Local Taxation Flashcards
(200 cards)
1
Q
What’s the definition of rateable value?
A
Schedule 6 of the Local Government Finance Act 1988 states:
“it is an amount equal to the rent at which it is estimated the hereditament might reasonably be expected to let from year on year”
Assumptions;
1) the tenancy begins on the day the determination is made
2) hereditament is in a reasonable state of repair
3) the tenant undertakes to pay all usual tenant’s rates and taxes to bear the cost of repairs necessary to maintain the hereditament
2
Q
What are the four tenets of rateability?
A
A = actual occupation
B = beneficial occupation
E = exclusivity
T = (not too) transient - must be a degree of permanence
3
Q
What is a hereditament?
A
Electric Telegraph Co. v Salford Overseers 1855;
- “anything on, over or under the surface of land including buildings and surface water”
Any property liable to business rates.
- Also defined in General Rating Act 1967
4
Q
Are rating valuations Red Book valuations?
A
No - they’re valuations for a statutory purpose
5
Q
What is the material day?
A
Schedule 6 of the Local Government Finance Act 1988;
“the day on which certain “relevant” matters are taken into account for valuation purposes”
e.g. matters affecting:
state or enjoyment of the hereditament;
quality of minerals extracted;
matters affecting physical state;
the mode or category of occupation of the hereditament;
the use of occupation of other premises situated in the locality
6
Q
What is the effective date?
A
Regulation 14 NDR Regs 2009;
The day on which the circumstances giving rise to the alteration first occured
7
Q
Where in the UK does your organisation cover and who are the other public bodies?
A
VOA covers England and Wales
Scotland = Scottish Assessors Association
Northern Ireland = Land & Property Services
8
Q
What does Schedule 5 contain?
A
Exemptions!
e.g. agricultural farms, fish farms, places of religious worship, sewers, property of Trinity House, parks and property for the disabled
9
Q
Would a church hall be exempt?
A
- It depends on the individual circumstances.
- Church halls are exempt when used in connection with the place of public religious worship for the purposes of the organisation responsible for the conduct of the worship e.g. to run Sunday schools/classes from.
- It would not fall to be exempt if used for other purposes e.g. when hired out for parties or when there is a social club run by someone other than the church.
10
Q
What is ‘rebus sic stantibus’?
A
Schedule 6 LGFA 1988
- taking the property as it stands
- 2 tiers;
1) physical state or enjoyment of the hereditament
2) mode or category of occupation
11
Q
Can the VT award costs?
A
Yes
12
Q
Is the VT the only option once a decision is made?
A
No - can use an arbitrator although rare
13
Q
Does RIC provide guidance for rating?
A
Yes - The Rating Consultancy Code of Practice 5th edn 2024
14
Q
Is there an organisation for Chartered Surveyors?
A
Yes - The Rating Surveyors’ Association
15
Q
What is the UBR?
A
Uniform Business Rates Multiplier
- multiply the UBR x RV = business rates bill
- changes each year in line with inflation, although it cannot go up by more than the rate in inflation except in the year of a revaluation
- standard multiplier is used for RVs over £51,000 (was previously £18,000)
For 2025/2026, the standard multiplier is 55.5p for small businesses it is 49.9p.
16
Q
What is the AVD of the 2023 Rating List?
A
01 April 2021
17
Q
Why do we have an AVD?
A
To ensure that there is uniformity so that all hereditaments are assessed at the same date.
K Shoe Shops Ltd v Hardy;
- values on Regent St and Oxford St were assessed 3 years apart and because of inflation, one was paying much more than the other and it was ruled there needed to be uniformity
18
Q
What is a section 44a?
A
- notice which apportions RV to the occupied part of the premises only
- apply to the BA in writing stating the amount of the property which is note in use and their details
- BA then applies to VOA for this certificate
- VOA values the property and decides on the apportionment
- no appeal against a s.44 notice
- only valid for a short time;
non-industrials = 3 months
industrials = 6 months
BUT will end at the end of the financial year regardless of how long it has been in place
19
Q
If the upper floor of a shop was not used but not capable of separate occupation, what option does the owner have?
A
- Owner could apply for a s.44 notice.
- However, these are only valid for a short time and so in the meantime he should take steps to alter the property so it is capable of separate occupation if he does not have the desire to occupy it himself so that he can let it out to someone else.
20
Q
What were the main changes that came into rating in 1999?
A
The definition of RV was altered to include the assumption that a property is in a reasonable state of repair following the Anston v Benjamin case
21
Q
What is a composite hereditament?
A
A composite hereditament is one which is a mixture of domestic and non-domestic such as a shop with living accommodation
22
Q
What is transitional relief?
A
It is relief applied to reduce the impact of changes to the RV between rating lists and can be applied up and down
23
Q
What is small business rates relief?
A
Small business rates relief is a relief which reduces rates liability for small business’.
- It only applies to properties less than £15,000 RV (although properties under £51,000 have small business UBR applied).
- Properties with an RV of £12,000 or less get 100% relief. Between £12,001 and £15,000 it is a sliding scale.
24
Q
How would you verify information on a form of return?
A
Cross check it against similar properties nearby, contact ratepayer to double check, contact landlords agent to check
25
If two properties were owned by the same company but separated by a road what would you do?
- I would gather all of the facts on the case and then decide whether the two properties were functionally essential to one another, i.e. could one operate without the other
- Leading case on this is Gilbert v Hickenbottom where the bakery and the engineers offices were found to be functionally essential to one another as one could not survive without the other – if there was no bakery there would be no engineers and if there were no engineers and there was a mechanical fault the bakery could not function
26
How do you deal with repair?
According to the Rating hypothesis you are to assume a property is in a good state of repair unless the disrepair is so great that it would be uneconomic for a landlord to repair.
27
Is it difficult in your opinion for a ratepayer to get a property taken out of the list?
- It is not difficult for a ratepayer to get a property taken out of the list if the property is in a poor enough state of repair.
- When the repairs are economic to repair it is difficult for them to get the property taken out of the list as it is not appropriate to do so.
28
If the property is empty is it liable for rates?
- Properties are exempt from rating for 3 months.
- Industrial properties are exempt for a further 3 months.
