A Labour district councillor in North Herts is facing calls to resign after the Court of Appeal ruled against a business rates avoidance scheme run by a company she co-owns.

Sarah Lucas, who has represented Royston Palace ward since 2024, is a co-owner of Principled Offsite Logistics Ltd (POLL), a company providing business rates "mitigation" services involving moving boxes in and out of otherwise empty buildings to exploit a loophole allowing leaseholders to claim rates relief.

But the Court of Appeal ruled this summer, in a case brought by the City of London Corporation, that the box shifting scheme operated by POLL "cannot amount to beneficial occupation", and therefore cannot be used to claim rates relief.

According to the Guardian, which first reported on the case, local authorities across the country may have missed out on £1.5bn in business rates from companies using such schemes.

Cllr Lucas has worked as director of finance at POLL since 2018, according to her LinkedIn profile, and has owned 50% of the company since 2024.

After the judgment against POLL, Cllr Lucas resigned her membership of North Herts Council's finance, audit and risk committee, of which she was vice-chair.

And, at a council meeting earlier this month, Labour council leader Val Bryant was questioned by the leader of the Liberal Democrat opposition, Ruth Brown, on whether she would be asking Cllr Lucas – who was not named during the exchange – to resign as a councillor.

Cllr Brown suggested that Cllr Lucas had "demonstrably breached the Nolan principles", the set of ethical standards that are supposed to guide elected representatives across the country.

In response, Cllr Bryant directed Cllr Brown to the council's standards regime: "We have the standards committee next week. I've just looked at the papers, and at this moment there are no outstanding complaints that have not been dealt with. We don't actually have a standing complaint against a councillor."

After the judgment against POLL, a government spokesperson said that "business rates avoidance is unacceptable".

But Cllr Bryant, when asked three times by the Local Democracy Reporting Service whether she agreed with that view, failed to respond.

She also failed to respond when asked whether she believes it is appropriate for a sitting councillor to be a co-owner of a business that operates rates avoidance schemes.

Following the Court of Appeal judgment against POLL, the government wrote to local authorities across the country asking them to "review whether box shifting schemes, and other schemes where the object of the occupation is rates avoidance, should continue to be recognised as occupation for rating and withdraw relief where they conclude it is not".

The Court of Appeal judgment related to 2 America Square, a seven-storey London office block leased by 48th Street Holdings Ltd.

POLL's "rates mitigation" services were used to exploit a loophole involving the three-month rates holiday that leaseholders of unoccupied buildings can claim at the end of their tenancy.

Under the scheme used at 2 America Square, at the end of each three-month end-of-tenancy holiday, POLL were granted a lease on the empty offices at a peppercorn rent and placed boxes inside so they could claim it was occupied.

After six weeks, the boxes would be removed, and the lease would return to 48th Street. This cycle repeated itself over multiple three-month periods in 2022 and 2023, according to the Guardian, with 48th Street saving more than £111,000 in rates on the single building.

POLL claimed to have saved its clients more than £500m through using the scheme, and court documents show that, in the 2 America Square case, they would have been paid "a fee equal to a percentage of the savings achieved" by 48th Street.

Before the recent judgment, POLL had previously defeated court challenges to the scheme's legitimacy in 2018 and in 2025.

But, in the Court of Appeal, Lady Justice Falk ruled: "'Occupation' for, in effect, the sake of it, and which has no use, value or benefit other than rate saving, does not amount to occupation for the purpose of the statutory scheme."

POLL have since lodged an application with the Supreme Court, asking for permission to appeal the Court of Appeal's decision.

Cllr Lucas did not respond to a request for comment on this story.

A spokesperson for Labour East said: "The Labour Party expects the highest standards from all of our elected officials, and all businesses are expected to pay the rates they owe under the law."

A spokesperson for North Herts Council said they have a code of conduct for councillors that has been "specifically developed to ensure councillors uphold the seven principles of public life, also known as the Nolan Principles".

They continued: "Under the council's adopted councillor complaints handling procedure, brief and anonymised details of complaints and any outcomes are reported through the standards committee.

"The council therefore does not confirm or deny whether a complaint has been received concerning an individual councillor outside those formal reporting arrangements."