Non-domestic rates – Exemption – Agricultural buildings – Respondent ratepayer appealing against decision of Valuation Tribunal for England dismissing challenge to entry of buildings in non-domestic rating list – Upper Tribunal holding buildings within scope of exemption for non-domestic rates – Appellant valuation officer appealing – Whether buildings “occupied together with” agricultural land and used solely for agricultural operations on “that or other land” – Appeal dismissed
The respondent ratepayer was a large producer of free-range eggs. Chequer Tree Farm, Benenden Road, Rolvenden, Cranbrook, Kent was its headquarters, encompassing some 530 acres. It also owned or operated a number of other farms within a 10-mile radius.
It was agreed that much of the land and some of the buildings at Chequer Tree Farm were exempt from non-domestic rating, including 482 acres of agricultural land used to produce barley and wheat, a mill store, feed mill, and chicken houses.
An issue arose whether three buildings at the farm (the egg-packing centre, egg-packaging store and egg warehouse) should also be exempt. If they were, an assessment of £136,000 was agreed; if they were not, the agreed figure was £352,500 RV.
The respondent appealed against a decision of the Valuation Tribunal for England in which its challenge to the entry of the three buildings in the 2017 non-domestic rating list was dismissed on the basis that the buildings did not meet the test for exemption from liability.
The Upper Tribunal held that all three buildings were exempt as agricultural buildings within paragraph 3(a) of schedule 5 to the Local Government Finance Act 1988 which defined a building as an “agricultural building” if it was not a dwelling and was “occupied together with agricultural land” and used “solely in connection with agricultural operations on that or other agricultural land”: [2024] UKUT 149 (LC); [2024] PLSCS 104; [2024] RA 229. The appellant appealed.
Held: The appeal was dismissed.
(1) The issue in this appeal was the scope of the agricultural exemption from business rates which were a tax on property, not on businesses; and the hereditament was the unit of assessment. A hereditament was (in the vast majority of cases) a parcel of land with cartographic unity. Nevertheless, there was in some cases a functional test which might be relevant either to break up a geographical unit into several subjects for rating purposes or to unite geographically dispersed units as one thing. By far the commonest application of the functional test was in de-rating cases where the extent of the hereditament was not decisive. The exemption was available “to the extent that” a hereditament satisfied the test: Woolway (VO) v Mazars LLP [2015] UKSC 53, [2015] EGLR 56 followed.
(2) To qualify as an agricultural building, a building had to be: (i) occupied together with agricultural land; and (ii) used solely in connection with agricultural operations thereon. The key words were “used in connection with” agricultural operations on the land. It did not matter whether the uses made of the buildings were in themselves agricultural operations. What mattered was whether the uses were solely “in connection with” agricultural operations on the agricultural land.
The “agricultural buildings” were buildings needed as an adjunct or a necessary aid to agricultural operations taking place on agricultural land and used solely in connection with those operations. The operations carried on inside a building occupied “together with” agricultural land need not themselves be agricultural operations, provided that they were “connected with” the agricultural operations on the agricultural land together with which it was occupied. The building had to be ancillary to those agricultural operations. Doing what was reasonably necessary in making a product marketable satisfied that test: W & JB Eastwood Ltd v Herrod (VO) [1971] AC 160 applied.
(3) In 2003, paragraph 3 of schedule 5 was amended so that the building might now be used in connection with agricultural operations on that or other land; whereas before 2003, paragraph 3 required the building in question to be occupied together with agricultural land and used solely in connection with agricultural operations on that land.
The occupation test acted as a limiting factor on the use test just as it did before the 2003 amendment which was intended to broaden the use test only, so as to abrogate the previous law that the agricultural use had to be confined to the land with which the building was occupied. The occupation test remained the same. Therefore, the UT was wrong to interpret the occupation test in the way it did.
Parliament did not alter the wording of that test, the meaning of which had been clearly established by the House of Lords in Farmer (VO) v Buxted Poultry Ltd [1993] 1 EGLR 155; [1993] AC 369. Where the same wording was carried forward into an amended section, it was a natural inference that the meaning remained the same. In addition, where Parliament used the same phrase in related parts of the same Act, it was the natural inference that the same phrase meant the same thing. The interpretation adopted by the UT gave different meanings to the same phrase used in different paragraphs of the same schedule of a single Act of Parliament, even though Parliament did not change a single word of the occupation test. That was an unconventional approach to statutory interpretation. It would require a strong context to justify that conclusion which was not the present case.
(4) It was not sufficient to ask generally whether the buildings, or buildings and land, in question were all part of the same business enterprise. What had to be shown was that the two buildings, or as the case might be the buildings and agricultural land, were occupied together so as to form in a real sense a single agricultural unit.
The meaning of “occupied together with” favoured by the UT was that the building and the land had to be occupied as part of the same enterprise and had to be geographically close if not contiguous. But that was the test rejected by the House of Lords in Farmer; and potentially converted a tax on land into a tax on businesses.
(5) So far as the functional connection was concerned, it was clear from the decision in Herrod that operations reasonably necessary to prepare produce for sale satisfied the agricultural connection. Although the eggs were (at least provisionally) packed elsewhere, they could not be sold without being weighed and graded. That activity took place in the three buildings. The UT was entitled to find that that activity was sufficiently connected with agricultural operations on that agricultural land.
Guy Williams KC (instructed by HMRC Legal Group) appeared for the appellant; Cain Ormondroyd (instructed by Thrings LLP) appeared for the respondent.
Eileen O’Grady, barrister
Click here to read a transcript of Bunyan (VO) v Fridays Ltd