- Listed buildings and properties with an RV of under £2,900 are exempt from rating until they are re-occupied.
- Properties owned by charities and community amateur sports clubs are also exempt until they are occupied again if their next use is likely to be as a charity or an amateur sports club.
29
Is there anything significant about empty property rates and listed buildings?
Yes - listed buildings are exempt from rates when empty until they are next occupied.
30
What are people doing to avoid EPR?
- People are getting their properties occupied for a short period of time only and then when they become vacant again they are entitled to empty property rates.
- They also get charities to occupy their premises as charities pay little rates so the landlords strike a deal with the charities giving them rent free occupation in exchange for the charity paying the rates.
- Another way to avoid rates is to use only part of the property for a period of time. Then when the whole property becomes vacant it is entitled to empty property rates.
- The leading case on this is the Makro case - the High Court found that the storage of paperwork by an occupier in just 0.2% of the floor space in a 140,000 square foot warehouse was sufficient to amount to rateable occupation so as to entitle the owner to empty rates relief upon vacation by the occupier.
31
What is a material change in circumstance (MCC)?
- It is a change to the material factors listed in Schedule 6 Paragraph 2(7) which occurs after the material day of the current assessment.
- The matters listed in schedule 2 are:
a) Matters affecting the physical state or physical enjoyment of the property
b) The mode or category of the hereditament
c) The quantity of minerals or other substances in or extracted from the hereditament
d) Matters though not affecting the physical state of the locality, are nonetheless physically manifest there
e) The use or occupation of other premises situated in the locality of the hereditament
HOWEVER, the Non-Domestic Rating Act 2023 amends the Non-Domestic Rating (Alteration of Lists and Appeals)(England) Regulations 2009:
The new paragraph 2ZA contains provisions such that any change to the following matters:
2(7)(a) matters affecting the physical enjoyment of the hereditament
2(7)(d) matters which, though not affecting the physical state of the locality in which the hereditament is situated, are nonetheless physically manifest there
2(7)(e) the use or occupation of other premises situated in the locality of the hereditament
must be disregarded if that change is directly or indirectly attributable to:
- Legislation of any country
- Provision made under legislation of any country
- Advice and guidance by a public authority of any country
- Anything done by a person to comply with the above
32
What would cause an MCC?
- roadworks outside the property
- the opening of another of the same type of property near by
- the closure of a town centre car park
- changes to the parking restrictions
- anchor tenant vacated
33
How would you assess a reduction of an MCC?
This depends on the type of the MCC e.g. for the opening of another similar property or the presence of roadworks, you would assess the loss in trade during the works/since the opening of the other property
34
What would be the reduction if the road was closed?
This depends if it was closed to traffic, pedestrians or both. If the road was closed to both traffic and pedestrians and the business could not actually trade then the property would be taken out of the list for the duration of the closure
35
What if next door was demolished, is it an MCC?
This depends.
It could be an MCC because of the noise/disturbance caused during the demolition.
36
A retailer in a shopping centre vacates a unit - is this an MCC?
This depends on the location and size of the unit as well as the tenant who vacated. For example if it was the anchor tenant within a shopping centre which seriously reduced the footfall past your unit then yes, it could be classed as an MCC.
It is also important to assess what the vacancy levels were at the AVD. If they have changed significantly since the AVD and the material day then it would probably constitute an MCC.
37
What if I appealed for road works one week after they were completed?
It would not be treated as a valid proposal. Proposals for MCCs due to works undertaken in the locality need to be submitted whilst the works are being undertaken, ideally as soon as the works start to allow the intensity of the works to be assessed.
38
What methods of valuation do you use in rating?
- Comparable method
- Receipts and expenditure method
- Contractor's method
39
Where would you look for comparables in a rating valuation?
As a VOA employee I would search the database for rental information of similar property types in the location around the valuation date.
In private practice companies would have their own databases of rental information they have collected over the years from appeals they have submitted and rent reviews, new lettings they have dealt with.
40
What features might you reflect when valuing a shop for rating purposes?
The size, location, layout, accessibility to all floors, frontage, windows display space.
41
Explain how you would do a contractors valuation for a rating valuation?
Follow the five steps:
1. Estimate cost of construction
2. Deductions from cost to arrive at effective capital value
3. Estimation of land value
4. Apply the appropriate decap rate
5. Stand back and look
42
Where do your build costs come from?
The VOA has a cost guide. This is a database they have created which lets you filter through and extract the ERC of a property per sm. This price psm then needs to be adjusted for location factor, size of contract and to reflect fees and charges.
43
If you were in private practice how would you source build costs?
In private practice build costs could be taken from building cost resources such as BCIS, spons or from actual projects worked on where build costs have been provided
44
How is age and obsolescence calculated?
- This is calculated at stage 2 of the contractor’s method.
- This depends on the type of obsolescence and whether the replacement building cost or the substituted building cost is used.
- If the substituted building cost is used, this usually already reflects the functional obsolescence of the property as the building which is costed is an appropriate size/layout for modern day standards.
- Physical obsolescence is calculated using the scales published by the VO. These give a % deduction to be made to reflect the age of the property. These come from analysis of information collected by the VOA/a series of discussions with firms of agents before the Rating List comes into force.
45
What is the location factor based upon?
The location factor is based on analysis of actual build costs. It reflects the difference in build costs throughout the country.
46
What about external works?
External works should be costed as a separate item at stage 1.
47
What about land values?
Land values should be taken from comparable evidence in the locality based on the same mode and category of use. Land values are the main element which provide different valuations across the country and these are where the biggest variations lie.
48
What if there isn’t any comparable sales evidence for land values?
Where there is no land evidence for comparable land sales in the same mode and category of use as the property to be valued, land sold in another mode or category of use can be considered provided adjustments are made to reflect the differences.
Alternatively, if agreed by both parties, a percentage of the build costs can be used to arrive at the land value. This is often reached by analysing other valuations where the build cost and the land value are known and deriving an agreed percentage from there.
49
What is the statutory decap rate for schools?
As of 2023:
2.6% for education, health and ministry of defence.
4.4% for all other properties valued on the contractor's basis.
50
Why is it different for schools/health?
The decap rate is based on the rate it would cost to borrow money.
Health/educational properties are generally government funded and therefore they can achieve lower borrowing rates than the rest of the market.
