Non-domestic rating – Alteration of list – Beneficial occupation – Local Government Finance Act 1988 – Appellant taking lease of premises – Works needed to replace lighting and reinstall high-voltage cabling before appellant able to occupy premises for its business – Whether premises to be removed from rating list while works carried out – Whether capable of beneficial occupation during that time – Whether rateable value to be reduced to nominal amount – Appeal dismissed
The appellant company’s business involved the conversion of mixed waste plastic, using plastic moulding techniques, to products for the construction industry such as permeable paving. Since that process consumed substantial amounts of electricity, the appellant needed a high-voltage power supply at its premises. In June 2011, it took a lease of commercial premises in Ecclesfield, Sheffield, which had originally been built as a warehouse, at a rent of £100,000 pa. After committing itself to the property, it discovered that the high-voltage electricity supply had been cut off and high-voltage cabling had been removed.
The appellant sought to be relieved of its liability to pay rates while it was carrying out the necessary work to reinstall the cabling and replace the lighting, which did not comply with health and safety legislation. It accordingly made a proposal that the premises should be removed from the rating list, in which they were entered with a rateable value of £102,000, while it carried out the first phase of the works between June 2011 to January 2012, after which they should be reintroduced on a phased, proportionate basis according to the amount of the property that was useable, until the remaining phases of the works were completed in August 2012.
The respondent valuation officer rejected that proposal and his decision was upheld by the Valuation Tribunal for England (VTE) on appeal. The VTE found that the premises had not ceased to be a hereditament and was not derelict or incapable of beneficial occupation; in that regard, it found that, while the premises as they stood had not been suitable for the appellant’s needs owing to the lack of high-voltage electricity, they could have been used by a different, non-specialist occupier.
The appellant appealed to the Upper Tribunal. It contended that: (i) the premises were not capable of beneficial occupation during the execution of the works; or, alternatively (ii) if the premises were to remain in the list, their rateable value should be reduced to a nominal amount. The respondent contended that the appellant was not entitled to rely on the latter argument since the scope of the appeal was limited to the deletion issue.
Held: The appeal was dismissed.
(1) The electrical works had been carried out once the lease had been completed and the appellant had taken possession. There was no evidence that the landlord would have allowed the works to be carried out unless the appellant signed the lease. Even though manufacturing might not have occurred until a later date, it was necessary for the appellant to have access to the premises in order to carry out the works. In those circumstances, the appellant was in beneficial occupation of the premises from June 2011 for the purpose of undertaking refurbishment work and making it suitable for the appellant’s particular requirements. It followed that the premises were capable of beneficial occupation from that time. The appellant had therefore failed to establish its primary case that the hereditament should be deleted from the rating list as being incapable of beneficial occupation: Spears Brothers v Rushmoor Borough Council [2006] RA 86 and Post Office v Nottingham City Council [1976] 1 WLR 624; [1976] 2 EGLR 94; (1976) 240 EG 211 distinguished.
(2) The appellant was entitled to advance its alternative case that the rateable value of the premises should be reduced to a nominal amount. The appellant’s finance director, who represented it, could not as a lay person be expected to differentiate between the removal of the hereditament from the rating list or being it retained in the rating list but at a nominal value. He was simply seeking to avert liability for rates for the period that he considered appropriate. The appellant’s proposal was, in effect, that the rateable value should not apply for the period commencing in June 2011, whatever method was used to bring about that result.
However, the nominal value argument had no merit. Under the Local Government Finance Act 1988, the statutory hypothesis for rating purposes assumed that the hereditament was in a state of reasonable repair, excluding any repairs that a reasonable landlord would consider uneconomic. The replacement of old lighting to comply with health and safety was clearly a repair. To reinstall electricity to the hereditament was also a repair. The rest of the works were not required to be assessed for the purpose of assessing rateable value. Accordingly, the only elements of the works that fell to be considered for the purposes of rating were the replacement of the lighting and any electrical work up to the first distribution board. On the evidence, a reasonable landlord, with the opportunity of a likely letting at a rent of approximately £100,000 pa, would consider it economic to carry out those works; it was therefore to be assumed, on the statutory hypothesis, that at the valuation date the lighting had been replaced to comply with legislation and the power supply had been reconnected. On that assumption, the rent would not have been less than that which had actually been agreed and, on that basis, the rateable value was £102,000.
Per curiam: There appeared to be no basis in the legislation for the reintroduction of a hereditament into the rating list on a phased basis, by reference to the area of the hereditament that was useable during the course of works.
The appellant was represented by its finance director, Paul Sapsford; Matthew Donmall (instructed by the legal department of HM Revenue and Customs) appeared for the respondent.
Sally Dobson, barrister
