1. Success Guides
Successfully
Negotiating
Business Rates

2. Success Guides
Successfully
Negotiating Business
Rates
By Colin Hunter MRICS IRRV
(Hons)
Front cover picture: The Historic Dockyard Chatham on a
busy day at the height of the summer season. The trust
which runs the dockyard has been successful in a range of
rating appeals and continues that process in relation to
values assigned to its many historic structures on a case by
case basis.

3. 3
AIM Success Guides
Successfully Negotiating
Business Rates
Business rates are
surrounded by myths
and legends, as is only
right and proper for
something with 400
years of history.
Business Rates may well deserve a place in a museum
exhibition: in one form or another they have been with
us since the 1601 Poor Law. You will be pleased to know
the legislation has been updated since its inception and
the current primary legislation for England and Wales is
the Local Government Finance Act 1988 (LGFA) 1988.
Both Acts were signed by a Queen Elizabeth.
History & Background
Business rates are surrounded by
myths and legends, as is only right and
proper for something with 400 years
of history, but in essence it is simple.
Under the current legislation, it is
simply a property tax.
Since devolution, England and Wales
operate slightly different systems.
Scotland and Northern Ireland have
always operated under similar but
separate legislation. The general
principles apply to all four countries
but the specifics vary. The commentary
set out below relates to England; a
comparison of the differences between
England and the other legislative areas
is set out at the end of this guide.
Business rates are a significant cost to
businesses, and will be an increasingly
significant cost to museums over the
next few years.
Basics
The basis of the tax is the Rateable
Value which is set by the Valuation
Office Agency (an executive agency of
HMRC). The Rateable Value is an
estimate of the rental value of the
property (‘hereditament’) which is
being charged business rates. Arriving
at a rental value is relatively
straightforward for shops, offices,
factories and warehouses but is far
from simple for properties which are
normally never let, or which are
unique. The definition of Rateable
Value is set down in the legislation but
has a track record of case law to ‘assist’
in working out what is being valued
and what is being ignored.
In its simplest form, the rates liability is
arrived at from the multiplication of
the Rateable Value by a nationally set
multiplier, which varies from year to
year, based on the RPI increase for
September of the previous year.
Revaluations – Resetting the
Clock
The Rateable Values are reset
periodically by a Revaluation of all
properties. The LGFA sets a statutory
period of five years between
Revaluations, the first being in 1990,
followed by five yearly reviews up to
2010. The Growth and Infrastructure
Act has however deferred the next
Revaluation to 2017. The valuation
date for each Revaluation is two years
prior to the Revaluation coming into
force, therefore the 2010 Revaluation is
based on rental values in April 2008,
just after the peak of the property
boom.
The system of grant support changed
on 1 April 2013. Although the rates
bills will not change, the political
and economic landscape for Local
Authorities in England has changed
significantly and is discussed in a
separate section below. This is in part
driven by the Localism Act 2011, which
places greater emphasis on the
provision of local services by Local
Government. It is however the biggest
change to Local Government funding
since the introduction of the ill-fated
Community Charge in 1990.

4. Management Successfully Negotiating Business Rates
At the start of a new Rating List, there
is often a significant adjustment
between different property sectors
and regional locations so that some
properties face significant hikes in
liability and some benefit from
significant reductions. This is smoothed
out by capping the maximum increase
or decrease based on a percentage
change from the liability for the year
immediately prior. Therefore for the
2010/11 rate year the liability is capped
by reference to the 2009/10 rate
liability. This is known as transitional
allowance.
The system of transitional allowance is
governed by Statutory Instruments.
Following the postponement of the
2015 Revaluation to 2017, there may
be changes made to deal with the
additional two years. As noted above,
Scotland, Wales and Northern Ireland
operate different regimes; please refer
to the section at the end of this guide if
your museum is not in England.
There is nothing individual ratepayers
or groups of ratepayers can do to
influence the multiplier, or the
transitional allowance scheme.