51
How are hotels valued for rating purposes?
Small hotels such as B&Bs are usually valued using the comparable method at a price per bed space.
Larger, chain operated Hotels are valued using the shortened receipts and expenditure method of valuation.
This shortened method is based on a generally accepted % to apply to certain types of hotel following the analysis of rental evidence against FMT.
The shortened method prescribes a % of the FMT to be taken to arrive at the RV. This removes any discussion regarding the split of the divisible balance.
52
How would you adjust for a rent free period?
It depends on the length of the rent free period.
If the rent free period was what you would normally expect to allow for fit out of that class of property at the valuation date you would disregard it. e.g. you would expect fit out periods of 3 months for retail property.
When adjusting for a rent free period you would calculate the value of the rent receivable to the next rent review date where the rent is likely to change using the YP and PV tables.
You would then amortise this over the period to the first review, e.g. divide the rent by the YP for 5 years @ 8.5% to reach an annual rental figure.
53
Does a tone get greater during the lifetime of a list?
No.
The tone gets more established. The more agreements and the more rental evidence that comes to light, the more established the tone will be and therefore the more weight that can be attached to it.
54
What reasons would you give an end allowance?
You would give an end allowance for unique features of a property which would affect the hypothetical tenant's rental bid which are not accounted for in the price per m2.
e.g. if there was an area of masking you might apply an end allowance. However, if all of the rental evidence analysed had the same amount of masking, and this analysis was then applied to reach the RV, the effect of the masking would already be accounted for and an end allowance would not be warranted.
55
Why would you use a 5% adjustment for external repairs?
5% for external repairs is the generally accepted amount for rating valuations.
This has been developed over years of rating appeals where analysis of expenditure on external repairs has generally indicated 5% is the average.
Certain types of property may have higher external repair bills (e.g. listed buildings) and in these instances it would be acceptable to deviate from this generally accepted figure.
56
How would you make an allowance for age?
Properties are generally valued using rental evidence from similarly aged properties therefore an age allowance is generally not required.
However, if an age allowance was appropriate the % to be applied would be derived from analysis of rental evidence
57
What statute governs plant and machinery?
The Valuation for (Rating) Plant and Machinery Regulations 2000
58
What are the four classes of plant and machinery?
Class 1 = Power
Class 2 = Service
Class 3 = Movement
Class 4 = Named Structures
59
How do you value P&M?
Using the contractor’s method of valuation.
Some items of P&M such as air conditioning are valued on a per m2 basis.
60
RICS Code of Practice 'Rating Consultancy' - what are the main points?
This deals with the conduct of the surveyors through the rating appeals procedure.
It details that the clients must be fully aware of the service the agent is going to provide to them and what the fee covers.
It details the terms of engagement that should be agreed with the client before commencing with the instruction.
It also states that as contingency fee arrangements can affect someone's impartiality, these should be avoided at all times.
61
What is zoning?
It is a method of comparability, not measurement nor valuation. It allows properties of all different shapes and sizes to be compared on an 'in terms of zone A' basis.
You measure zones in distances of 6.1m. The second zone is worth half the value of the first zone, and so on. The zones are A B C and the remainder.
62
How do you analyse and adjust a stepped rent?
You would find the equivalent for each period or 'step' and amortise over the period.
63
Lotus & Delta - tell me what this is?
It is a case which gives guidance on how rents on subject and comparable properties are to be treated. It concerned a shop requesting values in line with comparables in the area
It lays out 6 'rules' for assessing rents.
1. Subject rent is the starting point
2. The more this conforms to the definition of RV the more weight should be attached to it
3. Rents of similar properties are to be looked at
4. Assessments of other comparable properties are relevant
5. An opinion of value can be formed
6. Where no rents available a review of other assessments may be helpful
64
What is the Woolway case regarding?
Woolway v Mazars relates to offices occupied by Mazars on the 2nd and 6th floor of an office building.
This case was whether this formed one or two separate assessments.
This went to the Supreme Court in 2015 who decided that contiguous units need to be interconnected and easily accessed by one another. As the two floors could be let separately they were functionally independent. No exceptional factors with regard to enjoyment were present
65
Which case considered repair?
Newbigin (VO) v Monk (2017)
Scheme of works - incapable of beneficial occupation
VO argued that a property must be in an uneconomic state of repair in order to be zero rated as shown in schedule 6 para 2(1)(b) of the LGFA’s assumptions.
The works involved stripping the unit back to a shell prior to creating three office suites. The ratepayer argued the building should be removed from the rating list. The VO argued the works to put the property back into repair were economic and therefore it should remain in the rating list.
The Supreme Court agreed with the ratepayer. The Court decided that the premises should be valued by having regard to the actual physical condition at the valuation date.
66
What happened in Iceland v Berry?
Challenged whether the air conditioning is rateable as it is a trade process and therefore exempt.
Supreme Court held in favour of the appellant (Iceland). The specialised air handling system used in Iceland’s stores falls within the description of “manufacturing operations or trade processes” referred to in the relevant Regulations and so it was exempt from rateability.
67
Which case is used to determine rateable occupation?
John Laing and Sons v Kingswood Assessment Committee
68
What is actual occupation?
You must physically occupy or show occupation by actions.
Southend on Sea v White case - Seaside shop occupied in the summer months and not in the winter. Tenants were held to be rateable for the whole year as there was a definite intention to return and they had been in occupation in the past.
69
What is beneficial occupation?
If someone is in apparent occupation but can’t derive any benefit, beneficial occupation doesn’t exist.
Lambeth Overseers v London City Council case - Council purchased a park under a special act and maintained it for recreational purposes. Council was a trustee for the public, who benefitted from occupying the park but couldn’t held to be the rateable occupier.
70
What is exclusive occupation?
A rateable occupier should have the right to carry out the purpose of their occupation without anybody else on the premises doing the same thing.
Vitesse Networks case - Telecommunications network. Fibre pairs wound together with other fibres used by the landlord in a cable in a trench. However, because the ratepayer had exclusive use of their fibre pairs, no one else could send signals through their fibres, they were held to be the rateable occupier.
71
What is not too transient?
Casual occupations are not rateable because they lack the necessary degree of permanence. It is not only the length of occupation but also the character and nature.
