and (b) as if they were liable under section 43 or 45.

(4) In subsection (2), "the relevant date" means the later of-

(a) the day the arrangement mentioned in subsection (1) is made;

(b) the day the applicable regulations come into force;

(c) a day provided for in those regulations.

(5) In subsection (4)(b), "the applicable regulations" means the regulations under section 63H(1)(a) that specify the type of arrangement within which the arrangement mentioned in subsection (1) falls.' [bold added]

Section 63J, entitled 'Liability to non-domestic rating: central lists', will not frequently arise in most practices, and so is set out in a footnote[15].

Section 63K, entitled 'Liability to non-domestic rating: notification', reads: 

'(1) The billing authority must give notice to a person who is to be treated as liable in accordance with section 63I.

(2) The Welsh Ministers must give notice to a person who is to be treated as liable in accordance with section 63J.

(3) A notice under subsection (1) or (2) must set out-

(a) the reasons for treating the person as liable,

(b) information about requiring a review under subsection (4), and

(c) information about the right of appeal under section 63L.

(4) A person who receives a notice under subsection (1) or (2) may require a review of it by making a request in writing to the billing authority or the Welsh Ministers (as the case may be) within 30 days beginning with the date of the notice under subsection (1) or (2).

(5) The review must conclude that the notice under subsection (1) or (2) is to be either-

(a) confirmed, or

(b) withdrawn (in which case the arrangement subject to the notice is to be taken as not having been an artificial nondomestic rating avoidance arrangement).

(6) The billing authority or the Welsh Ministers must notify the person of the conclusion of the review and their reasoning within 30 days beginning with the day on which the request was made under subsection (4).

(7) Notices under this section must be in writing.' [bold added]

Section 63L, entitled 'Appeals to valuation tribunal', reads: 

'(1) This section applies where a person is given a notice under section 63K(1) or (2) that is confirmed in accordance with section 63K(5).

(2) The person may appeal to a valuation tribunal established under paragraph 1 of Schedule 11 within 30 days beginning with the day on which the billing authority or the Welsh Ministers notify the person of their conclusions in accordance with section 63K(6).

(3) The valuation tribunal may confirm the notice or require it to be withdrawn (in which case the arrangement subject to the notice is to be taken as not having been an artificial non-domestic rating avoidance arrangement).' [bold added]

Section 63M, entitled 'Penalties', reads: 

'(1) The Welsh Ministers may by regulations make provision for the imposition of a financial penalty where-

(a) a person has been given a notice under section 63K(1) or (2) and it has not been withdrawn,

(b) the time limit for requesting a review under section 63K(4) has expired and, if a review has been requested, the time limit for appealing under section 63L has expired, and

(c) the person has failed to pay an amount due to a billing authority or the Welsh Ministers in consequence of having made an artificial non-domestic rating avoidance arrangement.

(2) The maximum penalty that may be specified in the regulations is £500 plus 3% of the rateable value of the hereditament on the date of the notice under section 63K(1) or (2).

(3) The artificial non-domestic rating avoidance arrangement is to be ignored when determining the rateable value of the hereditament for the purposes of subsection (2).

(4) Any sum received by way of penalty under this section is to be paid into the Welsh Consolidated Fund.

(5) The regulations may make further provision in relation to the collection and enforcement of penalties under this section.

(6) The Welsh Ministers may by regulations amend subsection (2) by substituting a different amount for the penalty for the time being specified in that subsection.' [bold added]

2026 Welsh Regs

The Welsh Ministers duly made the 2026 Regulations.

The 2023 Welsh Regs are split into 3 Parts, containing a total of 7 regulations:

(1) Part 1 - Introduction

(2) Part 2 - Artificial avoidance arrangements

(3) Part 3 - Consequential amendments to secondary legislation

There is also an important schedule, Schedule 1, entitled 'Types of artificial avoidance arrangements'

A helpful starting point, is the Explanatory Note, accompanying the 2023 Welsh Regs. The Explanatory Note commences with:

'These Regulations describe the types of avoidance arrangements, in relation to hereditaments on the local non-domestic rating lists, which are artificial for the purposes of sections 63F to 63I and 63K to 63M of the Act (unless a billing authority determines otherwise). They also make provision in relation to penalties and consequential amendments to secondary legislation.