Therefore the only part of the basic
liability which can be addressed is the
Rateable Value.
need to understand what we are
valuing. The single word museum
normally conjures a mental image of
a Victorian red brick purpose built
municipal building. A museum is
not the building or land, it is the
organisation that occupies it and any
type of building could be occupied as
a museum. However, the normal
situation is that museums occupy
unique buildings, some of which are
purpose built, many of which are
adapted from older properties. The
property itself may be the reason for
the museum’s existence. There are a
small number of museums, such as
Beamish in the North East, which are a
collection of older buildings relocated
onto a single site to provide a new
setting. The true value of museums is
cultural, educational, and social.
However the Rateable Value should
only be a measure of financial value,
i.e. the rent the tenant would be willing
to pay, assuming the tenant has
responsibility for all repairs, running
costs and insurance.
There are four tried and tested
methods for arriving at this notional
rent for rating:
1. Rental Comparable Method
2. Rateable Value Comparable Method
3. Receipts and Expenditure Method
Reliefs
Charities receive a mandatory 80%
relief from business rates for properties
they occupy for their charitable
purposes. Some Local Authorities give
further discretionary relief which will
further reduce liability, potentially to
zero. The number of authorities giving
this discretionary relief has been falling
for several years, and that trend is
likely to accelerate due to the latest
changes to the funding regime for the
councils which is considered later in
this note.
How Museums are Valued for
Rating
As noted above, the Rateable Value is
a notional rent for the property, but
before we can arrive at that rent we
4. Contractors Method.
Rental Comparable and Rateable
Value Comparable
For the vast majority of properties
occupied by museums, there are no
rental comparables, and there is no
rent paid on the property so the first
option is ruled out in most cases. The
second option is something of a self
fulfilling prophecy; it has the problem
of how to compare different unique
properties, and is of no help at the
start of a new Rating List where there
are no agreed comparables.
This leaves two methods.
Receipts and Expenditure
The third method, Receipts and
Expenditure, is commonly used when
The single word
museum normally
conjures a mental
image of a Victorian
red brick purpose built
municipal building. A
museum is not the
building or land, it is
the organisation that
occupies it and any
type of building could
be occupied as a
museum.
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5. 5
AIM Success Guides
The Valuation Office’s
preferred approach is
to adopt a % of the
Gross Receipts on the
assumption that
irrespective of the
commercial reality, a
museum will still
make a bid for the
building.
valuing leisure attractions. Museums
are in the market in competition for
visitors with other leisure attractions
and some are described in the
Rating List as visitor attractions and
not museums (for example SS Great
Britain). There is a strong case for
arguing that this is the appropriate
method for valuing all museums
but this argument runs into several
difficulties. Firstly, there is a
general resistance from the
Valuation Office to consider the full
receipts and expenditure of museums.
Their argument is that museums are
occupied by charitable or public
bodies and so there is a belief that
they are not run on a truly commercial
basis and that the income generated
is not as much as a well managed
commercial operation would
produce. Their argument also
goes on to say that the costs and
expenditure are influenced by the
charitable nature of the business
and so do not give a true economic
picture.
The Valuation Office’s preferred
approach is to adopt a % of the Gross
Receipts on the assumption that
irrespective of the commercial reality,
a museum will still make a bid for the
building. This view is based on the
values, other than financial, that
museums create. This approach is
normally referred to as the simplified
receipts method.
This argument ignores the increasing
professionalism of museums over the
last three decades, with marketing
and promotion of the attraction on a
national or global scale, the advent
of internet sites and the enhanced
promotion of retail sales. There is a
limited degree of truth regarding costs
and expenditure in that the charitable
objectives of a trust are different to the
commercial objectives of a for profit
business. The reality is that for this
sector, the charitable trusts are the
market and so the considerations of a
charity are the relevant considerations
when deciding what a willing tenant
could, or would, pay in rent to a willing
landlord.
