Local Taxation

Question 1

What is the local Government Finance Act 1988?

Answer 1

Effective 1990

Is a major piece of legislation that had a significant impact on local taxation. It introduced a number of new taxes and reforms and abolished some of the old systems.

Replaced the General Rate Act 1967 and resulted amongst other changes the introduction of the Antecedent Valuation Date.

Question 2

What is a hereditament?

Answer 2

A hereditament is defined as a commercial property that can be BEAT
- Beneficial occupation
- Exclusive occupation
- Actual occupation
- Non to transient

Question 3

What is the rating consultancy code of practise (2017)?

Answer 3

Sets out standards of practise that rating consultants must adopt when seeking instructions or approaching new client.

Question 4

What is the principles established by Laing & Son Kingswood AC (1949)?

Answer 4

Laid down the four essential ingredients for whether an occupier is a rateable occupier. The rateable occupier has to meet the following conditions:

• Beneficial occupation – occupier does not need to be profitable but they benefit from the space in some form
• Exclusive occupation - do they have a right to exclude others
• Actual occupation - not necessarily who has legal ownership i.e. trespasses can be rateable occupiers
• Non to transient - 6 to 7 months were too transient

Question 5

What is the check, challenge and appeal process?

Answer 5

It is a three-stage approach introduced in 2017 for disputing rateable value of a property in the UK. First stage is checking whereby the VOA will review information that you have provided about the property, decide whether there are issues with the RV.

If the VOA does find issues with the RV you will be able to challenge it in the second stage, you will need to provide more info to the VOA.

If you are unhappy you can appeal to the Valuation Tribunal Service, They are an independent body that will hear your appeal and make a final decision.

Question 6

What is the non-domestic rating bill that is currently going through government?

Answer 6

Main changes are
- Reducing the time between the property revaluations from 5 to 3 years
- Imposing a duty to notify the VOA of any changes that could affect your property.
- Introducing reliefs for improvements to the property and heat networks.

Question 7

What are the uniform business rates and what are the current UBR’s?

Answer 7

It is a multiplier set by the government which you times by your RV to get rates liability.

51.2p
For small businesses in England it is 49.9p- for businesses are those with an RV of less than £51,000

Question 8

What are the principles of calculating a tenant’s rates liability?

Answer 8

Rateable value X the UBR

Question 9

What is the small business relief?

Answer 9

RV up to £12,000 - 100% relief

Rv between £12,000 - £15,000 - tapered between 100% to 0%

Question 10

What other business rates reliefs are there?

Answer 10

Retail, hospitality and leisure - 75% discount
Rural relief - 50% discount
Charitable relief - 100% discount
Empty property rates relief - Depends how long for

Question 11

What properties, when empty, are except from business rates?

Answer 11

Vacant listed building
Charities
Sports clubs

Question 12

What is the empty rates relief for offices, retail and industrial?

Answer 12

You get 3 months for offices and retail
6 months for industrial

Question 13

What is the rateable value?

Answer 13

They are set by the VOA which is part of HMRC.
It is the annual rental value on the AVD of a property assuming a hypothetical tenancy assumption.

Question 14

What did they establish in Newbigin (Vo) v Monk (2017)

Answer 14

A case was overturned in the supreme court when they held that properties undergoing refurbishment, or redevelopment should be exempt from business rates while work is being carried out and accommodation is unusable.

Question 15

Any new updates in regard to properties being except whilst works are carried out?

Answer 15

They are currently reviewing legislation whereby – new developments where there are no existing hereditaments the council can serve a completion notice (to prevent landlords sitting on properties and not paying rates). However, have not yet considered hereditaments which have been reduced to 0 whilst works are being carried out.

Question 16

What is the Lotus v Delta v Culvberwell (1976) legislation?

Answer 16

• Subject rent = starting point
• Closer it fits with statutory requirements the more weight it carries
• Rents on similar properties (that are available) are to be properly looked at
• Assessments on other properties are relevant
• In light of ALL evidence an opinion can be formed.
• If there are no comparable rents then a review of assessments is helpful but it is more difficult to reject the evidence of the actual rent.