Generally, must exceed 12 months. There are some cases where a period of occupation has been considered rateable, but this is where the use has been so extensive.
R v St Pancras Committee case - Two advertising hoardings on buildings in sites that clearly would only be temporary. Not rateable.
72
How would you advise a ratepayer to mitigate his rates liability?
The best way is to get the property let ASAP, this can be done by reducing the rent, short term lets, reverse premiums, easy payment options, break clauses, landlord takes responsibility for repairs.
Is the property capable of beneficial occupation, is it in reasonable repair, what is the domestic interface, can the assessment be merged with something else? If appropriate I might suggest a proposal.
73
When is P&M rateable?
If it is identified in the P&M regulations then it is rateable, all other items are disregarded for rating purposes.
74
What is Class 1?
This is power and includes items such as air compressors.
An air compressor can be used to supply compressed air to power pneumatic tools or can simply be used to inflate tyres.
Under the P&M regulations the compressor must generate power in order to be rateable. Supplying air to drive pneumatic tools would be rateable, whilst a compressor supplying air for the inflation of tyres would not.
75
What is Class 2?
This is services.
This means heating, cooling, ventilation, lighting, drainage or supplying of water and protection from trespass, criminal damage, theft, fire or other hazard.
For example, security cameras which comprise of four or more cameras linked to a security area where there are central monitor screens with recording apparatus are rateable.
76
What is Class 3?
This is movement and is concerned with moving things around such as lifts, hoists and rail tracks.
77
What is Class 4?
This is named structures contained in Tables 3 and 4.
78
What is the basis of value for rating?
The open market rental value.
79
What assumptions must you make about a tenancy?
Every hereditament must be assumed vacant and to let at the date of valuation.
A hypothetical landlord and tenant are assumed.
The rent to be determined is the rent the hypothetical tenant might reasonably be expected to pay.
It must be assumed to be a tenancy from year to year with reasonable prospect of continuance.
It must be valued Rebus Sic Stantibus - that is in its existing physical state.
80
What case law is there regarding Rebus?
Scottish & Newcastle v Williams - Pub located in a shopping centre valued as a shop. Lands Tribunal decided it was a pub, mode and category of use.
81
When would you use the rentals method?
When the hereditament belongs to a class of property which is generally let in the open market
82
What is direct rental evidence?
The rent of the hereditament being valued.
83
What are the issues with direct rental evidence?
- May not reflect the terms of the hypothetical tenancy
- Terms don’t match the definition of RV
- Rent may be connected parties
84
What is indirect rental evidence?
Evidence of lettings of comparable properties subject to the following cautions:
- May not reflect the terms of the hypothetical tenancy
- Terms don’t match the definition of RV
- Rent may be connected parties
85
Why are open market lettings the strongest evidence?
This is assuming the property has been freely exposed to the market for a reasonable period of time. The tenant can walk away from a new letting.
86
What issues are there with open market lettings?
Care needs to be taken that they represent market value and not the desperation of the tenant to secure space or the landlord to secure an immediate income. A range of evidence is needed.
87
What adjustments to rents are needed so that it accords to the definition of RV?
- Repairing and insuring liabilities- FRI
- Service charges
- Premium paid
- Improvements not included in the rent passing
- Date of rent
88
What does it mean if a premium has been paid and how do you analyse this?
If the tenant has paid a premium it usually means the rent is below open market value and there is a profit rent.
Premiums are decapitalised and added to the rent passing. The period of amortisation could be to the first review or renewal.
89
What is the principle of the profits method?
The ability of the property to provide the tenant with an income from his occupation that will compensate him sufficiently for operating the concern, and, in addition, provide him with a surplus which he would be prepared to pay for the right to occupy the hereditament, i.e. rent. Having found this rent, this will be the RV.
90
What is the divisible balance?
Gross receipts less cost of purchases = gross profit
Gross profit less working expenses = divisible balance
Divisible balance represents the amount to be shared between the tenant (tenant’s share) and the landlord (rent or rateable value).
91
What is the principle of the contractor’s method?
The contractor’s basis works on the principle that, in theory, the tenant in the rating world could build their own property rather than rent the actual property and this will inform their rental bid.
Therefore they will not pay more in rent than the annualised cost of buying land and building a similar property nearby.
92
What are the 5 stages of the contractor's method?
Stage 1 = Estimate the costs of constructing the property including all buildings, site works etc.
Include design costs, site works, provision of services and professional fees.
Decide whether to cost the actual property or a substitute.
Estimate the replacement cost (BCIS).
Stage 2 = Adjustments are considered to reflect certain deficiencies in comparing the actual property with the new one. This includes physical, technical and functions obsolescence.
Stage 3 = Find the cost of the site which is based on the open market capital value of the land at the valuation date. Then, consider any adjustment for disadvantageous effects that the actual building may have on the site value.
Stage 4 = Convert the actual sum to an annual equivalent through the use of the decapitalisation rate.
Stage 5 = Stand back and look. Consider if you need to make adjustments for the property as a whole.
93
What is Check, Challenge and Appeal?
The appeals process introduced for the 2017 Rating List in England.
A Check confirms matters of fact,
A Challenge is a proposal to alter the rating list, and An Appeal is made against the VO’s decision at challenge stage
94
What is an FRI lease?
Full repairing and insuring lease - liability on the tenant
95
What is an IRI lease?
Internal repair and insuring is responsibility of the tenant, external repairs is responsibility of the landlord, may be claimed back via a service charge making it effective FRI
96
What is the material day for compiled 2023 list appeal?
01 April 2023
97
What is the material day for a material change in circumstance appeal?
Day of proposal (check submission date)
98
What is the material day for splits and mergers?
Day of event
99
What is meant by goodwill in rating?
The value of the business as a trading entity - where the incoming tenant is in the same trade as the outgoing tenant
Goodwill could be included within a premium payment for a lease
Payment by the incoming tenant to reflect obtaining the benefit of existing clientele.
100
What is the PICO 2018 Act?
The Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Act 2018 reverses the Supreme Court decision in Woolway v Mazars LLP which required non-intercommunicating occupations to be assessed separately and reverts back to the former VO practice where separate, but adjoining areas, used for the same purpose and in common occupation, are valued as a single assessment.
