Rating – Non-domestic rates – Material change of circumstances – Offices occupied by appellant temporarily incapable of beneficial occupation during fitting out – Parties failing to agree period of reduction of rateable value – Valuation Tribunal (VTE) directing temporary alteration to rating list – Whether VTE having power to require alteration to list in respect of fitting out period only – Appeal dismissed in first appeal – Appeal allowed in second appeal
These appeals both concerned non-domestic rates and raised issues as to the scope of the power of the Valuation Tribunal for England (VTE) under regulation 38(7) of the Valuation Tribunal for England (Council Tax and Rating Appeals) (Procedure) Regulations 2009 to require an alteration to a rating list to be limited to the duration of the circumstances giving rise to the alteration, and as to how that power should be exercised.
In both cases, the VTE had made alterations under regulation 38(7) to the rating list for a period of time when both hereditaments were subject to building works.
In the first appeal, there had been a reduction in the rateable value of the property to nil for the duration of the works but the VTE then restored the rateable value making the appellant ratepayer liable to pay rates of around £2,000. The appellant appealed against the decision of the Upper Tribunal (UT) that regulation 38(7) empowered the VTE to make the disputed order and that it was entitled to exercise its discretion in the way it had: [2020] UKUT 58 (LC); [2020] PLSCS 30.
In the second appeal, the hereditament had been removed for the list and the appellant valuation officer appealed against the decision of the UT upholding the decision of the VTE declining to exercise its power to restore under regulation 38(7): [2020] UKUT 238 (LC), [2021] RA 1.
Held: The first appeal was dismissed. The second appeal was allowed.
(1) The issue in both appeals was whether the power in regulation 38(7) could be applied to a hereditament which had been incapable of beneficial occupation as a result of a scheme of reconstruction, where the scheme had resulted in alterations to the physical state of the hereditament in question.
The ratepayers contended that the VTE had no power under regulation 38(7) to limit the duration of the alterations made pursuant to their proposals because the hereditaments had changed at the end of the period in question, as had their rateable values. Further, the power was only available where the hereditament and its rateable value had been the same at the end of the period in question as they had been prior to that period and the power could only be used to restore the status quo prior to the alteration of the list.
It was not possible under the 2009 Regulations for a ratepayer to submit a single proposal for both alteration of the list to reduce the rateable value of the hereditament to a nominal value or remove the property from the list for the duration of the works and an alteration of the list to change the rateable value of the hereditament with effect from the conclusion of the works. However, a ratepayer could protect itself by making separate proposals.
(2) The VTE’s primary task was to consider whether alteration of the list was well-founded on the material day. However, given that rates were a daily tax, it would not be surprising to find that the VTE had power to consider whether alteration of the list should have effect for the remainder of the life of the list (subject to any subsequent alteration) or for some lesser period of time. On its face, that was precisely what regulation 38(7) did.
Regulation 38(7) gave the VTE discretion not to limit the duration of the alteration to the period of the circumstances giving rise to the alteration, rather than mandating the VTE to do so. As the present cases illustrated, that was a discretion which could be exercised to the ratepayer’s benefit. It was immaterial that the valuation officer was under a duty to ensure the accuracy of the list whereas the ratepayer was not.
(3) The purpose of regulation 38(7) was clear from its wording: it was to enable the VTE to ensure that its order for alteration of the list had effect only for the duration of the circumstances which justified that alteration, but to give the VTE a discretion not to do so. The present cases fell squarely within the scope of that power.
The VTE and the UT were correct to conclude that regulation 38(7) empowered the VTE to make the order that it made in the first appeal and to make a similar order in the second appeal.
(4) The discrepancy in reasoning between the decisions in the present appeals suggested that the UT had made a flawed decision in one of them. Although deletion from the list was justified because the property was temporarily incapable of beneficial occupation due to building works, when those circumstances ceased to exist, the starting point should have been that the power would be exercised unless there was a good reason not to do so. The UT had failed to consider relevant matters and misdirected itself in the second appeal.
The UT was right to take the ability of the ratepayer to protect itself into account in the first appeal and wrong not to do so in the second appeal. The fact that the ratepayer was under no duty to maintain the accuracy of the list did not justify the ratepayer relying upon its own failure to make a proposal which would have protected its position when the VTE was asked to exercise its discretion in the ratepayer’s favour under regulation 38(7).
(5) Given that the UT exercised its discretion in a flawed manner in the second appeal, it was open to the appeal court to exercise the discretion afresh. It was clear that the discretion should be exercised in the same manner as the UT exercised it in the first appeal and for essentially the same reasons.
Luke Wilcox (instructed by Mills & Reeve LLP) appeared for the appellant in the first appeal; Matthew Donmall (instructed by General Counsel and Solicitor to Her Majesty’s Revenue and Customs) appeared for the appellant in the second appeal; George Mackenzie (instructed by General Counsel and Solicitor to Her Majesty’s Revenue and Customs) appeared for respondent in the first appeal; Daniel Kolinsky QC (instructed by Mills & Reeve LLP) appeared for the respondent in the second appeal.
Eileen O’Grady, barrister
