2026 No. 43
RATING AND vALUATION, wALES

The Non-Domestic Rating (Artificial Avoidance Arrangements) (Local Lists) (Wales) Regulations 2026

Made
Coming into force in accordance with regulation 1(2) and (3)
The Welsh Ministers make the following Regulations in exercise of the powers conferred on the Secretary of State by paragraphs 1 and 11(1A) of Schedule 11 to the Local Government Finance Act 19881 and now vested in them2, and in exercise of the powers conferred on them by sections 63H(1)(a) and (3)(a), 63M(1) and (5), and 143A(3) of that Act3, and section 22(1)(a) of the Local Government Finance (Wales) Act 20244.
In accordance with the Senedd approval procedure applied by section 143A(5)(e) and (f) of the Local Government Finance Act 19885 a draft of this Welsh statutory instrument was laid before, and approved by resolution of, Senedd Cymru.

Part 1Introduction

Title and coming into force1.

(1)

The title of these Regulations is the Non-Domestic Rating (Artificial Avoidance Arrangements) (Local Lists) (Wales) Regulations 2026.

(2)

Subject to paragraph (3), these Regulations will come into force on 1 April 2026.

(3)

Regulation 7(3) comes into force immediately after regulation 11(4) of the Non-Domestic Rating (Provision of Information About Changes of Circumstances) (Wales) Regulations 20266 comes into force.

Interpretation2.

In these Regulations—

“the Act” (“y Ddeddf”) means the Local Government Finance Act 1988;

“arrangement” (“trefniant”) includes (among other things) any action, event, agreement, operation, promise, scheme, transaction, understanding or undertaking (whether legally enforceable or not), and references to an arrangement are to be read as including—

(a)

a series of arrangements, and

(b)

any part or stage of an arrangement comprised of more than one part or stage;

“billing authority” (“awdurdod bilio”) means a county council or county borough council in Wales;

“company” (“cwmni”) has the meaning given in section 1(1) of the Companies Act 20067;
“hereditament” (“hereditament”) has the meaning given by section 64 of the Act8;
“individual with significant control” (“unigolyn â rheolaeth sylweddol”) means an individual whose particulars are contained in the company’s register of people with significant control in accordance with Part 21A of the Companies Act 20069 as it has effect when these Regulations come into force;
“local list” (“rhestr leol”) means a list compiled and maintained in accordance with section 41ZA of the Act10;
“occupier” (“meddiannydd”) has the meaning given in section 65 of the Act11;

“owner” (“perchennog”) has the meaning given in section 65 of the Act;

“ratepayer” (“talwr ardrethi”), as it applies to a hereditament, means the occupier or, if the hereditament is not occupied, the owner;

“section 63K notice” (“hysbysiad adran 63K”) means a notice given by a billing authority under section 63K(1) of the Act.

Part 2Artificial avoidance arrangements

Types of arrangements3.

(1)

The Schedule to these Regulations specifies types of arrangements which are artificial for the purposes of section 63H(1)(a) of the Act.

(2)

But an arrangement of any type specified in the Schedule is not artificial if a determination is made by a billing authority to that effect having regard to all the circumstances.

(3)

The circumstances referred to in paragraph (2) may include—

(a)

whether the occupier is or was operating a business whose predominant purpose is or was not related to reducing non-domestic rates liability;

(b)

the proportion of the hereditament that is or was being occupied to conduct the business operated by the occupier;

(c)

the period of time for which the hereditament is or was occupied;

(d)

whether the characteristics of the hereditament are compatible with the predominant purpose of the business being conducted there.

Penalties4.

(1)

A billing authority must impose a penalty on a person who has been given a section 63K notice where—

(a)

the section 63K notice has not been withdrawn,

(b)

the condition or conditions in paragraph (2) that are relevant are met, and

(c)

the person has failed to pay an amount due in a demand notice served by the billing authority in accordance with regulation 4(1) of the Non-Domestic Rating (Collection and Enforcement) (Local Lists) Regulations 198912 in consequence of the section 63K notice.

(2)

The conditions are that—

(a)

the time limit for requesting a review under section 63K(4) of the Act has expired and, if the section 63K notice has been confirmed following a review, the time limit for appealing the notice under section 63L(2) of the Act has also expired13;

(b)

if the section 63K notice is subject to an appeal under section 63L(2) of the Act, it has been confirmed by a valuation tribunal established under paragraph 1 of Schedule 11 to the Act and the time limit for appealing the notice to the Upper Tribunal has expired14;

(c)

if the section 63K notice is subject to an appeal under regulation 56(1)(aa) of the Non-Domestic Rating (Alteration of Lists and Appeals) (Wales) Regulations 202315, it has been confirmed by the Upper Tribunal.