Question 17

What are the different methods of rating

Answer 17

Rental method
Contractor’s method or test
Profits or accounts method
Statutory formulae

Question 18

What are the 7 hypothetical tenancy assumptions?

Answer 18

1. Vacant
2. Available to let on an annual tenancy
3. FRI terms
4. In good repairs
5. Tenant pays rates
6. Current use
7. No alterations may be made

Question 19

What is the RICS Guidance note?

Answer 19

Rating Consultancy Code of Practice 2017

Question 20

What is the rating legislation?

Answer 20

The Local Government Finance Act

Question 21

In the case of the self storage unit in Wigan when you mentioned renovation, can you tell me the considerations you made in relation to Newbigin v Monk and the implications of the Material Day for the check you submitted?

Answer 21

In Newbigin v Monk the Supreme Court restored the previous established practice of ascribing nominal values to property undergoing redevelopment.

Stages to follow:
* Determine whether a property is capable of rateable occupation at all and thus whether it is a hereditament.
* If the property is a hereditament, to determine the mode or category of occupation.
* Consider whether the property is in a state of reasonable repair
for use consistent with that mode or category.

In respect of the Check – the date of submission establishes the Material Day when the physical state of the hereditament must be assessed and in addition, the mode or category of occupation of the hereditament.

Question 22

You mention Lotus and Delta Ltd v Culverwell (VO) and Leicester City Council LT 1976) Can you give a brief synopsis of the case and how the decision relates to the retail property in Gloucester.

Answer 22

The case sets out the Hierarchy. The Lands Tribunal set out the following propositions as a properly established procedure for considering evidence in the rating context:

‘(i) Where the hereditament which is the subject of consideration is actually let that rent should be taken as a starting point

(ii) The more closely the circumstances under which the rent is agreed as to time, subject matter and conditions related to the statutory requirements contained in the definition of rateable value the more weight should be attached to it.

(iii) Where rents of similar properties are available they, too, are properly to be looked at through the eye of the Valuer in order to confirm or otherwise the level of value indicated by the actual rent of the subject hereditament

(iv) Assessments of other comparable properties are also relevant. When a rating list is prepared these assessments are to be taken as indicating comparative values as estimated by the valuation officer. In subsequent proceedings on that list therefore they can properly be referred to as giving some indication of that opinion.

Question 23

You state that you know the key ingredients to Rateable occupation and the definition of a hereditament what is the leading case that sets down the ingredients and what are they? And how could this have affected your conclusions in relation to the property in Gloucester.

Answer 23

in John Laing & Son Ltd v Kingswood Area Assessment Committee [1949] 1 All ER 224 CA that the Court of Appeal gave the classic statement of the four essential ingredients that need to exist in order to determine whether an occupier is in rateable occupation:
* Actual occupation or possession that is of
* Benefit to the occupier and
* Exclusive for the particular purposes of the possessor; and
* the occupation must not be too Transient.

Question 24

What is a heridatement?

Answer 24

Means property which is or may become liable to a rate, being a unit of such property which is, or would fall to be, shown as a separate item in the valuation list.

Question 25

Does the case of John Laing & Son Ltd v Kingswood identify the heridtament?

Answer 25

No but it does indicate that a hereditament is a single unit of rateable property which will be shown as a separate entry in the rating list.

Question 26

Describe the main additional expectations for Ratepayers to become law in the new rating bill.

Answer 26

The Non-Domestic Rating Bill is currently on its third reading in parliament.

All ratepayers will soon have a Legal duty to inform the Government of any changes to their property, information regarding any new leasehold events (new lease, renewal, review, subletting etc),

Provide annual confirmation that the records the Valuation Office holds are correct.

This will mean that Checks will no longer be needed, but it also means that Occupiers (and their agents) will have to be ready to provide accurate information (and potentially accrue for any extra liability).

Question 27

You say you understand the importance of the Local Government Finance Act 1988

Can you tell me which schedule of the act refers to Non Domestic Rating and the 3 assumptions laid down within the act that describe the basis of Rateable Value?

