A High Court ruling saw just over a dozen companies closed down over their involvement in a scheme to assist landlords in avoiding business rate liabilities.

An investigation by Company Investigations, which are part of The Insolvency Service, found the companies formed part of a scheme allowing landlords of commercial and industrial property to avoid National Non-Domestic Rates liabilities payable on empty properties.

The Manchester-based property company initially used the scheme solely for its own properties. But around April 2009 it extended its illegal practices to properties owned by approximately 100 third-party landlords.

Between March 2008 and 31 March 2011 the scheme had facilitated the avoidance of paying business rates debts of approximately £8.9 million and generated a fee income of £1.4 million for the company operating the scheme.

When the judge wound up the 13 companies he discovered they never traded but were actually used as vehicles in the operation of the scheme under which they signed a lease for premises which would otherwise have been vacant.

Each of the companies was then placed into Members Voluntary Liquidation but no liquidator was appointed to deal with the winding-up of its affairs. The effect was that the landlord was no longer liable for business rates and the councils were unable to collect any National Non-Domestic Rates due on the premises.

Commenting on the case, Investigation Supervisor Alex Deane, said; “In making the decision to wind-up these companies, the court is sending a clear message that schemes which abuse the insolvency regime to avoid paying business rates liabilities are not acceptable”

It also came to light that the identities of those in control of the companies’ affairs were not transparently disclosed.