(3)

The penalty payable is—

(a)

£500, and

(b)

3% of the rateable value of the hereditament concerned shown in the local list on the date of the section 63K notice.

(4)

Where a billing authority imposes a penalty under this regulation, it must give notice in writing to the person stating—

(a)

the amount of the penalty,

(b)

the reasons for imposing the penalty,

(c)

how payment may be made,

(d)

the period within which payment must be made, which must not be less than 21 days beginning with the day of the notice, and

(e)

the consequences of non-payment including the recovery of any outstanding penalty in accordance with paragraph (5).

(5)

Any outstanding penalty imposed under this regulation may be recovered by the billing authority as a civil debt due to the authority.

Service of notices5.

(1)

A section 63K notice or a notice under regulation 4(4) of these Regulations is validly given to a person if—

(a)

it is hand delivered to that person;

(b)

it is delivered to that person at their proper address;

(c)

it is sent to that person’s proper address by post;

(d)

it is sent to that person by electronic communication.

(2)

For the purposes of paragraph (1), a person’s proper address is—

(a)

in the case of a body corporate, the address of the registered or principal office of the body;

(b)

in the case of a partnership, the address of the principal office of the partnership;

(c)

in any other case, the person’s last known address.

(3)

The notice is to be treated as having been hand delivered under paragraph (1)(a)—

(a)

in the case of a body corporate, if it is hand delivered to the secretary or clerk of the body;

(b)

in the case of a partnership, if it is hand delivered to a partner or a person having control or management of the partnership business.

(4)

In this regulation, “electronic communication” has the meaning given in section 15(1) of the Electronic Communications Act 200016.

(5)

See section 233 of the Local Government Act 197217 for additional provision about the methods by which billing authorities may serve documents.

Part 3Consequential amendments to secondary legislation

Amendments to the Non-Domestic Rating (Collection and Enforcement) (Local Lists) Regulations 19896.

(1)

The Non-Domestic Rating (Collection and Enforcement) (Local Lists) Regulations 1989 are amended as follows.

(2)

In regulation 3(1) (interpretation and application of Part 2) for the definition of “the amount payable” substitute—

““the amount payable”—

(a)

for a chargeable financial year or part of a chargeable financial year in relation to a ratepayer, a billing authority and a hereditament in England means—

  1. (i)

    the amount the ratepayer is liable to pay to the authority as regards the hereditament in respect of the year or part under—

    1. (aa)
      section 43 or 4518 of the Act, whether calculated by reference to any provision of or made under Schedule 4ZA, 4ZB or 7A19 to the Act or by reference to an amount or rules determined or prescribed under section 47(1)(a), 57A(3)(a) or 58(3)(a)20 of the Act, and
    2. (bb)
      section 11 of the BRS Act, whether calculated by reference to section 13 of the BRS Act21 (chargeable amount) or determined in accordance with rules set by the levying authority under section 15 of the BRS Act (BRS relief), or
  2. (ii)

    where an amount falls to be credited by the billing authority against the ratepayer’s liability in respect of the year or part, the amount (if any) by which the amount referred to in paragraph (i) above exceeds the amount falling to be so credited;

(b)

for a chargeable financial year or part of a chargeable financial year in relation to a ratepayer, a billing authority and a hereditament in Wales means—

  1. (i)

    the amount the ratepayer is liable to pay to the authority as regards the hereditament in respect of the year or part under section 43 or 45 of the Act, whether calculated—

    1. (aa)

      by reference to any provision of or made under Schedule 4ZA, 4ZB or 7A to the Act;

    2. (bb)
      by reference to an amount determined or prescribed under section 47(1)(a) or 58(3)22 of the Act;
    3. (cc)

      as a result of applying sections 63F to 63L of the Act (so far as relevant) and regulations under section 63H(1)(a) of the Act, or

  2. (ii)

    where an amount falls to be credited by the billing authority against the ratepayer’s liability in respect of the year or part, the amount (if any) by which the amount referred to in paragraph (i) above exceeds the amount falling to be so credited;”.

(3)

In regulation 5(1) (service of demand notices)—

(a)

in sub-paragraph (a), after “sub-paragraph (b)” insert “or (c)”;

(b)

at the end of sub-paragraph (b), for “.” substitute “, or”;

(c)

after sub-paragraph (b) insert—

“(c)

if a billing authority in Wales has given notice under section 63K(1) of the Act to a person who is to be treated as liable as regards the hereditament concerned under section 43 or 45 of the Act, the first day after—

(i)

the time limit for requesting a review under section 63K(4) has expired, or

(ii)

if a notice under section 63K(1) of the Act has been confirmed following a review, the time limit for appealing the notice under section 63L has expired.”

