Rating – Non-domestic rates – Valuation – Bingo hall – Valuation office agency employing valuation scheme for bingo halls based on percentage of fair maintainable trade (FMT) – Appellant club operator “right-sizing” property and proposing alteration to rateable value – Whether departure from valuation scheme justified – Appeal dismissed
The appellant operated a bingo club in a building at 937 Kingsbury Road, Birmingham. In late 2016, following a deterioration in market conditions, the appellant decided to “right-size” the building by reducing the floor area to accommodate a smaller clientele. Accordingly, it agreed to sub-let part of the building to a gym operator, and built an internal wall to divide the building in two.
In March 2017, the appellant made proposals to alter the rateable value of the building in the 2010 list in light of the changes to the building, which had originally been agreed at £179,000. It was common ground that the appellant would not have contemplated reducing the floor area of the club at the antecedent valuation date (AVD) for rating purposes, namely April 2008. The valuation scheme employed by the valuation office agency (VOA) for bingo halls was based on a percentage of the club’s fair maintainable trade (FMT). The respondent valuation officer did not consider the proposals to be well founded.
The appellant appealed to the Valuation Tribunal for England (VTE) which directed that the rating list be altered to show two entries for the building, in place of the previous single entry. The portion occupied by the appellant was entered as “bingo hall and premises” with a rateable value of £161,000, while the remainder (soon to be the gymnasium) was shown as “building under reconstruction” with a rateable value of £0.
The VTE did not consider that the rateable value of the bingo hall should be reduced on account of its reduced floor area. Its assessment of £161,000 was instead based on the original figure of £179,000 from which it deducted 10% to reflect disruption while the division works were undertaken. The appellant appealed.
Held: The appeal was dismissed.
(1) The VOA scheme was no more than an approach to valuation which supported but did not trump, the statutory valuation hypothesis. Moreover, the scheme itself made provision for departure from it where its application would be inappropriate. Where every other bingo club in the country had been valued using a certain method, to make no attempt to do so required some more substantial justification than reliance on a single valuer’s judgment.
The VOA’s valuation manual had no statutory authority, and the respondent did not dictate how properties should be valued. Where there was a valuation scheme, ordinarily it ought to be followed, but the valuer could depart from a valuation scheme whenever there was good reason to. In the present case, there was no such reason. The scheme had been adopted in a number of rating lists; and in the 2010 list it had been the basis of at least 300 settlements. No other bingo clubs in the 2010 or 2017 lists had been valued other than in accordance with the scheme. Far from being an approach of last resort, in the case of bingo halls the opposite was the case, especially where the validity of the only alternative method put forward, the comparative method, could not be verified because of the lack of market rental evidence: JD Wetherspoon plc v Day (VO) (2008) RA/11/2005 considered.
(2) The appellant’s proposed valuation method, of applying a pro-rata reduction to a starting value calculated according to the scheme, was fundamentally flawed. The scheme was not based on the size of the property, but on how it would be expected to trade under the management of a notional operator. If a property had a rateable value calculated by reference to trade which showed a comparatively low rate per sq m, it was likely that it was much larger than other properties with a comparable FMT. The implication was that such a property was too large for the level of trade it was able to generate. The commercial expectation was that a similar level of trade could be achieved from smaller premises, because the customer base had shrunk so significantly that the original larger premises were no longer required to accommodate them. The appellant’s approach paid no attention to that expectation. The appellant’s experts both stressed that bingo clubs were valued per sq m by reference to rent, yet rental evidence in this appeal was conspicuous by its absence. In all the circumstances, the appeal was without foundation and had to be dismissed. The VTE’s decision to enter the club into the rating list at £161,000 RV with effect from 28 November 2016 would be confirmed.
Luke Wilcox (instructed by Mills & Reeve LLP) appeared for the appellant; George Mackenzie (instructed by Solicitor for HM Revenue and Customs) appeared for the respondent.
Eileen O’Grady, barrister
Click here to read a transcript of Buzz Group Ltd v Salmon (VO)
