Rating – Non-domestic rates – Hereditament – Triple fronted shop split into two assessments – Split later reversed by merger – Whether two units of assessment existing – Whether parts in separate rateable occupation– Whether leases “sham” agreements – Appeal dismissed
The appellant was a director of a company which owned properties in the Bolton area. In 1999, the company bought a property known as 200 St Georges Road, Bolton. It was on a main road, running north-west from the town centre. The building was a corner block, with a front elevation to St Georges Road, and a right-hand return elevation to Ruth Street. The company converted the building to form four ground floor commercial units, with eight flats above.
The appeal property (Unit 1) was a triple-fronted ground floor shop, situated in the front right-hand corner of the block, with a return frontage to Ruth Street. In the compiled 2010 rating list, the ground floor of the block was shown as two assessments: Unit 1 and Unit 2. In 2014, following discussions with the appellant, the valuation officer (VO) agreed to split unit 1 into two assessments for rating purposes: Unit 1A: RV £7,000 and Unit 1B: RV £6,900. The company then granted two leases, the first to the appellant’s wife and the second to the appellant, each had a term of five years, at a commencing rent of £2,600 per annum, with three yearly rent reviews commencing after 12 months. Neither lease had a plan attached, nor any further description of the extent of the respective demises. The appellant said it was intended that new tenants would take over the two halves of the property, but that in the meantime he and his wife would operate as two separate businesses. In September 2014, the billing authority raised the issue of the split with the VO, on the basis that the two hereditaments, which had not physically separated, were occupied by husband and wife. This led to the re-merger of the two assessments as Unit 1: RV £12,000.
The appellant subsequently appealed against a decision of the Valuation Tribunal for England (VTE), dismissing the appellant’s proposal to reverse the VO’s decision to re-merge two rating assessments into one assessment. The appellant argued that “the whole issue in this matter” was that the VO had changed her mind and merged the two assessments having agreed to split them.
Held: The appeal was dismissed.
(1) (1) An argument that the VO had acted inconsistently seldom succeeded, even where a change of tack disadvantaged the ratepayer, as the VO was under a statutory duty to maintain an accurate rating list, including by correcting earlier errors. The high water mark for the appellant on that point was the VO’s acceptance that she was wrong to split the compiled list assessment before the appellant had started to make any physical alterations to divide the unit in two. In the end, she was caught between the billing authority’s “insistence” on a re-merger and trying to give the appellant every opportunity to carry out the work which he had said that he would do. But having split the assessment in error, the VO was under an obligation to correct it when she formed the view that there was only one unit of assessment. Accordingly, the main point of appeal was without merit.
(2) There was nothing dishonest in organising one’s affairs in such a way as to minimise one’s liability for tax, including business rates, provided the arrangements were genuine. The mere fact that one did something unusual with a view to securing a relief was not evidence of dishonesty. It was not open to the tribunal to conclude that the leases were not genuine, but were a sham designed deliberately to create a false impression (as the respondent alleged) since that allegation was not specifically put to the appellant in cross examination and the tribunal would decline to do so.
(3) For a lease to come into existence the property to be comprised in the lease had to be capable of identification with certainty. The fact that the boundary between the two units was not defined on a plan or by any description, other than “half the showroom”, need not have been fatal if, at the time the lease was granted, the parties to the agreement had settled between themselves where the dividing line was to be. The reality was that the appellant had no clear idea where the area of which he had exclusive possession stopped and his wife’s area began. Given the absence of any sufficient delineation in the leases, that ambiguity was sufficient to prevent the creation of a legal estate. The existence of a legal estate in land was not essential to the recognition of a hereditament which required a “unit of property” which was clearly defined, and the precise legal basis of its occupation was of secondary significance. However, having inspected the appeal property, the tribunal did not accept that any of the areas identified by the appellant was delineated by a sufficiently clear boundary to be capable of amounting to a separate unit of assessment. The only permanent structure was the chimney breast, which was insufficient, since the steps either side of it were entirely open. Whilst steps were often reflected in rating assessments by way of allowances, they did not (at least without some clear agreement) constitute a boundary.
(4) There was no suggestion that the layout of the unit had altered to any degree since the material day. Any customer would not differentiate between two businesses. The way in which a particular occupier chose to use a property was irrelevant to the identification of a hereditament: see Woolway (VO) v Mazars LLP [2015] UKSC 53; [2015] EGLR 56. Geographically separate premises should not be valued as one hereditament simply because a ratepayer chose to link his use of one with the use of the other. Equally, the fact that the appellant and his wife operated two bank accounts and tills from units 1A and 1B did not cause them to be two hereditaments. The two halves of the unit amounted to one unit of property, in one rateable occupation.
Ishtiaq Ahmed (of AUUA Law, of Bolton) appeared for the appellant; Cain Ormondroyd (instructed by HMRC Solicitor) appeared for the respondent.
Eileen O’Grady, barrister