Local Taxation Flashcards
What items of Plant and Machinery are rateable/
Any P/M which is significant to the functioning of the business.
Valuation for Rating (Plant and Machinery) Regs 2000
What is empty property rate relief?
Office and shops can claim empty rate relief for 3 months.
Industrial and warehouse get relief for 6 months.
If a lease is signed for 6 weeks then they can then apply for empty relief.
Lead case is Macro properties v Nuneaton and Bedwort Borough Council 2012
Why do we value at the Antecedent Valuation Date and not at the effective date?
To give the VOA time to produce and update the list.
Where can I find the definition of rateable value, and what is it?
S. 6 of the Local Government Finance Act 1988.
The amount equal to the rent which it is estimated that the hereditament might reasonable by expected to let on a year to year basis, based on three assumptions.
1) Tenancy begins at AVD.
2) Hereditament is in a reasonable state of repair.
3) Tenant responsible for all rates, taxes, repairs, and insurance.
What is the material day?
Day we take all physical factors affecting the property and the locality
What is AVD?
Antecedent valuation date
Day we take all non-physical factors; levels of value, economy and law. Two years before the start of the rating list.
E.g 2017 list = 1 april 2015
What is a hereditament?
A property which is an entry in a rating list (Section 115 of General Rate Act 1967)
What is an FRI lease?
Full repairing and insuring lease – liability on tenant
What is an IRI lease?
Internal repair and insuring is liable to tenant, external repairs is landlords, may be claimed back via a service charge making it effective FRI.
What is not rated according to schedule 5 Local government and finance act 1988? Can you name at least 3?
Public parks
Religious buildings
Agricultural land
Agricultural buildings
Fish farms
lighthouses
How does the small business relief scheme work?
If a business has 1 hereditament with an RV of less than £15,000 or multiple hereditaments totalling under £20,000 they can apply for SBRR.
Sliding scale of relief between £12k and £15k.
How does the Charitable rate relief work?
If a hereditament is used for charitable purposes they get 80% statutory relief off their rates bill.
The remaining 20% is at local authorities discretion.
What is transitional relief and how does it work?
A scheme to lessen the impact of significant RV increases and decreases between rating lists.
The liable amount is adjusted to buffer the impact.
In essence – amount payable won’t go up or down as much as it originally would have done.
Normal rules for determining a unit of assessment (3 rules)?
1 area of land
1 occupier
1 use
What are the four tenants of rateability?
BETA
Beneficial occupation- Hare v Overseers of Putney (1881) - Putney bridge being free of toll.
Exclusive - Westminster City Council v Southern Railway (1936) - Divisions of net receipts between landlord and tenant. Legal possession not essential.
Transient - Wilkins v London County Council (1957) - temporary huts erected by builders. 18 months plus - found to be rateable.
Actual - R V assessment committee of St Pancras (1887) - whether licence holder for use of advertising hoardings was in rateable occupation of any part of the land, held they weren’t.
Tell me about the case J Laing v Kingswood 1949?
Lead case on rateability. The Court of Appeal adopted 4 essential determinants of rateable occupation. These are that the occupation must be actual, exclusive, beneficial and not too transient.
BETA.
What is rebus sic stantibus?
‘Things standing thus’ in latin.
Taking things as they stand
Two limbs
Physical limb – assume property its in physical state
Use limb – assume use staying the same
What is the material day for a material change in circumstance appeal?
Day of proposal (check submission date)
What is the material day for splits and mergers?
Day of event
What is the effective day?
Day liability stops, starts or changes.
Usually material day unless there is an increase in RV then Effective date will be the day the list is altered.
Important date for ratepayers as this it affects finances.
Can you name the two secondary legislations for 2017 list alterations?
Non-domestic rating (alteration of lists and appeals) (england)(amendment) Regulations 2017.
The valuation tribunal for England (council tax and rating appeals) (procedure) (amendment) Regulations 2017.
Can you tell me about Newbigin v Monk (2017)?
S J & J Monk own the freehold of the first floor of a three-storey Office building in Sunderland
well known case on BENEFICIAL OCCUPATION
They requested to reduce ratable value during reconstruction period.
Issue was do we value at the 2012 condition where the unit was stripped out undergoing construction, or do we assumes a reasonable state of repair (para 2 schedule 6)?
VO rejected, VT upheld this, Upper Tribal allowed SJJM appeal, Court of appeal reversed and allowed VO appeal, then Supreme Court reversed and allowed SJJM in line with Upper Tribunal.
Hereditament incapable of beneficial occupation is not rateable
Repair assumption is irrelevant
Tell me about Jackson (VO) v Canary Wharf (2019)?
- It oncerned a number of floors in Canary Wharf’s iconic tower at 1 Canada Square.
- Well known case on beneficial occupation.
- In accordance with Canary Wharf’s usual practice, following the vacation of the previous tenants each of the floors had been stripped back to shell condition, and upgrading works were carried out.
