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Court case threatens London tax avoidance scheme tied to empty offices

The “box shifting” practice has been used for decades to reset business rate breaks on vacant buildings, cutting rates owed by up to 67%.

Reported · Written up by our desk · Europe

Guardian Business reports that a court case involving the seven-storey office building at 2 America Square, leased by a Virgin Islands-based company, has moved toward ending a tax avoidance scheme focused on unoccupied commercial property in England.

For almost two decades, companies have exploited a business rates loophole tied to changes made in 2008, when occupiers of vacant buildings stopped qualifying for a 50% discount but could still claim a three-month rate holiday at the end of each tenancy.

Under the scheme, an industry developed that brought equipment into empty space during the rate holiday window and then removed it after a short period, leaving the property unoccupied again to reset the clock and claim additional rate-free time.

The practice, dubbed “box shifting,” was designed to reduce rates owed by as much as 67%, and has been estimated to cost one London council about £35 million per year since the pandemic, when claims for empty property relief reportedly doubled.

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