| yorkshire region
A MAJOR SHIFT IN BUSINESS RATES VALUATION FOR MUSEUMS C
olin Hunter, business rates director at national commercial property
consultancy Lambert Smith Hampton (LSH), has been advising York Museum and Gallery Trust (YMT) in respect of its Business Rates appeals against the Valuation Office Agency (VOA) for several years. Here he talks about the recent Upper Tribunal hearing result and its significance for other museums.
Calculation of rateable value A property’s rateable value - which is used to determine its business rates liability - is intended to reflect the reasonable rent that a tenant would be willing to pay on the open market. In the case of YMT (and all other museums and specialist properties) where no rent is paid, the cost of constructing the building - commonly known as the contractor’s method - is deemed by the VOA to be a reasonable guide. However, it has long been argued that
using the contractor’s method for historic properties is neither fair nor reasonable, owing to the fact that it produces a dramatically higher rateable value than the alternative valuation method of receipts and expenditure, which has regard to the trading potential and the cost of running the property. The choice of valuation method is
determined by the VOA, which is tasked with setting and maintaining fair and reasonable rateable values. Yet, despite its industry-wide condemnation, almost 50% of all museums across England and Wales are still valued using the contractor’s method, including those of the YMT.
The specific properties that the appeals
referred to were all historic, listed buildings in York occupied and run by YMT and its wholly owned subsidiary York Museums and Enterprises Ltd (YME), and included the iconic Castle Museum, Yorkshire Museum which includes the ruins of St Mary’s Abbey, York Art Gallery and the former St Mary’s Church, known as the Heritage Centre.
...it has long been argued
that using the contractor’s method for historic properties is neither fair nor reasonable, owing to the fact that it produces a dramatically higher rateable value than the alternative valuation method of receipts and expenditure, which has regard to the trading potential and the cost of running the property.
Separate assessment of trading areas During the case, the VOA also argued that if a museum has a separate trading company (as recommended by the Charity Commission), then that company must be in occupation of any trading areas and therefore these should be separately assessed. If separately assessed, these areas are not eligible for 80% mandatory charitable rates relief, nor the discretionary 20% where this is granted. After several months of deliberation,
the Upper Tribunal published its decision, ruling primarily in favour of YMT on the following points: • Calculation of rateable value - The Upper Tribunal came down firmly against the use of contractor’s method of valuation for YMT’s properties, confirming a rateable value of £1 for the Yorkshire Museum - a hidden gem with modest visitor numbers high maintenance costs. In contrast, Castle Museum, which is the jewel in the crown for YMT and has higher visitor numbers, was set a much higher rateable value of £183,000, which reflects not just its turnover but the surplus the property is capable of generating.
Colin Hunter 78
• Separate assessment of trading areas - The Upper Tribunal reasoned that the
aims of the YMT and YME were wholly aligned and so in areas shared between the two, there was no conflict and YMT were indeed the rateable occupiers. The exception was the small “shop” at Yorkshire Museum which, at the dates for the appeals of 1 April 2010, was divided from the rest of the museum by a set of doors and was served by a dedicated retail counter and till. As this space was wholly retail, it was considered that there was no shared occupation and that the shop should therefore be viewed as being in the occupation of YME and separately assessed. The impact of this is a backdated liability of around £15,000, which might be further reduced.
Had the VOA been successful on this point, not only would it have significantly increased the YMT’s total Rateable Value, it would also have meant that charitable relief and discretionary relief would not be available for shops, cafés and wedding or conference venues.
Implications for other museums Over 700 museums across England and Wales, whose rateable value is calculated in a similar way to YMT, may benefit from appealing their valuations, based on this case - particularly those which have seen large increases following the Revaluation in April 2017. To view Lambert Smith Hampton’s
infographic to see the changes by region, visit
www.lsh.co.uk/~/media/files/lsh/pdfs/busin ess-rates/museum-article-infographic-
map.ashx?la=en Properties will not automatically be
reassessed and backdated appeals must be lodged by 30 September 2017. In addition, as the decision for Castle Museum demonstrates, museums can have legitimately high values so ratepayers are strongly advised not to appeal without first seeking professional advice from a qualified Chartered Surveyor. The YMT decision also provides a
blueprint for how museums can avoid having their shops and cafés separately assessed and also sets the boundaries for situations where the VOA will be able to split out the shops and cafés. A copy of the Decision of the Upper
Tribunal can be found at
http://landschamber.decisions.tribunals.gov .uk/Aspx/
view.aspx?id=1333. Charities and museum owners may also
be interested to visit
www.lsh.co.uk/commercial-property- services/business-rates
COMMERCIAL PROPERTY MONTHLY 2017
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