Redevelopment and liability for business rates

13th February 2020

Colour Weddings Ltd v Ritchie Roberts (Valuation Officer) [2019] UKUT 385 (LC)

The issue of how a property undergoing redevelopment should be treated for rating purposes hit the headlines a few years ago with the case of Monk v Newbegin. That case ended up in the Supreme Court, with a decision that was widely welcomed (other than by the Valuation Office). Essentially, the Supreme Court said that a building that is not capable of beneficial occupation due to ongoing redevelopment work should not be subject to rates liability.

Notwithstanding the principles set out by the Supreme Court, it is an issue which continues to cause dispute, as evidenced by this recent Lands Tribunal ruling.

The ratepayer had, in December 2014, entered into a lease of a disused warehouse with a view to converting it into a wedding venue. Works commenced in January 2015 and were completed by July 2017. The ratepayer contended that the property should be removed from rating liability for the full duration of the works. The VO contended that the initial phases of works were not sufficient enough in nature to render the premises incapable of beneficial occupation and contended for a later date, being 1 August 2015, as to when the works rendered the premises uncapable of beneficial occupation.

Having reviewed the full program of works, the Tribunal considered that, notwithstanding the works having commenced in January 2015, the premises would have not become incapable of beneficial occupation until 26 April 2015. There was no particular methodology applied in reaching this decision, it was simply the day that the Tribunal felt that the works would have been  sufficiently disruptive so as to render beneficial occupation of any part of the building impossible.

Key points

  • The mere fact that a building is undergoing redevelopment will not render it incapable of beneficial occupation for rating purposes; the Tribunal is entitled to look at the condition of the premises on any given day to decide whether it was capable of beneficial occupation as at that time
  • The decision demonstrates that the Valuation Office has become much more forensic in its analysis than used to be the case with a view to ascertaining precisely when the works render the premises incapable of beneficial occupation. In the past properties undergoing significant redevelopment would generally be removed from rates liability for the duration of the works
  • It is worth keeping the above in mind when preparing a schedule of works. It is possible that bringing certain elements of works forward, so as to render the building incapable of beneficial occupation, might result in significant savings of rates
  • It is important to keep records of the progress of works; photographs, as well as detailed schedules, could all prove useful evidence as to the condition of the building at any particular point in time 

For more information and to discuss how your business could be impacted please contact Arren Thornton.

The decision demonstrates that the Valuation Office has become much more forensic in its analysis.

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