The types of arrangements which are artificial are described in regulation 3 of, and the Schedule to, these Regulations. These are: arrangements where a hereditament is not occupied on a commercial basis, where the ratepayer has been wound up voluntarily, where the owner or occupier exhibits particular characteristics and behaviours, or where the occupation of the hereditament has certain characteristics. However, regulation 3(2) enables a billing authority to determine that an arrangement of a type specified in the Schedule is not artificial after having regard to all the circumstances. Such circumstances may include (but are not limited to) those listed in regulation 3(3).

Regulation 4 makes provision in relation to the penalty imposed where a person has failed to pay an amount due to a billing authority in consequence of having made an artificial arrangement and the information which must be contained in notices imposing such penalties ("penalty notices").

Regulation 5 makes provision as to how a billing authority may effect service of notices given under section 63K(1) of the Act ("section 63K notices") and penalty notices.

Regulation 6 amends the Non-Domestic Rating (Collection and Enforcement) (Local Lists) Regulations 1989 ("the 1989 Regulations"), which govern the billing, collection and recovery of unpaid non-domestic rates. These amendments ensure that the 1989 Regulations will apply to an amount payable by a ratepayer as a result of the billing authority applying sections 63F to 63I and 63K to 63L of the Act and these Regulations. The amendments also provide that where a section 63K notice has been served on that ratepayer, a demand notice in respect of the amount payable will not be served until after the deadlines for reviewing and appealing the section 63K notice have expired.

Regulation 7 amends the Non-Domestic Rating (Alteration of Lists and Appeals) (Wales) Regulations 2023 to ensure that relevant provisions of those Regulations apply in relation to appeals brought against section 63K notices.'

2026 Wales Regs - Part 1 - 'Introduction'

It is convenient to start with Part 1, which contains reg.2, 'Interpretation', since it contains useful definitions (particularly 'arrangement'). It reads:

'In these Regulations-

"the Act" ("y Ddeddf ") means the Local Government Finance Act 1988;

"arrangement" ("trefniant ") includes (among other things) any action, event, agreement, operation, promise, scheme, transaction, understanding or undertaking (whether legally enforceable or not), and references to an arrangement are to be read as including-

(a) a series of arrangements, and

(b) any part or stage of an arrangement comprised of more than one part or stage;

"billing authority" ("awdurdod bilio ") means a county council or county borough council in Wales;

"company" ("cwmni ") has the meaning given in section 1(1) of the Companies Act 2006;

"hereditament" ("hereditament") has the meaning given by section 64 of the Act 2; "individual with significant control" ("unigolyn â rheolaeth sylweddol") means an individual whose particulars are contained in the company's register of people with significant control in accordance with Part 21A of the Companies Act 2006 3 as it has effect when these Regulations come into force;

"local list" ("rhestr leol") means a list compiled and maintained in accordance with section 41ZA of the Act 4 ;

"occupier" ("meddiannydd") has the meaning given in section 65 of the Act 5 ; "owner" ("perchennog ") has the meaning given in section 65 of the Act;

"ratepayer" ("talwr ardrethi"), as it applies to a hereditament, means the occupier or, if the hereditament is not occupied, the owner;

"section 63K notice" ("hysbysiad adran 63K") means a notice given by a billing authority under section 63K(1) of the Act.'

2026 Wales Regs - Part 2 'Artificial avoidance arrangements'

Part 2 contains 3 regulations, reg.3, reg.4 and reg.5. 

2026 Wales Regs - Part 2: Reg 3 - Types of Arrangements

Reg.3 is entitled 'Types of arrangements' and reads:

'(1) The Schedule to these Regulations specifies types of arrangements which are artificial for the purposes of section 63H(1)(a) of the Act.