Act took effect from 01 April 2010
Following the 2017 Autumn statement regarding the reversal of the effects of the 'stair-case tax', an addition to the definition of hereditament was made to the LGFA 1988.
The amendment ordered the VO to assess together properties that were made to be individual assessments following the Supreme Court decision in Woolway v Mazars
101
What is contiguous?
Two areas which are used by the same common occupier who share a wall, fence or other means of enclosure.
Ceilings and floors, where directly overhead of below each other, will allow property to be considered as contiguous where the properties are in the same occupation.
Property will still be considered contiguous if there is a service space between the floor and ceiling, control of which remains with the landlord.
102
How does contiguity work for empty property?
Previously occupied contiguous property will continue to be one assessment where it all becomes empty on the same day. If parts are vacated on separate days then individual assessments will apply.
103
CCA timelines?
VOA have 12 months to resolve a check (3 month aim). If not complete, the IP has a right to move on to a Challenge.
Challenge must be made within 4 months of check completion (16 months for external MCC)
Challenge must be resolved within 18 months or IP has the right to go direct to appeal stage
- IP appeal to VTE within 4 months of decision notice
104
What is the central rating list?
Rating list containing assessments of the network property of major transport, utility and telecommunications.
e.g. electric, gas and water supply networks,
railways,
telecommunication networks,
cross country pipelines
105
What are the 6 rules of a hereditament?
1) Single rateable occupier
2) In a BA
3) Be capable of separate occupation
4) Single geographical unit
5) Single use
6) Single definable position
106
What are the 7 assumptions of a hypothetical tenancy?
1) Reasonable state of repair
2) Tenant pays rates
3) Available to let on an annual tenancy
4) Vacant
5) FRI terms
6) Current use
7) No alterations may be made, only minor
107
What is the Business Rates Supplement Act 2009?
Local authorities can charge an additional 4.5% for economic development purposes where the RV is over £75,000 however full transparency of the local authority's plans is required
108
What is the original rating Act?
Poor Relief Act 1601
109
Where is a hereditament defined in legislation?
General Rating Act 1967
110
Where can the listed factors which must be taken at the material day be found?
Local Government Finance Act 1988, Schedule 6, Paragraph 2(7)
111
What is a Material Change in Circumstances?
This is a change to a property or its surroundings which may affect its Rateable Value
112
What can you tell me about any updates to Material Change of Circumstances?
The Non-Domestic Rating Act 2023 has tightened the scope of proposals for MCCs
113
What are the 2 leading cases on MCCs?
1. Merlin Entertainment v Cox (VO) [2018]
2. Wigan Athletic FC v Cox (VO) [2019]
114
How have the mentioned matters changed since the introduction of the Non-Domestic Rating Act 2023?
Paragraphs a) and d) have now been separated in to 2 independent matters:
1. a) matters affecting the physical state of the hereditament and aa) matters affecting the physical enjoyment of the hereditament
2. d) matters affecting the physical state of the locality in which the hereditament is situated, and da) matters which, though not affecting the physical state of the locality in which the hereditament is situated, are nonetheless physically manifest there.
115
What happened in the Merlin Entertainments v Cox case?
This was an Upper Tribunal case to determine whether a crash of the Smiler ride constituted a Material Change in Circumstances.
It was dismissed at both VTE and UTLC as the Appellant argued that the crash reduced visitor numbers to the park and therefore constituted an MCC, where as the VO contended that this wasn’t an MCC as per legislation.
The UTLC found that visitor numbers do not affect the physical state of the hereditament and are not physically manifest there, and as this was the crux of the appellants appeal it failed. There was also contradictory evidence such as other park attendance increases in the East Midlands and nationally.
116
What happened in the Wigan Athletic FC v Cox case?
In this case, the Appellant contended that relegation from the Premier League and then subsequent relegation to League One amounted to an MCC due to a physical change to the hereditament and a change in the mode or category of use.
The appellant argued that relegation was physically manifest there such as a reduction in attendance numbers and closure of a ticket office, and a change in the mode or category of use was dependent on what league you were in.
The respondent argued that relegation was not a material/physical change but rather an economic one which fell outside the legislation and therefore wasn’t an MCC.
The UTLC dismissed the appeal and ruled that relegation didn’t amount to an MCC, and despite the financial hardship it could have on a club, this can only be addressed at a revaluation.
117
What MCC allowance did the agent seek within your case for the MCC retail shop?
40%
118
What MCC allowance did you give on conclusion of the Challenge?
7.5%
119
What is an MCC allowance?
This would represent a reduction in the yearly hypothetical tenancy. The allowance would represent the whole year.
120
What did you consider when deciding upon what MCC allowance to grant?
1. Duration and severity of the disability
2. Reduction in rent - which must be for the MCC alone and not volatility of the market
3. Reduction in trade - which must be down to the MCC alone also
4. Settlement evidence - Having regard to the settlement evidence of similar retail properties in the locality for similar works.
121
If the trade had dropped by 40%, would you be giving a 40% allowance for the MCC?
No, the allowance must reflect a reduction in the annual rental bid. The trade could also be down to other factors such as economic ones.
122
Can economic factors be considered when determining the MCC allowance?
No, the economic factors can only be considered at the AVD.
With MCCs we are focused on the material day.
123
What was your 7.5% MCC allowance based on?
For my retail shop in Birmingham, it was based on settlement evidence.
There was no evidence of a reduction in rent or trade, therefore I determined an allowance from settlement evidence based on the duration and severity of the works at the material day.
124
What are the new proposed changes to the business rates system?
- An intention to introduce permanently lower multipliers for retail hospitality and leisure properties with an RV under £500,000 from April 2026
- Funding this sustainably via a higher multiplier on all properties with an RV of £500,000 and above
- Providing RHL properties in the interim period by providing 40% relief in 2025-2026 up to a cash cap of £110,000 per business.
- Protecting smaller businesses by freezing the small business multiplier in 2025-2026
125
What is improvement relief?
* Removes any additional liability (i.e. increase in RV), created following certain ‘qualifying works’ undertaken on a property.
* Relief will last for 12 months after works are complete, with regime set to be in place until 1st April 2029.