- The VO argued that, in the absence of a programme of works, there was no admissible evidence bringing the property within the ambit of the Monk Newbigin case. The VO thus valued the floors as though they were offices in repair.
- VT held in favour of Canary wharf, VO appealed but Upper tribunal rejected appeal.
- Premises which are not capable of beneficial occupation cannot represent a hereditament, and therefore should not be included in the rating list
Gilbert v Hickingbottom (1956)
Lead case on hereditament assessment before Woolway v Mazars
Three general rules:
1. Properties in same occupation within curtilage or contiguous = 1 hereditament
2. Properties in same occupation but not in curtilage nor contiguous = separate hereditaments
3. Properties in same occupation but separated by highway = 1 hereditament – but only if the two are essential to one another
Tell me about Woolway v Mazars LLP (2015)?
A question in this appeal is how different storeys under common occupation in the same block are to be entered in the rating list.
Concerned Tower Bridge House, an eight-storey office block in St Katherine’s Way, East London.
Mazars, a firm of chartered accountants, occupies the second and sixth floors of the building under separate leases. These floors are separated by common areas in the building and were entered in the 2005 rating list as separate hereditaments.
In February 2010 Mazars applied to the Valuation Tribunal to merge the two entries to form a single hereditament.
The VTE agreed that the two entries should be merged. The Valuation Officer, Mr Woolway, appealed to the Upper Tribunal who confirmed that the premises could be treated as one hereditament.
The Court of Appeal dismissed Mr Woolway’s appeal. Mr Woolway appeals to the Supreme Court. The Supreme Court unanimously allows the appeal.
Lord Neuberger, concurring with Lord Sumption and Lord Gill, concludes that a hereditament is a self-contained piece of property, where all parts are physically accessible without having to go onto other property.
If contiguous units do not intercommunicate and have to be accessed via other property of which the common occupier is not in exclusive possession, this will be a strong indication that they are separate hereditaments.
This completely changed the landscape from the Gilbert v Hickingbottom 1956 case. Creating what was called staircase tax.
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 1 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 Local Government Finance Act 1988.
The amendment ordered the Valuation Officer to assess together properties that were made to be individual assessments following the Supreme court decision in Mazars.
what do you mean by 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 or 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.
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.
What are the three CCA stages?
Check – ratepayer confirms or edits details about their property
Challenge – once property details are agreed they can then challenge the valuation
Appeal – if the challenge result is unsatisfactory, they can take the case to tribunal (up to £300)
CCA timelines?
VO have 12 months to resolve a check, if not complete the IP has the right to move on to challenge.
Challenge must be made within 4 months of check completion date (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
What is the RV multiplier?
Universal Business Rates Multiplier
Small Business - 49.9p (RV below £51,000)
54.6p - standard rate - increasing from 01-Apr-2025 to 55.5p.
Why was CCA introduced?
To make the rating appeal system more efficient
Ensures that factual issues are dealt with early in the process.
What is the central rating list?
Rating list containing assessments of the network property of major transport, utility and telecommunications.
Such as:
Electric, gas and water supply networks
Railways
Telecommunication networks
Cross country pipelines
Who is the stakeholder for Local Tax?
Ministry of Housing, Communities, and Local Government - Angela Rayner is Secretary of State for Levelling up, also Jim Mcmahon OBE and Matthew Pennycook MP
Name three ratepayers on the Central List?
Network Rail
London Underground
National Grid
How would you go about valuing something you thought was P&M?
Firstly consider is it plant? Ask occupier, take photo and/or ask colleague if unsure
Secondly Is the item listed in the 2000 P+M Regs?
What P&M classes are there?
Class 1 - Power
Class 2 - Services
Class 3 - Infrastructure
Class 4 – Structures (contains 2 tables)
What do the P&M regs say about air conditioning?
Air conditioning is not specifically named in Class 2, but all the functional elements are, such as heating, cooling, ventilating and filtration.
How is air conditioning dealt with in rating assessments?
Office valuation schemes will often, but not always, reflect A/C.
For retail properties, there are agreed schemes in place, based on £7 sq m addition in shops, and £4 sq m in retail warehouses.
For industrial premises, A/C is commonly dealt with as a % addition, A/C usually being found in the ancillary offices.
Are you aware of any recent case law on plant and machinery?
A/C rateable unless used for trade related purposes as held in SC judgement of Iceland Foods v Berry 2018
- Upper Tribunal Iceland Foods v Berry 2016 - Iceland argued AC system far more powerful than in normal supermarket setting to suit particular way of operating stores. Upper Tribunal held that merely keeping goods frozen did not satisfy manufacturing / trade purpose. Court of Appeal held same view.
- Supreme Court Iceland Foods v Berry 2018- SC overruled, taking much wider view of regulation proviso. Ruled that trade process is simply trade carried out in course of trade - keeping food frozen is sufficient. Rejected VO assertion that proviso limited to productive classes of industry - regulations suggested applied to all types of hereditaments. Plant deemed ‘tool of the trade’ and therefore non-rateable.
How do we value A/C in retail?
