Hurstwood Properties (A) Ltd v Rossendale Borough Council [2021] UKSC 16

A test case for around 55 similar claims, and proof the Ramsay principle was never really just a tax doctrine. The Supreme Court used it to dismantle a business rates avoidance industry, and quietly finished off piercing the corporate veil as a serious alternative route.

Why This Case Matters

Hurstwood Properties is significant for two distinct reasons that go well beyond its own facts. First, it confirms that the Ramsay principle of purposive statutory construction, developed in the tax context in WT Ramsay Ltd v IRC [1982] AC 300, is a general principle of statutory interpretation that applies equally to non-tax legislation, here business rates, wherever an artificial structure is interposed to defeat the evident purpose of a statutory charge. Second, in reaching its result through statutory construction rather than by piercing the corporate veil, the Supreme Court significantly narrowed the practical relevance of veil-piercing as a tool for defeating avoidance structures generally.

The Facts

The case was a test case for around 55 similar claims concerning business rates avoidance schemes used by owners of unoccupied commercial properties. Under the schemes, the property owner granted a lease of the empty property to a special purpose vehicle (SPV) with minimal assets, typically a shelf company. Under one variant, the SPV was then dissolved without any winding-up process, so that any rates liability that had accrued to it passed to the Crown as bona vacantia when the lease vested in the Crown on dissolution. Under another variant, the SPV was placed into members' voluntary liquidation within days of the lease being granted, intended to trigger a statutory exemption from rates that applies to properties owned by a company in liquidation. In each case, the practical purpose was to ensure no one with any real assets or intention to pay was liable for the empty property rates that would otherwise have fallen on the original owner.

Procedural History

• High Court and Court of Appeal: findings varied across the linked claims, with some decisions favouring the property owners on the basis that the leases were formally effective.
• Supreme Court: allowed the local authorities' appeals, holding the SPV structures were ineffective to transfer rates liability, applying a purposive construction of “owner” rather than piercing the corporate veil.

The Issue

Whether a lease granted to a special purpose vehicle, set up with minimal assets and intended from the outset to be dissolved or placed into liquidation shortly after the grant purely to avoid business rates liability, is effective to make the SPV the “owner” of the property for the purposes of section 65 of the Local Government Finance Act 1988, or whether the true owner for rates purposes remains the party that set up and controlled the arrangement.

The Ratio Decidendi

The Supreme Court's reasoning drew directly on the Ramsay principle's insight that a court construing a statute is entitled, and often required, to look at the real, composite effect of an artificial arrangement rather than accepting an inserted step as effective simply because it was, viewed in isolation, legally valid. The Court treated the SPV's grant of a lease, and its near-immediate dissolution or liquidation, as a single, integrated scheme with no purpose beyond avoiding the rates charge, directly analogous to the self-cancelling and pre-ordained structures considered in WT Ramsay, Furniss v Dawson and BMBF v Mawson.

The Corporate Veil Route Rejected

The local authorities had also argued, in the alternative, that the SPVs' separate legal personality should simply be disregarded by piercing the corporate veil, relying on the narrow evasion principle confirmed in Prest v Petrodel Resources Ltd [2013] UKSC 34. The Supreme Court declined to decide the case on that basis, reaching its result instead through purposive statutory construction of the word “owner.” This is widely regarded as a significant, if largely implicit, further narrowing of veil-piercing as a live doctrine: where a purposive construction argument is available to reach the same practical result, the Supreme Court's evident preference is to use it rather than to disregard a company's separate legal personality directly, reinforcing how little independent work veil-piercing now does following Prest.

Practitioner Application

• Recognise that Ramsay-style purposive construction is not confined to revenue statutes. Hurstwood confirms the same interpretive technique applies to any statutory charge defeated by an artificial, purpose-built structure, and the reasoning is directly transferable to other regulatory and charging regimes beyond tax and rates.
• Prefer a statutory construction argument over a veil-piercing argument where both are available; Hurstwood strongly suggests the courts will reach for the former, and a case built primarily around veil-piercing risks being seen as reaching for the harder, narrower route unnecessarily.
• Assess whether an intermediate SPV or vehicle has any function beyond its avoidance effect, since that is the central question the purposive construction analysis turns on, mirroring the Ramsay/Furniss/Craven White line directly.
• Expect this reasoning to be cited well beyond rates disputes, in any context where a statutory liability is said to have been diverted onto an asset-less vehicle set up and wound up as part of a single, integrated avoidance scheme.

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