Rating – Non-domestic rates – Hereditament – Appellant valuation officers altering rating list to create separate hereditaments in respect of sites of ATM machines in supermarkets and convenience stores – Whether ATM sites properly regarded as separate hereditaments – Whether sites in rateable occupation of store or ATM operator – Appeals dismissed
The respondents were supermarket and convenience store operators in whose premises ATM services were provided by banks within the same corporate structure. In all cases, the ATMs were installed and operated pursuant to a licence agreement with the relevant store operator.
In 2014, the appellant valuation officers altered the 2010 rating list to create separate entries in respect of the sites of the ATM machines, encompassing the ground on which each ATM stood and the space it occupied. Before the alteration, the ATMs had not been distinguished from the host stores for rating purposes. Thereafter, each ATM site was listed as a separate hereditament with its own rateable value but, in most cases, without any corresponding reduction in the rateable value of the shop or other premises in which it was located.
The Valuation Tribunal for England dismissed the respondents’ appeals against alteration, holding that the ATM sites were separate hereditaments in the rateable occupation of the bank or ATM provider rather than the proprietor of the host store. The Upper Tribunal upheld that decision in respect of all the external machines, but not the internal machines: [2017] UKUT 138 (LC); [2017] PLSCS 90. That decision was overturned by the Court of Appeal which held that none of the ATMs were rateably occupied separately from the host stores: [2018] EWCA Civ 2472; [2018] PLSCS 194. The appellants appealed to the Supreme Court.
Held: The appeals were dismissed.
(1) The appellant had argued that the approach of the Court of Appeal risked undermining the fundamental rating principle of equality, in that identical ATMs of adjacent high street buildings would be treated differently depending on the use of the building. However, that overstated the significance of the principle of equality between ratepayers in cases such as the present where the fundamental issue was simply about where to draw the line, when the functions of the ATM and the host building were not wholly disconnected.
(2) Under the Valuation for Rating (Plant and Machinery) (England) Regulations 2000, the ATM was left out of account for valuation purposes. In assessing the hypothetical rent for rating purposes, other than in respect of plant or machinery within the classes set out in the schedule to the regulations, the prescribed assumption was that the value of any plant and machinery had no effect on the rent to be so estimated. An ATM did not fall within any of the classes set out in the schedule; it therefore had to be assumed to have no effect on the rateable value of the hereditament on which it was sited. On its face the regulations were concerned solely with issues of valuation, not issues of rateability such as those in the present appeals.
(3) In principle, the presence of an item of non-rateable machinery, such as an ATM, should not be ignored when determining whether a separate hereditament existed. The statutory assumption applied only for the purpose of valuation and might not legitimately be applied in answering the logically prior question of whether there was a hereditament which needed to be valued. A hereditament was a self-contained piece of property, all parts of which were physically accessible from all other parts, without having to go onto other property. The Upper Tribunal had been entitled to find that, once a machine had been installed, there should be no difficulty in defining the boundaries of a fixed ATM site with sufficient precision to satisfy the geographic test of self-containment: Kennet District Council v British Telecommunications [1983] RA 43 and Woolway (VO) v Mazars LLP [2015] UKSC 53; [2015] EGLR 56 applied.
(4) In deciding whether the retailer or the bank was in rateable occupation, the underlying principle remained that, where a person already in possession had given to another possession of a part of his premises, if that possession was not exclusive, he did not cease to be liable to the rate, nor did the other become so. The starting point was that the retailers were in exclusive occupation of their stores. One then asked how that had been affected by the transfer of operation to an associated company and the limited possession given of the ATM sites; and whether the occupation of the store owner remained paramount.
The Upper Tribunal had been entitled to find, on the evidence, that the retailers retained occupation of the ATM sites but had agreed to confer rights on the bank which substantially restricted the store’s use of that small part of its premises which comprised the ATM site. The store had agreed to that restriction because the presence of the ATM furthered its own general business purposes and the operation of the ATM by the bank provided the store with an income. The tribunal had been right to reject that as of any relevance because both parties derived a direct benefit from the use of the site for the same purpose and shared the economic fruits of the specific activity for which the space was used.
However, the Upper Tribunal had erred in law in treating the external machines differently by taking an unduly narrow approach. The only differences identified were the fact that the external ATMs were available to a wider market at all times and physically separated from the other facilities in the store. However, those factors did not detract from the finding that the retailer remained in occupation of the ATM site; nor did they suggest that it was any less part of the retailer’s overall business. The difference was no greater in principle than that between internal and external ATMs in a bank. Accordingly, the external ATMs ought not to be treated as separate hereditaments.
Timothy Morshead QC and Galina Ward (instructed by HMRC Solicitor’s Office and Legal Services) appeared for the appellants; Daniel Kolinsky QC and Luke Wilcox (instructed by DMH Stallard LLP, of Crawley) appeared for the first respondent; Timothy Mould QC and Guy Williams (instructed by Bryan Cave Leighton Paisner LLP) appeared for the second respondent; Richard Drabble QC and Christopher Lewsley (instructed by Dentons UKMEA LLP) appeared for the third respondent; Timothy Mould QC and Christopher Lewsley (instructed by Dentons UKMEA LLP) appeared for the fourth respondent.
Eileen O’Grady, barrister
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