Answer 27

The basis of valuation is set out in Paragraph 2(1) of Schedule 6 to the Local Government Finance Act 1988 (as amended).

Assumptions:

• Tenancy begins on the day by reference to which determination is to be made
• Immediately before the tenancy begins the hereditament is in a state of reasonable repair, but excluding from this assumption any repairs which a reasonable landlord would consider uneconomic
• the tenant undertakes to pay all usual tenant’s rates and taxes and to bear the cost of the repairs and insurance and the other expenses

This requires an assumption that the hereditament is vacant and available to let on the above statutory terms. All evidence should be considered in respect of that and weighed accordingly.

Question 28

What is business rates supplement act 2009?

Answer 28

• on top of business rates, local authorities now have the power to charge an extra 4.5% to raise money to be spent on economic development
• Only levied on RV over £70,000y
• Local authorities have to consult occupiers over their plans and provide detailed plans on how the money is spent

e.g. The London City Council charging additional rates for Crossrail is an example of BSR 2009 (52.2p)

Question 28

What are the rules for the Rating (empty buildings) Act 2007?

Answer 28

• the empty property rate is 100% of rates payable
• 3 months for offices and shops
• 6 months for industrial nd warehouses

Question 29

How long does a property need to be re-let for before it qualifies for empty rates again?

Answer 29

If an empty property is re-occupied for more than 6 weeks and becomes vacant again it will qualify for 3 & 6 months relief

Question 30

Under the Rating Act 2007, what exceptions are there.

i.e. zero rates for empty properties?

Answer 30

• Vacant listed
• Charities
• When the owner is prohibited by law from occupying it - demolition or closing order
• Sports clubs

Question 31

Which section of the Local Gov finance Act 1998 relates to completion notices?

Answer 31

Section 46a

The VO can serve notice on an owner of a newly constructed property to prevent the party avoiding rates

Question 32

Can you tell me about another recent case?

Answer 32

Woolway v Mazars (2015)

Woolway won an appeal in the Supreme Court in respect of whether the 2nd and 6th floor within the same office block could be assessed as one hereditament

Prior to the case it would be considered that unless those part occupied by the rate payer were contiguous they would form separate hereditament unless they were shown to be functionally essential (with access via common parts)

The court held that this was not the case and the two floors should be rated separately

As a result the VOA embarked on a programme to split relevant assessments of adjourning property if the only access between them, was via a common part.

The Rating and Council Tax Act 2018 reversed this decision ion 1st November 2018

Question 33

What is an MCC?

Answer 33

Paragraph 2(7) of Schedule 6 to the Local Government Finance Act 1988 defines an MCC as:

• Matters affecting the physical state or physical enjoyment of the hereditament e.g. extensions or part demolitions
• Matters affecting the physical state of the locality in which the hereditament is situated e.g. an increase in pedestrian flow, an extension of licensed trading hours or frequency
• The mode or category of occupation of the hereditament – changes to the type or category of a hereditament e.g. a change in use of a premises from a shop to a factory.

Question 34

What is the rating list?

Answer 34

Statutory document

Question 35

Is there any other RICS rating guidance note you could refer to for appeals?

Answer 35

RICS Rates Appeal Guidance Note 2017

Question 36

Talk through the Newbigin v Monk case?

Answer 36

• Originally the VOA won an appeal for an office building undergoing refurbishment where RV was reduced to 0 during the construction
• The court found that the building works were repairs not improvements, so the initial rating assessment should apply
• git overturned in the Supreme Court in March 2017 when the court held that properties undergoing refurbishment or development should be except while space is unusable

Question 37

What was the Makro Properties Ltd v Nuneaton Bedworth Borough Council (2012) case?

Answer 37

The occupier used a small part of a large warehouse to store pallet ofdocuments

They tried to claim empty rates when the pallets were removed

High Court overturned the Magistrates Court decision against the occupier and held that the occupier was in occupation and could claim empty rate relief at the end of their occupation.

Question 38

What is Transition?

Answer 38

A scheme for the transitional relief to lessen the impact of higher rateable values with an upward and downward cap to limit the increases and decreases over the years from the new rating list

Question 39

What else other than duty to notify does the new rating bill bring in?

