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My colleagues and I in the Vail Williams Business Rates department breathed a sigh of relief as the Supreme Court today unanimously allowed an appeal against the Valuation Office in a long-running test case focused on how property undergoing redevelopment or refurbishment is valued for rating purposes.

This ruling has important implications for rating of property in both the 2010 Rating List and following the forthcoming rates revaluation with experts hailing the decision as supportive of development across the UK.

The Supreme Court threw out the Court of Appeal’s judgement and restored the decision of the earlier Upper Tribunal in its entirety. It has overturned the Valuation Office Agency’s operational stance that premises undergoing refurbishment or redevelopment were, all the same, still capable of beneficial occupation because they were deemed to be in economic ‘reasonable repair’, as stated under the Para 2 (1) (b) of Schedule 6 of the Local Government Finance Act 1988.

Here’s the detail:-

Business Rates –Supreme Court - Newbigin (Valuation Officer) v S J & J Monk (Appellant)

Decision: Appeal allowed - restoration of the determination of the Upper Tribunal – New definition: ‘Building undergoing reconstruction’ - with the premises reduced to the nominal amount of £1 rateable Value.

Overview: Principle of reality cannot be overridden! Premises in the course of refurbishment or redevelopment are not capable of beneficial (rateable) occupation – it’s an objective fact - they’re in the process of redevelopment and consequently no part is capable of beneficial use.

Developers and owners who redevelop commercial premises will be pleased with this ‘common-sense’ decision. However, to avoid abuse and deliberate ‘soft stripping’ attempts to obfuscate beneficial occupation, it is expected that this judgment will only apply where the major building elements have been stripped out to such an extent that their replacement would go beyond the meaning of repair. So the principle is there but the facts will dictate.

For more information, clarification and assistance about this or any other Business Rates concerns you may have – please contact any member of the Vail Williams Business Rates Team.