* New relief will apply from 01-Apr-2024 and will apply to works completed by 31-Mar 2028.
* To receive the relief, ratepayers must satisfy two conditions:
1) Improvement must satisfy the ‘qualifying works’ condition – and must have certified any increase in RV due to the works. Works must be completed on or after 01-Apr-2024.
2) Must be satisfied that in the period since the qualifying works, the property has remained occupied, and that the ratepayer hasn’t changed – the ‘occupation condition’. (e.g. relief won't apply where a landlord improves a vacant building).
126
What does locality mean?
K Shoe Shops Ltd - The area with sufficient evidence to produce a reasonably expected rent and outside which the rent might be different.
Barclays Bank v Moore - retail park case
127
What is a mezzanine floor?
Supported first floor - mezzanines can be readily removed without affecting the structural integrity of the warehouse.
128
What were the facts of John Laing v Kingswood?
The appellant building contractors had been engaged by the Air Ministry to execute works at an aerodrome. They erected on the site: offices, garages, canteen for workmen and other structures. Although the site was handed over to the contractors, the conditions of the contract between the contractors and the Air Ministry specified that the execution of the work was subject to the control and direction of the Ministry’s Superintending Officer. In due course the local rating authority proposed to amend its valuation list by adding the contractors’ officers and other structures as a rateable hereditament. Issue was whether the contractors were in rateable occupation of that hereditament.
Yes rateable occupation - the builders’ huts had been on the land for the two years that work was being carried out there so was not too transient.
129
What is paramount?
"Occupation of part is occupation of the whole". Where there are two or more persons having similar use of the land and each cannot exclude the other from using the land in the same way, the occupation which is rateable will be the person who is in "paramount" occupation, i.e. the person who has control over the use to which the others may make of the property.
130
Would ancillary administrative premises be exempt in the place of worship?
Yes if they are used in connection with a place of public religious worship for the purposes of the organisation responsible for the conduct of the worship.
131
What is the AVD for the 2023 list?
1st April 2021
132
What is the AVD going to be for the 2026 list?
1st April 2024
133
What are the two limbs of Rebus Sic Stantibus and the relevant case law?
- Physical (Scottish new castle)
- Mode and category or use limb (Fir Mill Ltd v Royton UDC and Jones)
134
Why would you give a temporary reduction in value in MCC case?
There are 4 tests to establish this:
* Does the matter concern an intrinsic characteristic of the hereditament or locality? If it concerns the way the party conducts their business, then it is not an MCC.
* Does the matter concern a characteristic of the hereditament?
* Does it matter characteristics of the locality?
* Is the matter physically manifest in locality?
135
What are the main regulations for 2017 Rate Appeals?
Two sets of regulations with effect of 01-04-2017:
* The Non-Domestic Rating (Alteration of List and Appeals)(England)(Amendment) Regulations 2017
* The Valuation Tribunal for England(Council Tax and Rating Appeals)(Procedure)(Amendment) Regulations 2017
136
Can we reject Challenge? Why?
Yes if it is unlawful or there is information missing
137
Do customers pay for appeals?
Yes. £150 for a small proposer and £300 for large firm.
Fee is refunded if case decision is in customer’s favour.
138
How many grounds are there to a Challenge and what are they?
There are 12 grounds to appeal the challenge:
01 – IP disputes accuracy of RV in the Rating List
02 – Disputes the RV changed in the Rating List by the VO
03 – Disputes Effective Date of assessment in the List
04 – Disputes RV because of Material Change of Circumstances
05 – Deletion of the assessment shown in the list
06 - Deletion, property is now domestic or exempt
07 - Deletion for another reason
08 - The property should be shown as more than one assessment
09 - 2/more should be shown as 1/more different hereditaments
10 - Include a new assessment entry in the List
11 - Challenge after VT/LT/H Court decision on another property
12 - Incorrect statement or omission of a statement in the List
139
Does Wales have the same system? If not, how is it differ?
Wales had IPP’s until April 2023. CCA was introduced from 2023 list. Customers do not pay for appeals
140
What is the leading case for the tone of the list?
O'Brien v Harwood - there are 3 stages leading to the establishment of the tone of the list:
* At first - when a new rating list is put on deposit, entries will carry relatively little weight; they are opinions of value by the valuation officer, as yet unchallenged and untested by negotiations.
* Over time assessments will be challenged and agreed or determined by tribunal or accepted by lack of challenge.
* Finally, a stage is reached where enough assessments have been agreed or determined or are unchallenged to establish a pattern of values. a tone of the list. The list is then said to have settled. Rents will be largely subsumed into assessments. At that stage rating surveyors will have little regard to rent and pay considerable amount to assessments. The position regarding tone of the list at any particular time is a question of fact.
141
What is the purpose of revaluation? How frequent will Revaluations be?
Purpose of revaluations is to maintain fairness in the rating system.
Revaluations will be every 3 years, subject to change.
142
ITMS, TA &TSA what do they mean? When do we use them?
Total area (TS)
The internal area of the building measured using the appropriate code of measurement (NIA, GIA etc.)
Total Significant Area (TSA)
Similar to total area but excluding elements that are unlikely to be included in the rent e.g. a supported first floor.
TSA is used as the entry point for a size-based valuation scheme. TSA should be used when selecting and discussing comparable evidence to ensure we are comparing like with like.
Total Area, In Terms of Main Space (ITMS)
For retail, it is often referred to as total area in terms of Zone A.
The starting point is total area, but adjustments are made to reflect a number of subjective valuation considerations. Adjustments can be positive or negative.
ITMS is not a true measurement of size, it’s a construct or a tool, used to help us analyse rents and value property.
143
What is definition of domestic property and where can it be found?
Section 66 (1) of LGFA 1988, as amended, provides a basic definition of what constitutes domestic property:
Property is domestic if:
a) it is used wholly for the purposes of living accommodation,
b) it is a yard, garden, outhouse, or other appurtenance belonging to or enjoyed with property falling within paragraph a) as above,
c) it is a private garage which either has a floor area of 25m2 or less or is used wholly or mainly for the accommodation of the private motor vehicle, or
d) it is private storage premises used wholly or mainly for the storage of articles of domestic use
144
What happened in Dawn Bunyan (VO) v Acenden Limited?
