Commentary on Sections Part 1 – Non-Domestic Rating Section 13 – Artificial non-domestic rating avoidance arrangements
41.This section inserts sections 63F to 63M (Anti-avoidance: Wales) into the 1988 Act. They make provision about counteracting advantages arising from artificial arrangements for the avoidance of non-domestic rates liability.
42.For the purposes of sections 63F to 63M, an artificial non-domestic rating avoidance arrangement has the meaning given in sections 63F to 63H.
43.As regards the key concept of “artificial”, section 63H of the 1988 Act provides that an arrangement is artificial if it is of a type specified by the Welsh Ministers in regulations (and, where Ministers have made provision for this under subsection (3), no contrary determination has been made). The Welsh Ministers may only specify a type of arrangement is artificial if making an arrangement of that type would not be a reasonable course of action in relation to legislative provisions for non-domestic rating, having regard in particular to the matters listed in paragraphs (a), (b) and (c) of subsection (2). These matters cover techniques which are designed to exploit perceived ‘loopholes’ in the legislation to obtain the advantage.
44.Regulations made under section 63H(1)(a) of the 1988 Act will describe the specific avoidance techniques or behaviours that will be addressed by the process set out in the following sections. The regulations may also (see section 63H(3)) provide that a specified arrangement is not artificial in a particular case if, having regard to all the circumstances, a determination to that effect is made by the relevant billing authority or the Welsh Ministers (as the case may be). This enables the Welsh Ministers, when making the regulations, to identify types of arrangement that may not be artificial in every case and, for those types of arrangement, to give billing authorities (or the Welsh Ministers as the case may be) a discretion to determine that, in the particular circumstances, an arrangement of that type is not artificial.
45.Sections 63I (Liability to non-domestic rating: local lists) and 63J (Liability to non-domestic rating: central lists) provide for the application of the anti-avoidance provisions by billing authorities and Welsh Ministers, in relation to hereditaments shown in a local or central rating list, respectively. Where an artificial avoidance arrangement has been made in relation to a hereditament, the billing authority or the Welsh Ministers (as the case may be) must treat the ratepayer (or another person, if that person would have been the ratepayer in the absence of the arrangement) as liable to pay the chargeable amount that would have applied in the absence of the arrangement. This has the effect that, where a specified avoidance behaviour continues after regulations are made, the person will be required to pay the shortfall in liability since the later of: the day the arrangement is made; the day the regulations come into force; and a day specified in the regulations.
46.Section 63K (Liability to non-domestic rating: notification) of the 1988 Act obliges the billing authority or the Welsh Ministers (as the case may be) to serve a notice on the person who is to be treated as liable where an artificial avoidance arrangement has been identified, and enables the person to have the notice reviewed. The billing authority (or the Welsh Ministers) will then either confirm the notice or withdraw it (in which case the arrangement subject to the notice is taken as not having been an artificial non-domestic rating avoidance arrangement).
47.Section 63L (Appeals to valuation tribunal) enables a person to appeal a notice which is confirmed following a review. The tribunal may confirm the notice or require it to be withdrawn.
48.Section 63M (Penalties) enables the Welsh Ministers to make regulations providing for the imposition of a financial penalty where a person treated as liable fails to pay an amount due.