(2) But an arrangement of any type specified in the Schedule is not artificial if a determination is made by a billing authority to that effect having regard to all the circumstances.

(3) The circumstances referred to in paragraph (2) may include-

(a) whether the occupier is or was operating a business whose predominant purpose is or was not related to reducing nondomestic rates liability;

(b) the proportion of the hereditament that is or was being occupied to conduct the business operated by the occupier;

(c) the period of time for which the hereditament is or was occupied;

(d) whether the characteristics of the hereditament are compatible with the predominant purpose of the business being conducted there.'

2026 Wales Regs Schedule

The Schedule to the 2026 Wales Regs Schedule (there is only 1 schedule). It contains 4 types of arrangement which is categorised as 'an artificial arrangement for the purposes of section 63H(1)(a) of the Act'

Type 1 - The occupation is not on a commercial basis

'An arrangement is an artificial arrangement for the purposes of section 63H(1)(a) of the Act where it makes a person ("P") the occupier of the hereditament and the hereditament is not occupied on a commercial basis because one or more of the following applies-

(a) P is not required to make payment in consideration for their occupation of the hereditament;

(b) the payment which P must make in consideration for their occupation of the hereditament is-

(i) significantly below the level which could reasonably have been obtained on the open market on the day the arrangement was entered into, or

(ii) offset or cancelled in whole or in part by other transactions;

(c) one or more parties to the arrangement (including a person providing services relating to non-domestic rating) has identified (whether expressly in the arrangement itself or documentation relating to it, or otherwise) the mitigation of nondomestic rates liability as a purpose of, or motivation for, the arrangement;

(d) P does not have assets which would enable them to act in relation to the hereditament in the manner which is claimed.'

Type 2 - The ratepayer has been wound up voluntarily

'(1) An arrangement between a person ("L") who granted the lease, tenancy or any other form of agreement for occupation and another person ("P") is an artificial arrangement for the purposes of section 63H(1)(a) of the Act where it makes P the ratepayer of the hereditament and either or both of sub-paragraphs (2) and (3) apply.

(2) Prior to entering into the arrangement with P, L entered into an arrangement with another person ("X") where X became the ratepayer of a hereditament (either the hereditament referred to in sub-paragraph (1) or another hereditament), and-

(a) X, whilst a party to that arrangement, was wound up voluntarily under Chapters 2 to 5 of Part 4 of the Insolvency Act 1986 1, and

(b) on the day L enters into the arrangement with P, P has a qualifying connection with X.

(3) P has a qualifying connection with L or with a person providing services to L relating to non-domestic rating, on the day the arrangement is entered into, and either or both of paragraphs (a) and (b) apply—

(a) prior to entering into the arrangement with P, L entered into an arrangement with another person ("Y") where Y became the ratepayer of a hereditament (either the hereditament referred to in sub-paragraph (1) or another hereditament), and-

(i) on the day that arrangement was entered into, Y had a qualifying connection with L or a person providing services to L relating to non-domestic rating, and

(ii) Y, whilst a party to that arrangement, was wound up voluntarily under Chapters 2 to 5 of Part 4 of the Insolvency Act 1986;

(b) within 3 years of the day the arrangement was entered into between L and P, P was, or is in the process of being, wound up voluntarily under Chapters 2 to 5 of Part 4 of the Insolvency Act 1986.

(4) A person is to be treated as having a qualifying connection with another person-

(a) where both persons are, or one or both were, companies, and

(i) one is, or was, a subsidiary of the other,

(ii) both are, or one or both were, subsidiaries of the same company,

(iii) the same person is, or was, either a director of, or an individual with significant control over, both companies, or

(iv) the same person is, or was, a director of one company and an individual with significant control over the other company, or

(b) where only one person is, or was, a company and the other person ("the second person") has or had such an interest in that company as would, if the second person were a company, result in it being the holding company of the other.