Upper Tribunal case regarding Ascot House, Maidenhead Office Park.
Ascot House was a detached 1996 built 4700m2 headquarters office building on an office park, 4 miles from the centre of Maidenhead. The building had been refurbished by the landlord to a Cat A (unfitted) standard at a cost of £3m and the tenant had spent £3.4 m fitting the premises out in 2015. £1.6m of that expenditure was on rateable items.
The ratepayer’s agent had argued that the tenant’s fit out added nothing to the Cat A (unfitted) rental value, or alternatively it added £15/m2 derived from using the statutory decapitalisation rate in perpetuity in amortising the tenant’s rateable expenditure.
145
What case law relates to agricultural exemptions?
Fridays Ltd v Leigh Collins (VO) - Going to Court of Appeal
- Egg packaging where appellant argued that the packaging buildings were controlled together as part of the farming enterprise but VO argued that the buildings were not occupied together with agricultural land - eggs are produced on other farms and brought into the buildings.
- VT decided in favour of the VO and dismissed the appeal.
146
Which regulations set the statutory decap rate for contractor's valuations?
NDR (Miscellaneous Provisions)(No2) Regulations 1989
147
What does incomplete mean?
The form has not been completed correctly. The ratepayer must re-submit the proposal but the same time limits apply.
148
L3 Shop - Why did you advise that £700/m2 was reasonable?
Subject rent - New letting agreed 6 months prior to AVD. 3 month rent free and landlord responsible for external repairs only. 3 months RF ignored and 5% adjustment made for repair. Rent analysed to £706.14/m2.
5 Bull Street - Lease renewal. Landlord responsible for external repairs only. 2.5% adjustment made. Rent analysed to £733.06/m2.
18 Bull Street - Lease renewal. No adjustments required. 1 year pre-AVD. Analysed to £714.16/m2.
149
L3 Shop - What did you consider when deciding on the MCC contention?
- Duration and severity of the works
- Reduction in the trade
- Settlement evidence
150
L3 Shop - Any guidance on sufficiency of evidence? How many you need?
RICS PS Comparable Evidence in Real Estate Valuation 2019 - Comparables should be comprehensive (should be several comparables rather than one single transaction)
151
L3 Shop - What would you have done if there was an allowance given in the 2010 list?
I would have considered principles in Barnard and Barnard v Walker (1975) - there was a presumption that the differentials in previous rating lists were correct unless the valuation officer (VO) was able to refer to rental evidence to show why the differentials from the previous list should not be carried forward.
152
L3 Industrial in Oldbury - What advice did you give?
I advised the agent that the allowances for layout and access were not appropriate following my analysis of comparable evidence but that the tone should be reduced in line with their proposed value of £25/m2 and the first floor to be amended on the survey to mezzanine.
153
L3 Industrial - What evidence did you use regarding allowances?
Following my inspection of the property I firstly considered the agent's comparables which had allowances of 5-10% but these properties were predominantly units that had been split/merged so were fragmented units which the subject was not. The comparables for access were all on properties which did not face a front road and had narrow access behind other units. I then looked at comparable evidence of properties with similar layout and access to the subject and noted none of these had allowances for layout. The unit was owner occupied so there was no rent on the subject.
154
L3 Industrial - Did you measure the property?
Yes to the Gross Internal Area
155
L3 Industrial - What guidance did you follow?
The VOA's Code of Measuring Practice which is largely in line with the RICS COMP
156
L3 Industrial - What is the difference between VOA and Code of measuring practice?
Areas under 1.5m headroom are excluded for VOA
157
L3 Industrial - Did the property have any areas under 1.5m?
No
158
L2 Day nursery - What properties did you use to compare the nursery?
When valuing day nurseries for the 2017 list, nurseries are valued based on the location and type of care they provide so it ranges from Types 1-5. The subject was Type 2 - provides full time care in converted/solidly constructed buildings in urban/suburban locations. The subject was a residential conversion so I compared with similar Type 2 converted day nurseries.
159
L2 Shop - Why did you consider the rent free period to be unusually long?
As the development was built in 2016, all of the units were let around a similar time so I reviewed the rent free periods given on the development which ranged from 3-9 months, therefore 24 months was an outlier. I asked for a copy of the lease to establish why the RF had been given but this was not forthcoming.
160
L2 Shop - What was the AVD for that Challenge?
01 April 2015
161
L2 Shop - How did you analyse? What did the FOR info suggest?
FOR noted FRI basis and no RF so no adjustments required. I analysed this rent but also analysed with 9 months RF as per the top of the range of similar units, and both rents analysed to above the £900/m2 supporting the existing tone.
162
What is the rating hypothesis?
Definition of RV and 4 tenets of rateability
163
Case law surrounding exclusive occupation?
Cardtronics v Sykes
164
What does the RICS Comparable Evidence in Real Estate Valuation say about post-AVD evidence?
Paragraph 3 refers to the benefit of hindsight. Valuer needs to place themselves in the position of someone reviewing the available evidence on the valuation date and then make a judgment on the extent and nature of that evidence that could be reasonably expected to have been available at the time.
165
L2 Shop - What rental evidence did you refer to?
Subject - £911/m2 with no RF.
Unit 10 - New letting with 6 months RF. Analysed to £972/m2.
Unit 9 - New letting with 5 months RF. Analysed to £905/m2.
Units 7-8 - New letting with 4 months RF. Analysed to £894/m2.
166
Are you aware of any recent case law regarding disrepair?
Carey Group Plc v Ricketts
- UT found that despite water ingress rendering premises incapable of beneficial occupation the repair assumption operated to make the hereditament liable to a rate.
167
What is a smaller proposer?
You’re a smaller proposer if in the last 12 months (both of these apply):
- your turnover or balance sheet total was £2 million or less
AND
- your business had on average 10 employees or fewer
Reg 3A
168
What is the hypothetical tenancy?
Not based on the actual characteristics of the landlord or tenant or the terms to which the property might be subject (Rating (Valuation) Act 1999).
169
MCC example - Why 7.5%? Did you agree with the previous settlements?
Investigated evidence and reasoning behind it and agreed with the allowances agreed there
170
Why did you not value the mezzanine as plant?