Answer 39

Completion notices
Clarification on MCC

Question 40

Crossrail Supplement RV threshold?

Answer 40

£75,000 in comparison to normal £70,000

Question 41

Definition of RV in the Local Government Finance Act 1988?

Answer 41

is estimated the hereditament might reasonably be expected to let from year to year on these three assumption:
(a)the first assumption is that the tenancy begins at the AVD
(b)the second assumption is that immediately before the tenancy begins the hereditament is in a state of reasonable repair, but excluding from this assumption any repairs which a reasonable landlord would consider uneconomic;
(c)the third assumption is that the tenant undertakes to pay all usual tenant’s rates and taxes and to bear the cost of the repairs and insurance and the other expenses (if any) necessary to maintain the hereditament in a state to command the rent mentioned above.

Question 42

How often is the UBR changed?

Answer 42

It is often reviewed annually but since covid it has been fixed.

Question 43

What is transition?

Answer 43

It lessens the impact of a higher rateable value with an upward cap to limit the increases at the new rating list.

Question 44

What statutory grounds was check/challenge for the self-storage unit in Gloucester?

Answer 44

Compiled list grounds

Question 45

What other types of grounds are there?

Answer 45

Splits & mergers/MCC

Question 46

What did you submit to the VOA for your challenge?

Answer 46

Have to disclose the rent if there is one and date that the rent is payable
Description/tenure
Evidence that you are to submit
Summary of the argument
Detail of the valuation

Question 47

What comparable evidence did you use?

Answer 47

In the first instance say that you used self-storage evidence as you must use what the current mode of category is.
Then you could look at industrial – apply 65% of the prevailing industrial tone to the ground floor of a self-storage unit under the self-storage scheme.

Question 48

Talk through the self-storage unit in Wigan?

Answer 48

Say that the property was incapable of beneficial occupation and thus the RV was reduced to 0.

Question 49

What other case other than Newbigin and Monk relates to RV being reduced whilst works are being carried out?

Answer 49

Jackson v Canary Wharf (2019) – an upper tribunal decision. Case supported Newbign v Monk.

1 Canada Square - tenants vacated and they were undergoing significant refurbishment works.

The fitting out works, however, were not scheduled to be undertaken until after a tenant was identified. The material day for the appeal fell during the “pause” after the strip out works were completed, but before the tenant was identified or the fit out works were commenced. It was common ground that at the material day the property was incapable of beneficial occupation.

Question 50

Where is the non domestic bill in terms of stages?

Answer 50

The Bill has recently had its final amending stage in the House of Lords and is expected to receive Royal Assent before the end of 2023.

Question 51

What was the check for Wigan grounds?

Answer 51

Material Change in Circumstances
(because it was after the 1st April 2017)

Question 52

How could you know whether aspects of a property are deemed rateable?

Answer 52

Address the Plant and Machinery Order

• includes security cameras (if more than 8)
• Aware that it depends on asset types

Question 53

Which properties are except from the rating list as a whole

Answer 53

Places of worship
Fish Farms
Agricultural properties

Question 54

What is section 44a

Answer 54

Section 44a of the Local Government Finance Act 1988 enables the Council to grant relief on business premises that are partly occupied, as long as this situation is for ‘a short time only’.

Question 55

Talk about a recent case

Answer 55

Nuffield Health v London Borough of Merton 2023

Nuffield Health argued that it satisfied the two-part qualifying test for business rates relief at this site and should therefore be entitled to the mandatory 80% rates exemption available to charities.

As a general rule, charities are entitled to a mandatory 80% relief from business rates under sections 43(5) and 43(6)(a) of the Local Government Finance Act 1988. This requires that:

the ratepayer is a charity or trustees for a charity; and
the property in question is used wholly or mainly for charitable purposes (whether for that charity or that and other charities).

The decision provides clear, unequivocal authority for the position that when considering whether a property fulfils the charitable purposes test for entitlement to mandatory business rates relief, a rating authority should not make the assessment on that property’s individual merits. Instead, the authority must consider whether the property is used in furtherance of the charity’s purposes