All retail warehouses require heating, cooling and ventilation to a greater or lesser extent. The question that arose in Iceland Foods Ltd v Berry [2018] UKSC 15 was whether a specialised air handling system, used in connection with refrigerated merchandise in a retail store, designed and programmed to maintain the store temperature at an acceptable level for both the functioning of the refrigerated cabinets and the comfort of staff and customers, should be treated as part of the hereditament for rating purposes, or whether it should be ignored.
The Valuation for Rating (Plant and Machinery) (England) Regulations 2000 provide that plant or machinery in or on the hereditament “used or intended to be used in connection with services mainly or exclusively as part of manufacturing operations or trade processes” (ie “the tools of the occupier’s trade”) are not rateable. And the Valuation Officer argued that the words “trade processes” should be narrowly construed to refer to a process that was designed to bring about a “transition” from one state to another.
The Valuation Tribunal ruled in favour of the retailer. But the Upper Tribunal reversed the decision. It did not believe that the display or storage of goods in itself, or the creation of an environment conducive to the display or storage of goods, could properly be regarded as involving a trade process. And the retailer’s requirement for more substantial or powerful equipment than is normally found in retail premises did not create a relevant distinction. The Court of Appeal agreed. It accepted that “the process of freezing chickens” would probably be a trade process, but ruled that “just keeping them frozen to be offered for sale” did not qualify.
The retailer appealed. It claimed that its trade process involved “the continuous freezing or refrigeration of goods to preserve them in an artificial condition, without which they would be worthless”.
The Supreme Court reviewed the history of the legislation, the distinction between plant and machinery that serve premises and plant and machinery provided for use in connection with a trade process, and the difficulties that arise when plant and machinery perform both functions. It interpreted the exclusion in the 2000 regulations widely, ruling in favour of the retailer.
Lord Carnwath, who spoke on behalf of the Supreme Court, noted that the word “process” has various means. He took the view that there is nothing in the word itself that implies transition or change, stating that the phrase “trade process” refers simply to a process carried on for the purposes of a trade. In its widest sense, it includes anything done to goods and materials and is apt to cover “the continuous freezing or refrigeration of goods to preserve them in an artificial condition”. And, since the services provided by the relevant plant and machinery were used “mainly or exclusively” as part of that trade process, they were not to be treated as part of the hereditament for rating purposes.
Allyson Colby, property law consultant