(5) In this paragraph, "holding company" and "subsidiary" have the meanings given in section 1159 of the Companies Act 2006.'

Type 3 — The owner or occupier exhibits particular characteristics or behaviours

'(1) An arrangement is an artificial arrangement for the purposes of section 63H(1)(a) of the Act when one or more of the following applies in relation to the hereditament-

(a) the owner, occupier or person who granted the lease, tenancy or any other form of agreement for occupation failed to provide the name of the ratepayer in response to a request for such information under paragraph 5(1B) of Schedule 9 to the Act within the period specified in paragraph 5A(1) of that Schedule;

(b) the arrangement makes a person ("P") the ratepayer and P has no connection to the operation or economic activity taking place on or in relation to the hereditament;

(c) the arrangement, between a person ("L") who granted the lease, tenancy or any other form of agreement for occupation and another person ("P"), makes P the ratepayer and, on the day the arrangement was entered into, P was an employee, contractor, partner or close relative of L;

(d) the arrangement makes a person ("P"), or a company, firm or trust for which P is a director, partner, charity trustee or an individual with significant control, the ratepayer and on the day the arrangement was entered into, one or more of the following applies-

(i) within the previous 2 years, P had been convicted under section 767(1) of the Companies Act 2006 of doing business or exercising any borrowing powers of a public company which did not have a trading certificate;

(ii) within the previous 2 years, P was subject to a declaration issued by a court for fraudulent or wrongful trading under section 213(2), 214(1), 246ZA(2) or 246ZB(1) of the Insolvency Act 1986, or article 177 or 178(1) of the Insolvency (Northern Ireland) Order 1989;

(iii) P was disqualified from being a company director, either by virtue of a disqualification order or a disqualification undertaking under section 1 or 1A of the Company Directors Disqualification Act 1986, or article 3 or 4 of the Company Directors Disqualification (Northern Ireland) Order 2002, without the leave of the court to be a director in respect of the ratepayer;

(iv) P was disqualified from being a charity trustee or trustee for that charity under section 178 or 181A of the Charities Act 2011, section 69 of the Charities and Trustee Investment (Scotland) Act 2005 8 or section 86 of the Charities Act (Northern Ireland) 2008;

(v) within the previous 2 years, P was convicted of an offence under section 216 of the Insolvency Act 1986 or article 180 of theInsolvency (Northern Ireland) Order 1989 (restriction on re-use of company names); 

(vi) P was subject to a bankruptcy restrictions order, an interim bankruptcy restrictions order, or a bankruptcy restrictions undertaking, under Schedule 4A to the Insolvency Act 1986, Part 13 of the Bankruptcy (Scotland) Act 2016, or Schedule 2A to the Insolvency (Northern Ireland) Order 1989.

(2) In sub-paragraph (1)(c), "close relative" means a parent, adoptive parent, step-parent, parent-in-law, son, son-in-law, daughter, daughter-in-law, step-son, step-daughter, adoptive son, adoptive daughter, brother or sister (whether of full-blood or half-blood), step-brother, step-sister, or the partner of any such person.

(3) In sub-paragraphs (1)(c) and (2), "partner" means-

(a) the husband or wife or civil partner of that person, or

(b) if the person is living together with another person as if they were a married couple or civil partners, that other person.

(4) In sub-paragraph (1)(d)-

"charity trustee" ("ymddiriedolwr elusen") means a person who falls within the definition of "charity trustees" in section 177 of the Charities Act 2011;

"firm" ("ffyrm") means any other entity, whether or not a legal person, that is not an individual and includes a body corporate, a corporation sole and a partnership or other unincorporated association.'

Type 4 — The occupation exhibits certain characteristics

'(1) An arrangement is an artificial arrangement for the purposes of section 63H(1)(a) of the Act when one or both of the following applies to the occupation of the hereditament—

(a) the occupation is beneficial primarily because it contributes to the carrying on of a non-domestic rates mitigation business;

(b) the benefit of the occupation wholly or mainly arises from a WiFi or Bluetooth transmitter (and any associated apparatus) used for localised electronic marketing or advertising.