Amendments to the Non-Domestic Rating (Alteration of Lists and Appeals) (Wales) Regulations 20237.

(1)

The Non-Domestic Rating (Alteration of Lists and Appeals) (Wales) Regulations 2023 are amended as follows.

(2)

In regulation 2 (interpretation: general)—

(a)

in paragraph (1)—

(i)

in the definition of “appeal”, after sub-paragraph (b) insert—
  1. “(ba)

    section 63L of the Act (appeals to a valuation tribunal);”;

(ii)

at the appropriate place insert—

““section 63K notice” (“hysbysiad adran 63K”) means a notice under section 63K(1) of the Act which is confirmed in accordance with section 63K(5) of the Act;”;

(b)

in paragraph (3), after sub-paragraph (b) insert—

“(ba)

where an appeal is made under section 63L of the Act, the relevant authority;”.

(3)

In regulation 32 (appeals against completion notices or imposition of Schedule 9 penalties)—

(a)

in the heading, after “Appeals against” insert “section 63K notices,”;

(b)

after paragraph (1A) insert—

“(1B)

A person who wishes to appeal against a section 63K notice must serve a notice of appeal to the VTW so that it is received within the period of 30 days beginning with the day on which the relevant authority notifies the person of its conclusions in accordance with section 63K(6) of the Act.”;

(c)

in paragraph (2)—

(i)

in sub-paragraph (a), after “notice of the imposition of the penalty” insert “or the section 63K notice”;

(ii)

in sub-paragraph (ba), after “Schedule 9 to the Act” insert “or a section 63K notice”;

(d)

in paragraph (3), for “or (1A)” substitute “, (1A) or (1B)”;

(e)

in paragraph (4), for “and (1A)” substitute “, (1A) and (1B)”.

(4)

In regulation 35 (arrangements for appeals)—

(a)

in paragraph (1), after sub-paragraph (b) insert—

“(ba)

section 63L of the Act,”;

(b)

for paragraph (3) substitute—

“(3)

Paragraphs (3A) and (3B) apply where the following appeals relate to the same property—

(a)

an appeal under regulation 24 and an appeal under regulation 10A of the Council Tax (Alteration of Lists and Appeals) Regulations 199323, or

(b)

an appeal under section 63L of the Act and an appeal under regulation 24 and/or an appeal under regulation 10A of the Council Tax (Alteration of Lists and Appeals) Regulations 1993.

(3A)

The President of the Valuation Tribunal must ensure the appeals in paragraph (3)(a) or (b) are dealt with in the order which appears to the President to best secure the interests of justice.

(3B)

The following must be joined as a party to the appeals—

(a)

the listing officer where an appeal is made under regulation 24 of these Regulations, and

(b)

the VO where an appeal is made under regulation 10A of the Council Tax (Alteration of Lists and Appeals) Regulations 1993.”;

(c)

in paragraph (4), for “(3)” substitute “(3B)”.

(5)

In regulation 56(1) (appeals), after sub-paragraph (a) insert—

“(aa)

an appeal under section 63L of the Act;”.

Mark Drakeford
Cabinet Secretary for Finance and Welsh Language, one of the Welsh Ministers

ScheduleTypes of artificial avoidance arrangements

Regulation 3(1)

Type 1 – The occupation is not on a commercial basis

1.

An arrangement is an artificial arrangement for the purposes of section 63H(1)(a) of the Act where it makes a person (“P”) the occupier of the hereditament and the hereditament is not occupied on a commercial basis because one or more of the following applies—

(a)

P is not required to make payment in consideration for their occupation of the hereditament;

(b)

the payment which P must make in consideration for their occupation of the hereditament is—

(i)

significantly below the level which could reasonably have been obtained on the open market on the day the arrangement was entered into, or

(ii)

offset or cancelled in whole or in part by other transactions;

(c)

one or more parties to the arrangement (including a person providing services relating to non-domestic rating) has identified (whether expressly in the arrangement itself or documentation relating to it, or otherwise) the mitigation of non-domestic rates liability as a purpose of, or motivation for, the arrangement;

(d)

P does not have assets which would enable them to act in relation to the hereditament in the manner which is claimed.

Type 2 – The ratepayer has been wound up voluntarily

2.

