Local Taxation Flashcards
What’s the definition of rateable value?
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
What are the four tenets of rateability?
A = actual occupation
B = beneficial occupation
E = exclusivity
T = (not too) transient - must be a degree of permanence
What is a hereditament?
Electric Telegraph Co. v Salford Overseers 1855;
- “anything on, over or under the surface of land including buildings and surface water”
- Also defined in General Rating Act 1967
Are rating valuations Red Book valuations?
No - they’re valuations for a statutory purpose
What is the material day?
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
What is the effective date?
Regulation 14 NDR Regs 2009;
The day on which the circumstances giving rise to the alteration first occured
Where in the UK does your organisation cover and who are the other public bodies?
VOA covers England and Wales
Scotland = Scottish Assessors Association
Northern Ireland = Land & Property Services
What does Schedule 5 contain?
Exemptions!
e.g. agricultural farms, fish farms, places of religious worship, sewers, property of Trinity House, parks and property for the disabled
Would a church hall be exempt?
- 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.
What is ‘rebus sic stantibus’?
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
Can the VT award costs?
Yes
Is the VT the only option once a decision is made?
No - can use an arbitrator although rare
Does RIC provide guidance for rating?
Yes - The Rating Consultancy Code of Practice 5th edn 2024
Is there an organisation for Chartered Surveyors?
Yes - The Rating Surveyors’ Association
What is the UBR?
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 2024/2025, the standard multiplier is 54.6p or for small businesses it is 49.9p.
What is the AVD of the 2023 Rating List?
01 April 2021
Why do we have an AVD?
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
What is a section 44a?
- 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
If the upper floor of a shop was not used but not capable of separate occupation, what option does the owner have?
- 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.
What were the main changes that came into rating in 1999?
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
What is a composite hereditament?
A composite hereditament is one which is a mixture of domestic and non-domestic such as a shop with living accommodation
What is transitional relief?
It is relief applied to reduce the impact of changes to the RV between rating lists and can be applied up and down
What is small business rates relief?
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.
How would you verify information on a form of return?
Cross check it against similar properties nearby, contact ratepayer to double check, contact landlords agent to check
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
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.
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.
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.
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.
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.
What is a material change in circumstance (MCC)?
- It is a change to the material factors listed in schedule 2 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
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
How would you assess a reduction?
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
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
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.
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.
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.
What methods of valuation do you use in rating?
- Comparable method
- Receipts and expenditure method
- Contractor’s method
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.
What other features might you reflect when valuing a shop for rating purposes?
The size, location, layout, accessibility to all floors, frontage, windows display space.
Explain how you would do a contractors valuation for a rating valuation?
Follow the five steps:
- Estimate cost of construction
- Deductions from cost to arrive at effective capital value
- Estimation of land value
- Apply the appropriate decap rate
- Stand back and look
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.
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
