Property owners are allegedly avoiding paying business rates in prime West End office space by leaving boxes supposedly containing snails in their buildings.

Landlords in London are claiming that commercial properties are ‘snail farms’ and therefore exempt from paying tax as a ‘fish farm or agricultural use’ property.

While the Government’s Valuation Office is unlikely to grant such an exemption, the council then has to try to wind up the company occupying the office space.

Because the council must hold a property’s occupier liable for business rates, the landlord therefore does not have to pay the tax and is seen as complicit in the scam.

In the latest example, Westminster City Council officers visited offices on Old Marylebone Road where they found sealed boxes purporting to contain snails.

The local authority has so far wound up four snail companies for non-payment of £286,000 worth of business rates, and is now seeking to wind up a further two.

Officials are also asking the Insolvency Service to investigate whether the director of these companies should be disqualified from being a director of any future firms.

Council leader Adam Hug told the Daily Mail today: ‘This latest raid vividly illustrates an issue of business rates avoidance based on the ludicrous notion of snail farms which we have raised with central Government before.

‘In the last fortnight we have discovered more boxes of snails in empty office buildings in Westminster so there is little sign of this racket slowing up.

‘Rather than unscrupulous traders dropping on one avoidance scheme after another, it would be good to see a general clause on business rates avoidance and evasion which stops these kinds of activities in their tracks.

‘As a local authority with limited resources, we enforce wherever we can. We will be on the trail of the snail racketeers or anyone else who thinks they can cheat the taxpayer.’

The scam works by the organiser telling the council that a previously empty property is occupied by a shell company that claims to be operating as a snail farm.

There is a business rate exemption under Rating Law for properties occupied as an ‘agricultural building or fish farm’ – but the building is usually an empty office.

When the council inspects the property, it will find it empty with the exception of a relatively small number of sealed boxes purportedly containing snails.

To achieve an exemption as a snail farm an application must be made to the Valuation Office, which is part of HM Revenue andCustoms.

But in these cases, no such application is ever made, which the council believes is because the Valuation Office would inevitably reject it.

The council has to hold liable the company occupying under a lease or licence agreement, which are documents supplied by the avoidance organiser and/or by the landlord.

The council follows the statutory recovery process of National Non-Domestic Rates (NNDR) until the relevant shell company is eventually wound-up.

Although the exemption from business rates is never applied for or granted, the landlord does not pay business rates for the relevant period.

The council believes that the avoidance organiser then receives his percentage share of the business rate savings.

The shell company has no assets and therefore the insolvency practitioner or liquidator cannot distribute any funds to the companies’ creditors.

Council officials believe the property landlord is effectively complicit with the attempted avoidance scheme because they wish to avoid paying empty rates on the property and pay the avoidance organiser a percentage of the rates that they save.

As the scams continue, the council is now seeking a special investigation by the Insolvency Service of the companies that it has wound-up and an associated director.