(1)

An arrangement between a person (“L”) who granted the lease, tenancy or any other form of agreement for occupation and another person (“P”) is an artificial arrangement for the purposes of section 63H(1)(a) of the Act where it makes P the ratepayer of the hereditament and either or both of sub-paragraphs (2) and (3) apply.

(2)

Prior to entering into the arrangement with P, L entered into an arrangement with another person (“X”) where X became the ratepayer of a hereditament (either the hereditament referred to in sub-paragraph (1) or another hereditament), and—

(a)

X, whilst a party to that arrangement, was wound up voluntarily under Chapters 2 to 5 of Part 4 of the Insolvency Act 198624, and

(b)

on the day L enters into the arrangement with P, P has a qualifying connection with X.

(3)

P has a qualifying connection with L or with a person providing services to L relating to non-domestic rating, on the day the arrangement is entered into, and either or both of paragraphs (a) and (b) apply—

(a)

prior to entering into the arrangement with P, L entered into an arrangement with another person (“Y”) where Y became the ratepayer of a hereditament (either the hereditament referred to in sub-paragraph (1) or another hereditament), and—

(i)

on the day that arrangement was entered into, Y had a qualifying connection with L or a person providing services to L relating to non-domestic rating, and

(ii)

Y, whilst a party to that arrangement, was wound up voluntarily under Chapters 2 to 5 of Part 4 of the Insolvency Act 1986;

(b)

within 3 years of the day the arrangement was entered into between L and P, P was, or is in the process of being, wound up voluntarily under Chapters 2 to 5 of Part 4 of the Insolvency Act 1986.

(4)

A person is to be treated as having a qualifying connection with another person—

(a)

where both persons are, or one or both were, companies, and

(i)

one is, or was, a subsidiary of the other,

(ii)

both are, or one or both were, subsidiaries of the same company,

(iii)

the same person is, or was, either a director of, or an individual with significant control over, both companies, or

(iv)

the same person is, or was, a director of one company and an individual with significant control over the other company, or

(b)

where only one person is, or was, a company and the other person (“the second person”) has or had such an interest in that company as would, if the second person were a company, result in it being the holding company of the other.

(5)

In this paragraph, “holding company” and “subsidiary” have the meanings given in section 1159 of the Companies Act 2006.

Type 3 – The owner or occupier exhibits particular characteristics or behaviours

3.

(1)

An arrangement is an artificial arrangement for the purposes of section 63H(1)(a) of the Act when one or more of the following applies in relation to the hereditament—

(a)

the owner, occupier or person who granted the lease, tenancy or any other form of agreement for occupation failed to provide the name of the ratepayer in response to a request for such information under paragraph 5(1B) of Schedule 9 to the Act25 within the period specified in paragraph 5A(1)26 of that Schedule;

(b)

the arrangement makes a person (“P”) the ratepayer and P has no connection to the operation or economic activity taking place on or in relation to the hereditament;

(c)

the arrangement, between a person (“L”) who granted the lease, tenancy or any other form of agreement for occupation and another person (“P”), makes P the ratepayer and, on the day the arrangement was entered into, P was an employee, contractor, partner or close relative of L;

(d)

the arrangement makes a person (“P”), or a company, firm or trust for which P is a director, partner, charity trustee or an individual with significant control, the ratepayer and on the day the arrangement was entered into, one or more of the following applies—

(i)

within the previous 2 years, P had been convicted under section 767(1) of the Companies Act 2006 of doing business or exercising any borrowing powers of a public company which did not have a trading certificate;

(ii)

within the previous 2 years, P was subject to a declaration issued by a court for fraudulent or wrongful trading under section 213(2), 214(1), 246ZA(2) or 246ZB(1) of the Insolvency Act 198627, or article 177 or 178(1) of the Insolvency (Northern Ireland) Order 198928;

(iii)

P was disqualified from being a company director, either by virtue of a disqualification order or a disqualification undertaking under section 1 or 1A of the Company Directors Disqualification Act 198629, or article 3 or 4 of the Company Directors Disqualification (Northern Ireland) Order 200230, without the leave of the court to be a director in respect of the ratepayer;

(iv)

P was disqualified from being a charity trustee or trustee for that charity under section 178 or 181A of the Charities Act 201131, section 69 of the Charities and Trustee Investment (Scotland) Act 200532 or section 86 of the Charities Act (Northern Ireland) 200833;

(v)

within the previous 2 years, P was convicted of an offence under section 216 of the Insolvency Act 198634 or article 180 of the Insolvency (Northern Ireland) Order 198935 (restriction on re-use of company names);

(vi)

P was subject to a bankruptcy restrictions order, an interim bankruptcy restrictions order, or a bankruptcy restrictions undertaking, under Schedule 4A to the Insolvency Act 198636, Part 13 of the Bankruptcy (Scotland) Act 201637, or Schedule 2A to the Insolvency (Northern Ireland) Order 198938.

