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Museum operators across England and Wales breathed a sigh of relief last week after the Upper Tribunal (Land Chamber) ruled in their favour, following a long-running battle with the Valuation Office Agency (VOA) over how the properties are valued for business rates purposes.
In the case of Stephen G Hughes v Exeter City Council the court said that the Royal Albert Memorial Museum (RAMM) in Exeter should not have been valued based on the cost of rebuilding (Contractor’s), which is the Valuation Office Agency’s (VOA) preferred method. Instead, the court ruled that the museum buildings should be valued based on net income (Receipts and Expenditure).
The ruling reinforces the decision of a similar appeal by York Museums and Gallery Trust (YMT) in 2017, in which it was determined the Contractor’s basis was not an appropriate valuation method and the rateable value of the loss making Yorkshire Museum should be reduced to £1.
RAMM is the largest museum Exeter and is housed in a Gothic Revival building of local New Red Sandstone that has undergone several extensions during its history. It had been entered in the 2010 non-domestic rating list at a rateable value of £510,000 with effect from 15 December 2011. This followed the completion of a £24m project of essential repairs and refurbishment that started in 2008. This assessment was appealed and a revised rateable value of £445,000 was agreed. Following the YMT decision the agreed value was again challenged resulting in the appeal to Upper Tribunal by the VOA.
Following this decision, RAMM’s rateable value will be reduced to £1, effective from 1 April 2015. The reduction should also be applied to the 2017 Rating List which will result in significant savings for the museum.
Colin Hunter, Director of Business Rates at Lambert Smith Hampton (LSH) who advised Exeter City Council on the appeal, commented:
“This is the third appeal of this kind that we have taken to the Upper Tribunal and, in all cases, the court has found in our favour. However, what is interesting about this case compared with the others is that it makes it clear that the choice of valuation method isn’t a matter of legal principle but rather should be based upon fact and evidence.
“The result is therefore likely to have a significant impact on the way English and Welsh museums are valued in the future, particularly older museums situated within historic buildings which would have substantial rebuild costs.”
The VOA now has until 7 February 2020 to appeal against the decision.
In partnership with Lambert Smith Hampton, AIM has updated its guide on ‘Successfully Negotiating Business Rates’. Written by Colin Hunter, the guide covers the basics required to understand the complex world of Business Rates.