A test case dispute over the effect of relegation on the calculation of business rates for football stadiums is to be heard by a tribunal next month.
Wigan Athletic – which in recent years had tumbled from the Premier League all the way down to League One, but last season secured a return to the Championship – argues that such demotion constitutes a “material change of circumstances” that should lead to lower business rates bills.
The club’s lawyers will argue at the valuation tribunal (VT) in early July that the devastating financial impact of relegation should have been taken into account immediately, not put off until the next revaluation. However, whatever the VT decides, it is likely that the high-profile case will be appealed to the Upper Tribunal (Lands Chamber), and perhaps even to the Court Of Appeal, meaning it is likely to be some time before the issue is resolved.
Unlike most other business premises, the rateable values of football stadiums are arrived at by reference to a number of factors, the principal one being the estimated cost of building a replacement stadium. However, a crucial element in this valuation is an adjustment that recognises the ability to pay, based on income.
This means that clubs in lower leagues face far lower bills than elite Premier League teams.
John Webber, head of business rates at Colliers International, called for a “common sense” change to the rating system to enable the Valuation Office Agency (VOA) to recognise both relegation and promotion as a “material change of circumstance”.
He said: “It is ridiculous that if a club is then relegated to a lower division, there is nothing in the current VOA’s approach to note that this is a ‘material change’ to its income and the club faces a double whammy of high business rates combined with often significantly reduced income.”
Jim Gallagher, director of Colliers, added: “The problem is that the real world has moved at a faster pace than the rating system. The advent of the Premier League in 1992 has seen ever-increasing amounts of money flowing into top flight football, as Sky and others have been prepared to invest millions in TV rights for games that have worldwide appeal.”
“We are not advocating a one-sided approach – surely it would be fairer to expect promoted clubs to pay more in business rates and relegated ones less? Leaving matters until the next revaluation is too late for many clubs. It would be easy for the VOA to adjust rating assessments on promoted and relegated clubs on an annual basis and it is hard to believe that there would be any resistance as the system would be so much fairer.
“All that is required is a tweak in rating legislation leaving the government’s coffers intact as they can balance the books in terms of numbers of rates bills going up and those coming down.”
Wigan was relegated from the Premier League, after a seven-year stay, in 2013. It was then relegated to League One two years later, following which point Colliers says it was paying more than six times the average business rates of its rivals in the division £590,000 compared with an average of £88,000. The club secured promotion back to the Championship last season.
But the club is far from alone in suffering the consequences of relegation. When Sunderland’s Stadium of Light was valued for business rates in early 2017, the club was in the Premier League and its rateable value (RV), Colliers says, was increased by 86% from £1.9 million to £3.53 million, giving the club an annual rates bill of £1.38m in 2017/8, rising to £1.74 million for this coming year.
Yet, during this time, Sunderland has been relegated twice.
In contrast, Wolverhampton Wanderers’ stadium was valued when the club was in the Championship, giving it a rateable value of £685,000, and thus an annual rates bill of £328,000 in 2017/8 and £338,000 this year. The club has now been promoted and will play next season in the Premier League, where it will receive at least £100 million of income from TV rights, etc.
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