- Comparable rents
- Comparable assessments
- If no good evidence, do cost approach
- Find annual equivalent
If unreliable, adopt £7 backstop
Name Air Conditioning systems?
· VAV – variable air volume (highest capital cost but most flexible).
· Fan coil – usually 4 pipe (lowest capital cost and good flexibility, but higher running cost).
VRV – variable refrigerant volume (lower capital costs but higher running and maintenance cost).
How long is deemed long enough to show permanence in relation to exclusive occupation?
12 months or more
What rental adjustments do you make?
Rent free
Stepped rent
Premium
Reverse Premium
Repair liability
Tenant contribution
Landlord contribution
What is the role of an expert witness?
Primary duty as an expert witness is not to a client but to the tribunal.
Must give independent and unbiased evidence.
State main facts and assumptions.
‘Surveyors Acting as Expert Witnesses (2023)’
What is the role of an advocate?
- Duty to client
-Also owe an overriding duty to the tribunal to act properly and fairly as set out in Surveyors Acting as Advocates (2nd edition professional statement, 3rd edition guidance note) 2017
What is a completion notice?
Notice for a newly constructed property to serve as the date whereby building is said to be complete and rate liability can commence.
How do you value using the time value of money when analysing a rent-free period
0 rent free period shown as the first line
Rental income on second line, YP is deferred by length of rent free using growth rate of 7%
PV is deferred by length of time of rent free
(YP x PV of £1) x Rent = total rental income
Divided by YP @ growth rate = yearly rent
How would you deal with zoning a property with return frontage?
If the returned glazed frontage runs for the entire length of the shop, then it will be appropriate to apply a percentage additional to the value of the whole shop.
Dependent on the quality of the return frontage (i.e. is it facing other retail units, does it substantially add to the prominence of the shop, is there a secondary entrance from the return frontage elevation). One might add 10% or 7.5%, 5% or 2.5% to the total rental value of the ground floor to reflect the benefit of the return frontage.
In a situation whereby, the glazed return frontage is partial i.e. only part of the shops return frontage benefits from glazing, and the rest is a solid structure, an addition to the rental value should be made for the area of the shop which benefits from the glazed frontage.
Another approach is to zone from both frontages (only say this if they ask)
zoning from the inferior entrance ceases when it is less in value than the value attributed when zoning from primary frontage.
What is a return frontage?
Where a retail unit occupies a corner position it may have glazing on part of the side elevation and we refer to this as return frontage (R/F).
JEWELLERS IN PARTICULAR LIKE CORNER SHOPS WITH R/F OR SPLAYED FRONTAGE
Name some benefits and drawbacks of return frontages?
Benefits
Increases prominence of the shop
Customers can see inside the shop thus enhancing the tenant’s opportunity to attract more customers.
Tenant has a greater opportunity to display.
Negatives
Most retailers now seek the maximum amount of linear wall space and so do not want a glazed return frontage because they could not rack against that frontage and so lose linear wall space.
The dressing of shop windows is time consuming and costly.
The insurance premises are higher for a unit with a glazed return frontage.
Why do you adjust rents for rating purposes?
To convert rental evidence into a form which is compatible with the definition of Rateable Value in Schedule 6 para 2(1) of the Local Government Finance Act 1988.
The rental evidence obtained on FORs will rarely, if ever, accord with the definition of RV.
Why is the rental information on FORs not always in line with the definition of RV?
May contain premiums or incentives.
During periods when the market is depressed reverse premiums are sometimes paid to a new tenant by the landlord or the previous occupier, or other incentives given in the form of rent-free periods in excess of any ‘norm’ fitting out period or the transfer of liabilities to the landlord.
How is VAT treated in terms of rent in determining rateable value?
Although VAT is often specified within leases to be recoverable from tenants as additional rent it is considered that it does not form part of the rent payable under the hypothetical tenancy.
The imposition of the tax is likely to be inconsistent and its impact on underlying rents insignificant in most cases. The overwhelming need for a uniform basis for rating dictates that the RV is net of VAT
What is VAT?
Value Added Tax
What is a GPCR?
Group-Pre-Challenge-Review
An agreement is made between a VO and ratepayers of an action to be taken regarding a group of rating assessments.
Tell me about Fir Mill Ltd v Royston 1960?
It relates to mode and category. Held that a cotton mill could be valued as a factory and not restricted to a cotton mill - a factory is a factory but not any particular kind of factory.
Define the term ‘rebus sic standibus’, and the two limbs involved.
Which is the main case law that this principle is derived from?
Taking it as it is - Latin.
Scottish and Newcastle v Williams 2000:
Case determined mode or category of occupation has two distinct limbs:
- Use – must be valued in same use
- Physical – only minor alterations
How many grounds for a Challenge? Name 3
12
Compiled list error
MCC
Deletion
Recon
What is an MCC?
Material change in circumstances - something that impacts the hereditament or locality.
- road works
- public transport
What is the guidance and case law for splits?
PICO act 2018 - Mazars 2015