Not listed in P&M Regs and reference Rogers v Evans – determined mezzanines are not plant, valued as additional plant
171
What legislation for the 2023 Rating List assumes factors concerning Covid to remain the same as at 1st April 2021?
The Valuation for Rating (Coronavirus) (England) Regulations 2023.
172
Industrial Oldbury - How comparable were your rental comparables for the subject and did this influence your consideration of whether an allowance versus a tone reduction was appropriate?
Rental evidence on comps was similar in terms of location, size, age and quality, therefore I would expect the rental evidence to be similar on subject. If subject was poorer than comps with a unique disadvantage and therefore not in line with tone of area, I would apply allowance.
173
Why are charity shops treated with caution?
80% guaranteed relief and 20% up to the discretion of the local authority
174
Which case preceded Woolway v Mazars in terms of unit of assessment?
Gilbert v Hickinbottom
175
What happened in Futures London v Stratford?
Similar to O'Brien and Harwood, considered the tone of the list. Offices in London where the subject rent was in dispute due to high aircon costs and service charge. The court held that the most weighting should be applied to assessments rather than the rent.
176
I note the agent agreed with your value on L2 day nursery, did the agent have the right to appeal?
No as Decision Notice was not issued - can't appeal if agreed/withdrawn
177
Why do we take account of rent free periods during our analysis?
Trying to establish what a year to year tenancy would be to conform to definition of rateable value
178
MCC - Did you consider betterment?
I did consider it and acknowledged that if it made the locality better then this may improve the rental bid, however there wasn't sufficient evidence of rents to prove that this was the case in this instance.
179
What is rateable?
Anything that is not exempt or domestic.
180
Difference between exemption and relief?
Exemptions are not in the rating list
181
What level of court was John Laing v Kingswood Assessment Committee?
1949 case which went to the Court of Appeal
182
What type of hereditament has functional essentiality?
Golf course
183
Why were the CCA penalties introduced?
To deter the submission of false or misleading information by ratepayers during the business rates appeals process
184
How did you know it was mezzanine?
It was an intermediate floor in a building which was partly open to the double-height ceilinged floor below and didn't extend over the whole floorspace of the building
185
Any case law regarding mezzanines?
Edmundson Electrical Ltd v Wilkinson (VO)
Court held that chipboard decking supported by timber joists and steel staircases were not part of the building's fabric and did not constitute a mezzanine floor. Non-rateable.
Rogers (VO) v Evans
Court held the mezzanine floor was not plant and machinery, it was part of the building and as such was rateable.
186
What relativity would you apply to accommodation under mezzanine floor?
0.5
187
If the date of check was towards the end of the works, would you have applied an allowance?
Referring to relevant case law of Morton (VO) v Jones [1986], I established that the ‘severity’ and ‘duration’ of the works did not warrant an allowance as the disturbance had ceased at the Material Day, with only 6 weeks of the works left to complete snagging works.
188
Tell me about the case of Morton (VO) v Jones [1986]?
FACT – Considered the effect on trade on a shop due to a road widening scheme varying in intensity over a 12 month period.
Evidence showed that there was only real interference for a period of 3 and a half months.
HELD – The tribunal confirmed that the matter had to be considered as at the date of the proposal (material date) at which point the works were almost at an end.
No allowance was warranted even if regard could have been had to the full length of time.
189
What difference would the works office being on the first floor or mezzanine make?
Lower relativity applied to mezzanines due to them being of a poorer quality to first floor, and not being part of the structural building fabric.
190
L3 Industrial - Considering this is a 2017 list case, did you place more weighting on rental or settlement evidence? Any case law regarding this? Which takes precedent?
Although O'Brien v Harwood note that the tone becomes more established towards the end of the list and more weighting given than rents, in this case there was clear rental evidence and a lack of determined or settled Challenges. The comparables in the locality had remained largely unchallenged.
191
MCC - If you had trading information, how would this have affected your opinion of value?
It would need to be proven that the trade had been impacted by the MCC alone. You would also consider the duration/severity and settlement evidence in conjunction with this to form an opinion on an appropriate allowance.
Berrill v Hill - evidence of turnover not helpful - no direct correlation between turnover and rent
192
Why do you consider the evidence from the 2010 list has lower weighting?
2017 list you're considering new economic and market factors. The MCC did not take place during the 2010 list. The previous evidence was also largely unrelated to the subject where larger allowances were given for longer and far more intensive works.
193
Shop L3 - How long did the occupier have to lodge a Challenge after the Check completion?
4 months for the tone case
16 months for the MCC case
194
Shop L2 - How did you explain to the agent that their comparable settlement evidence was further from the prime pitch? How is this value significant?
Using a GOAD plan I mapped out the rental evidence to show the trends of values the further away from the 'prime pitch' the properties are
195
Day nursery L2 - Do day nurseries regularly have rental transactions?
There is rental evidence available as market was buoyant in 2014 but perhaps not as regular as classes such as shops, offices or industrials. Predominantly rely on settlement evidence for nurseries.
196
Do day nurseries ever get valued on a different basis?
Predominantly rentals method.
Where there is insufficient rental evidence to form an opinion as to value either because the nursery is of a size for which there is no evidence or where the nursery (invariably a LA provided nursery school) is in an area where there is no private sector demand then the application of the contractors basis will be appropriate.
197
Day nursery L2 - Was there any P&M at the property?
No - other than heating and lighting already reflected in price per m2.
198
What is uneconomic repair?
A property is considered uneconomic to repair if the repair costs are so out of proportion to the rental value that a reasonable landlord would not spend the money doing them.
Thomas Denley v Davies - 5 x the RV
Princes Street - Landlord would look at the local property market, consider the location of the premises, the likelihood of finding a tenant for the actual property, the likely length of any lease, whether further tenants were likely and from these answers determine over what period the landlord would be prepared to spread repair costs.
199
Why would a newly built unit agree a lower price than the other retail properties in the area?
- Landlord wants to fill the space quickly due to financial pressures or to meet investment goals.
- Could be an introductory rate to entice businesses to sign longer leases.
- Attract tenants quickly in order to generate foot traffic and establish a customer base.
200
How long does the appeal tribunal have to hear the case?
Aims to hear all non-domestic rate appeals within 5 months
