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Business rates – the fight goes on
If you have been following the progress of appeals for business rates you may be forgiven for believing that the argument over how museums should be valued for is over. Unfortunately, as Colin Hunter of Lambert Smith Hampton explains, we are not there yet.
Appeals were heard before the Upper Tribunal (Lands Chamber) in 2017 (Stephen G Hughes (VO) v York Museums and Gallery Trust) and 2019 (Stephen G Hughes (VO) v Exeter City Council) with the Tribunal coming down firmly on the side of the museums and radically reducing the Rateable Values. The arguments in those cases turned on how the properties should be valued, either by reference to the cost of building a replacement museum, as proposed by the Valuation Officer (VO), or by reference to the receipts and expenditure which reflects the ability of the museum to pay rent for the property. Typically, museums valued by the former approach have much higher levels of value than by the latter. If the museums are loss making, like Yorkshire Museum in York and Royal Albert Museum in Exeter then the Rateable Value may even be reduced to £1.
The York cases included other issues, such as whether the museum shops and cafes should be included in the assessment of the museum or separately assessed. The Exeter case included an attempt by the Valuation Officer to have the Upper Tribunal overturn their earlier decision for York. The VO tried to appeal the decision in respect of Royal Albert Memorial Museum, Exeter, but their application to the Court of Appeal was rejected.
Due to the appeals to Upper Tribunal, over 200 appeals for other museums dating back to the 2010 Rating List have been held up. The first of those appeals to be brought forward again were listed for a hearing by the Valuation Tribunal for England (VTE) on 6 November 2020. In total there were seven appeals listed: four for Tyne and Wear Archives and Museums; one for Redcar and Cleveland Council; one for York Civic Trust and one for Chard and District Museum Society. All museums in, or include, listed historic buildings.
The Valuation Office changed their internal guidance to reflect the decisions of the Upper Tribunal. But whilst the guidance now accepts that contractor’s method isn’t appropriate for historic buildings, they have not accepted that loss making museums should have a nominal or £1 Rateable Value.
Instead, the Valuation Office is arguing that as a minimum the property should either be valued based on the rent that would be needed to be paid for storing the collection elsewhere, or at a low percentage of the gross income (including any potential income from admissions if admission is free). This revised guidance meant that agreement could not be reached for six out of the seven appeals listed for hearing on 6 November and so cases were presented to Mr Alf Clark, Vice President of the VTE.
His decision on 3 December again found in favour of the Ratepayer with the outcome as follows:
|Property||Original RV||Museums’ valuation||VO’s valuation||Decision|
|Laing Art Gallery||£193,000||£1||£160,000||£10|
|Shipley Art Gallery||£94,500||£1||£4,000||£10|
|South Shields Museum & Gallery||£62,500||£1||£72,500||£10|
As seen above, the VO didn’t defend their original valuations, other than for South Shields where it was claimed that the museum was under assessed. Even so the difference between the figures adopted by the Valuation Office and the outcome of the decision is marked, and has a significant impact on liability, especially where Charitable relief isn’t available. The knock-on effect on the 2017 Rating List is even greater or would be if the Valuation Officer was willing to agree. The VO have again chosen to appeal to the Upper Tribunal, no date has yet been set for the hearing.
Note that the appeals so far have all been about properties which both the VO and the museums can agree involve historic properties. But there is no agreement with the VO on the definition of historic properties and the VO are still insisting that modern museums should be valued by reference to contractor’s method.
The VO has been asked repeatedly to meet with sector representatives including AIM, the Museums Association, and National Museum Directors’ Council to seek agreement. At the time of going to press it has finally agreed to such a meeting – we will update on outcomes as soon as practical.
In summary if you haven’t already, you should be considering whether your museum has been over assessed for business rates. A simple rule of thumb question is: could you afford to pay as rent the Rateable Value for your museum? If the answer is no, you should take advice from a suitably qualified and experienced chartered surveyor about starting the appeals process. Most AIM and Museum Association members have not appealed and are thus at risk of paying higher business rates, putting greater strains on finances stretched by the on-going impact of COVID 19.
Finally, many museums worry that making an appeal could reflect badly on the museum when it comes to being given charitable or other reliefs. Yet there is no connection between the Rateable Value and the right to reliefs, meaning an appeal won’t detrimentally affect the right to relief.
As ever, it is advisable to take professional advice before embarking on any appeals not least as the Rateable Value can be increased if it has been under-assessed. If you are interested in finding out more, Colin Hunter of Lambert Smith Hampton has agreed to provide AIM members with a minimum of 15 minutes free consultation. You can contact Colin on 0113 245 9393 or email firstname.lastname@example.org.