Charity that ran business rates avoidance scheme shut down

A charity that ran a multi-million pound tax avoidance scheme by attempting to claim charitable relief from business rates on empty commercial premises has been wound up following a High Court decision.

The firm could owe tens of millions of pounds to councils up and down the country.

On  Monday (8 July), the Companies Court in London ordered that The Public Safety Charitable Trust Ltd be wound up, following a petition led by South Cambridgeshire District Council.

In May, South Cambridgeshire, Milton Keynes Council and Cheshire West and Chester Borough Council won a landmark case at London’s High Court to stop the Chester-based charity claiming charitable relief from business rates on empty commercial premises, from which they were broadcasting public safety messages.

The High Court ruled that the Trust must repay outstanding business rates to South Cambridgeshire and since May other councils also affected have been using the decision to take their case to local Magistrates Courts to try and secure repayment of rates.

Three other councils notified the courts of their support for South Cambridgeshire’s latest legal action and the total debt owed to them alone exceeded £2.2m. In the case of Liverpool City Council, which supported the action, over £1.6 million is owed.

During the course of the district council’s investigation into the case 24 local authorities have been in contact and it is expected the file of claims against the Trust will continue grow.

The Trust had taken on over 30 leases of otherwise empty business premises in South Cambridgeshire which were liable for business rates – and had leased around 1,500 premises nationwide. They paid a nominal rent to landlords and placed transmitters in the premises offering free wi-fi and sending crime fighting messages to Bluetooth-enabled devices in the area.

The landlords also paid the Trust a premium to reward them for the savings they made on their business rates. During legal action in May, the Trust had argued they were entitled to relief from business rates because the premises were being used for charitable purposes but the High Court ruled against them.

An insolvency practitioner will now be appointed following the latest legal ruling.

“Obtaining the winding up order, at the first hearing of the petition, was an excellent result for the council, in light of the opposition from PSCT," said Matthew Dix, partner of Wilkin Chapman which acted for South Cambridgeshire in bringing the petition. "There was considerable support for the petition, with three local authorities submitting formal notices of support, in relation to outstanding business rates in excess of £1.75m.

"We were able to ensure that the council’s winding up petition was prosecuted as robustly as possible from the outset. This was particularly important as this winding up action was the culmination of proceedings in the High Court whereby PSCT sought to overturn liability orders obtained against them by a number of local authorities”