(2) In paragraph 4(1)(a), "non-domestic rates mitigation business" means a business or person involved with the operation (including advising, co-ordinating or managing) of a scheme or schemes for the predominant purpose of reducing nondomestic rates liability.'

2026 Wales Regs - Part 2: Reg.4 'Penalties'

Reg.4 is entitled 'Penalties' and reads:

'(1) A billing authority must impose a penalty on a person who has been given a section 63K notice where—

(a) the section 63K notice has not been withdrawn,

(b) the condition or conditions in paragraph (2) that are relevant are met, and

(c) the person has failed to pay an amount due in a demand notice served by the billing authority in accordance with regulation 4(1) of the Non-Domestic Rating (Collection and Enforcement) (Local Lists) Regulations 1989 1 in consequence of the section 63K notice.

(2) The conditions are that-

(a) the time limit for requesting a review under section 63K(4) of the Act has expired and, if the section 63K notice has been confirmed following a review, the time limit for appealing the notice under section 63L(2) of the Act has also expired 2 ;

(b) if the section 63K notice is subject to an appeal under section 63L(2) of the Act, it has been confirmed by a valuation tribunal established under paragraph 1 of Schedule 11 to the Act and the time limit for appealing the notice to the Upper Tribunal has expired 3 ;

(c) if the section 63K notice is subject to an appeal under regulation 56(1)(aa) of the Non-Domestic Rating (Alteration of Lists and Appeals) (Wales) Regulations 2023 4 , it has been confirmed by the Upper Tribunal.

(3) The penalty payable is-

(a) £500, and

(b) 3% of the rateable value of the hereditament concerned shown in the local list on the date of the section 63K notice.

(4) Where a billing authority imposes a penalty under this regulation, it must give notice in writing to the person stating-

(a) the amount of the penalty,

(b) the reasons for imposing the penalty,

(c) how payment may be made,

(d) the period within which payment must be made, which must not be less than 21 days beginning with the day of the notice, and

(e) the consequences of non-payment including the recovery of any outstanding penalty in accordance with paragraph (5).

(5) Any outstanding penalty imposed under this regulation may be recovered by the billing authority as a civil debt due to the authority.'

2026 Wales Regs - Part 2: Reg.5 'Service of notices'

Reg.5 is entitled 'Service of notices' and reads:

'(1) A section 63K notice or a notice under regulation 4(4) of these Regulations is validly given to a person if—

(a) it is hand delivered to that person;

(b) it is delivered to that person at their proper address;

(c) it is sent to that person's proper address by post;

(d) it is sent to that person by electronic communication.

(2) For the purposes of paragraph (1), a person's proper address is—

(a) in the case of a body corporate, the address of the registered or principal office of the body;

(b) in the case of a partnership, the address of the principal office of the partnership;

(c) in any other case, the person's last known address.

(3) The notice is to be treated as having been hand delivered under paragraph (1)(a)—

(a) in the case of a body corporate, if it is hand delivered to the secretary or clerk of the body;

(b) in the case of a partnership, if it is hand delivered to a partner or a person having control or management of the partnership business.

(4) In this regulation, "electronic communication" has the meaning given in section 15(1) of the Electronic Communications Act 2000.

(5) See section 233 of the Local Government Act 1972 2 for additional provision about the methods by which billing authorities may serve documents.'

2026 Wales Regs - Part 2 - Amending Other Provisions 

For completeness, it is noted that 2026 Wales Regs - Part 3, contains 2 regulations, reg.6 and reg.7, which make some amendments to: (a) Non-Domestic Rating (Collection and Enforcement) (Local Lists) Regulations 1989; and (b) Non-Domestic Rating (Alteration of Lists and Appeals) (Wales) Regulations 2023.

SIMON HILL © 2026*

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