Court of Appeal refuse VOA key appeal over public buildings

Stuart Hicks, Manchester Office, Director - Dunlop Heywood

By Stuart Hicks, Director.

In a key legal moment for business rates, the Court of Appeal has refused the Valuation Office Agency permission to appeal against a judgment which it claimed would affect £billions in business rates paid in respect of public buildings.

In the rating world, particular valuation methods are often key and can make a huge difference in the rateable value – the calculation on which business rate liabilities are based. The higher the rateable value the higher the bill.

With a few exceptions (e.g. York Museums which we covered at the time), it had been broadly accepted that certain public buildings occupied, other than for profit, had to be valued on the contractors’ basis of valuation. That’s where a percentage of the capital value of the property is taken as the rateable value. The receipts and expenditure method is based on the ability to make profit and usually not a suitable valuation method to employ for those public buildings.

In last year’s Hughes v. Exeter City Council the Upper Tribunal undertook an extensive review of the underlying principles of valuation and held that there was no principle that prevented the receipts and expenditure method from being used for buildings occupied, other than for profit, where the circumstances and the evidence justified it.

The end result for the Royal Albert Memorial Museum in Exeter was to reduce the rateable value to just £1.

The decision itself was particularly directed at grand, listed civic museums but the VO, in seeking permission to appeal, claimed that it could have very wide-ranging implications for other public buildings putting £billions of business rates receipts at risk.

The Court of Appeal, however, rejected the VOA’s central contention as unarguable that buildings occupied for socio-economic reasons by public authorities had to be valued on the (often disadvantageous) contractor’s basis.

It will be interesting to see if the VOA’s prophecy comes true and that occupiers of civic buildings now head to the Tribunal to appeal their rateable values; an appealing prospect for those which may be facing a financial blackhole as revenues dry up during the Covid shutdown.