The Supreme Court decision in Iceland Foods Ltd (Appellant) v Berry (Valuation Officer) on 7 March establishes what is and is not rateable plant and machinery as applied to its use in respect of trade or manufacturing operations. It means that some properties, such as cold stores, could be overvalued by as much as 40%.
The court was asked to decide whether the services provided by a specialised air handling system, used in connection with refrigerated merchandise in the appellant’s retail store, were “manufacturing operations or trade processes” for rating purposes and thereby excluded from the rating assessment.
Prior to the decision the Valuation Office had routinely included in the rating assessments of properties plant and machinery that were in situ purely to ‘’facilitate a particular process’’ on the property. Such plant and machinery is now excluded from rating assessments. In respect of the Iceland property, their trade for these purposes was accepted as ‘’the continuous freezing or refrigeration of goods to preserve them in an artificial condition”. This means that the exclusion of such plant and machinery from rating assessments can extend beyond industrial property into retail properties.
It is unlikely that the Valuation Office has the resources to revisit valuations affected by the decision. It will be left to ratepayers or their representatives to contest their valuations in light of the decision. Any reductions secured will only be effective for the purposes of the 2017 rating list, unless there are existing appeals against the 2010 rating list which have been waiting for the Iceland decision.
Further appeals based on this decision will establish how far the principle extends to other plant and machinery that is currently included in existing rating assessments. For example, the impervious wall finishes in food production properties and chill or cold stores on retail premises could now be considered as part of the “trade processes” or “manufacturing operations” and therefore excluded from rating.
Robert Hayton, Executive Vice President at business rates advisor Altus Group, said: “This decision has far reaching implications for businesses that rely on plant and machinery attached to their building to undertake a ‘process’ rather than to enhance the comfort or enjoyment of the property for those working in it.
“In other words, the plant and machinery is included for the particular activity of the occupier, not for the building. While a sprinkler system protects the building and air conditioning usually makes the property more comfortable, the air handling equipment in this Iceland property was there specifically to help preserve the food.
“Historically, the Valuation Office has included plant and machinery in rating assessments, and has only excluded it where it was obviously there to facilitate an industrial process. This decision makes no distinction between industrial and other types of process.”
“For grocers, the implications of this decision are therefore far reaching. Any process that preserves food or products using plant and machinery will need to be looked at. This will include every facility in the supply chain from the grower or importer to the shop shelves. Some properties, such as cold stores, may have been over-valued by as much as 40%.”
“It could affect tens of thousands of properties and save hundreds of millions of pounds in business rates over the five years of the current rating cycle.”