(2)

In sub-paragraph (1)(c), “close relative” means a parent, adoptive parent, step-parent, parent-in-law, son, son-in-law, daughter, daughter-in-law, step-son, step-daughter, adoptive son, adoptive daughter, brother or sister (whether of full-blood or half-blood), step-brother, step-sister, or the partner of any such person.

(3)

In sub-paragraphs (1)(c) and (2), “partner” means—

(a)

the husband or wife or civil partner of that person, or

(b)

if the person is living together with another person as if they were a married couple or civil partners, that other person.

(4)

In sub-paragraph (1)(d)—

“charity trustee” (“ymddiriedolwr elusen”) means a person who falls within the definition of “charity trustees” in section 177 of the Charities Act 2011;

“firm” (“ffyrm”) means any other entity, whether or not a legal person, that is not an individual and includes a body corporate, a corporation sole and a partnership or other unincorporated association.

Type 4 – The occupation exhibits certain characteristics

4.

(1)

An arrangement is an artificial arrangement for the purposes of section 63H(1)(a) of the Act when one or both of the following applies to the occupation of the hereditament—

(a)

the occupation is beneficial primarily because it contributes to the carrying on of a non-domestic rates mitigation business;

(b)

the benefit of the occupation wholly or mainly arises from a WiFi or Bluetooth transmitter (and any associated apparatus) used for localised electronic marketing or advertising.

(2)

In paragraph 4(1)(a), “non-domestic rates mitigation business” means a business or person involved with the operation (including advising, co-ordinating or managing) of a scheme or schemes for the predominant purpose of reducing non-domestic rates liability.

EXPLANATORY NOTE
(This note is not part of the Regulations)

Sections 63F to 63M of the Local Government Finance Act 1988 (“the Act”), which were inserted by section 13 of the Local Government Finance (Wales) Act 2024, make provision about counteracting advantages arising from artificial arrangements for the avoidance of non-domestic rates liability in relation to hereditaments in Wales.

These Regulations describe the types of avoidance arrangements, in relation to hereditaments on the local non-domestic rating lists, which are artificial for the purposes of sections 63F to 63I and 63K to 63M of the Act (unless a billing authority determines otherwise). They also make provision in relation to penalties and consequential amendments to secondary legislation.

The types of arrangements which are artificial are described in regulation 3 of, and the Schedule to, these Regulations. These are: arrangements where a hereditament is not occupied on a commercial basis, where the ratepayer has been wound up voluntarily, where the owner or occupier exhibits particular characteristics and behaviours, or where the occupation of the hereditament has certain characteristics. However, regulation 3(2) enables a billing authority to determine that an arrangement of a type specified in the Schedule is not artificial after having regard to all the circumstances. Such circumstances may include (but are not limited to) those listed in regulation 3(3).

Regulation 4 makes provision in relation to the penalty imposed where a person has failed to pay an amount due to a billing authority in consequence of having made an artificial arrangement and the information which must be contained in notices imposing such penalties (“penalty notices”).

Regulation 5 makes provision as to how a billing authority may effect service of notices given under section 63K(1) of the Act (“section 63K notices”) and penalty notices.

Regulation 6 amends the Non-Domestic Rating (Collection and Enforcement) (Local Lists) Regulations 1989 (“the 1989 Regulations”), which govern the billing, collection and recovery of unpaid non-domestic rates. These amendments ensure that the 1989 Regulations will apply to an amount payable by a ratepayer as a result of the billing authority applying sections 63F to 63I and 63K to 63L of the Act and these Regulations. The amendments also provide that where a section 63K notice has been served on that ratepayer, a demand notice in respect of the amount payable will not be served until after the deadlines for reviewing and appealing the section 63K notice have expired.

Regulation 7 amends the Non-Domestic Rating (Alteration of Lists and Appeals) (Wales) Regulations 2023 to ensure that relevant provisions of those Regulations apply in relation to appeals brought against section 63K notices.

The Welsh Ministers’ Code of Practice on the carrying out of Regulatory Impact Assessments was considered in relation to these Regulations. As a result, a regulatory impact assessment has been prepared as to the likely costs and benefits of complying with these Regulations. A copy can be obtained from the Non-Domestic Rates Policy and Reform Division, Welsh Government, Cathays Park, Cardiff, CF10 3NQ.