Contractors Method
The final method, Contractors Method,
is often referred to as the method of
last resort. Contractors Method
assumes that if the property did not
exist it would be built. The cost of
constructing a replacement property,
including a figure for the land and the
fees for construction, is calculated and
a statutory percentage is taken as
being the equivalent rental value.
This approach is adopted for most
municipal buildings, and specialised
properties such as steelworks. Where
the construction cost is met in part
from Central Government or EU grants,
there is an argument that the costs
should be reduced to reflect the
availability of the grants. This argument
has recently been thrown out by the
Upper Tribunal (Lands Chamber)
(formerly the Lands Tribunal) which
is the final court in England for
determining valuation matters. AIM
and several of its members were
contacted by the Valuation Office
following the outcome of an appeal for
Sport England in respect of Bisham
Abbey. This decision took away any
allowance for grant aid. The Valuation
Office had previously made allowances
(potentially as much as 50%) when
valuing a range of properties funded
by grants.
This method normally produces far
higher values for museums than the
receipts and expenditure approach
and raises serious problems when
considering historical properties that
are expensive to build and have no
modern equivalent. If these properties
did not exist then there would be no
purpose in recreating them. As always
there are exceptions to the rule, such
as the recreation of the Globe Theatre
on the South Bank. There are over
2,500 properties valued as museums
or art galleries in England and Wales;
more than 1,200 are valued by
Contractors Method.
Rights of Appeal
The Rateable Value can be appealed
against. There is however only one

6. Management Successfully Negotiating Business Rates
Case Study – Waltham Abbey
When the Waltham Abbey Royal Gunpowder Mill first opened as a
museum, it was entered in the 2000 Rating List with a Rateable Value of
£140,000. Despite 80% mandatory relief this created a level of rates
liability which was unaffordable.
The property had been valued by reference to the Contractors Method.
After initial discussions, the Valuation Office revised its approach to include
only those buildings accessible to the public or used as offices and ancillary
buildings by the Foundation. This resulted in an offer to settle at £95,000.
At a hearing of the Valuation Tribunal, the Valuation Officer defended this
level of value and Waltham Abbey’s adviser argued for a reduction to £0
based on receipts and expenditure method. The Valuation Tribunal found
for Waltham Abbey.
The Valuation Officer appealed to Lands Tribunal (now Upper Tribunal
(Lands Chamber)) and, to avoid costs, a compromise settlement was
reached at £5,000, which is based on receipts not costs of
construction.
The 2005 Rateable Value was drastically reduced and agreed at £6,000,
following the same argument and the 2010 Rateable Value came into the
Rating List at £7,000 and has not been appealed.
right of appeal for every ground
(reason). It is therefore imperative that
if an appeal is made it must be carried
out by a qualified professional, who
not only has experience of business
rates but understands museums and
the wider leisure market.
The appeal system starts with a
proposal to alter the Rating List, served
on the Valuation Office. The proposal
can be made on a standard form
provided by the Valuation Officer, but it
is often necessary to understand the
detailed regulations which the form
does not provide direct correlation
with. If the proposal is not resolved
within three months, it will be sent on
to the Valuation Tribunal, by the
Valuation Officer, as an appeal.
Proposals made before 31 March 2017
could potentially be backdated
to 1 April 2010.
Although making the proposal is a
simple process, and can be done using
a standard form provided by the
Valuation Office, the proposal must
meet a number of technical
requirements or it will be rejected.
The detailed grounds of the proposal
must be sufficiently vague that they do
not rule out wide debates, but must
have enough detail that the Valuation
Office is required to deal with the
relevant issues. It may even be
necessary to make several proposals,
on a number of different grounds, in
order to achieve the desired outcome
of minimising liability.
When appeals are made, the onus
of proof is on the appellant. The
ratepayer has to prove that the
Rateable Value is wrong. The
Valuation Office does not have to
prove that it is right. This is an
important distinction as can be
seen from the decided cases.
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7. 7
AIM Success Guides
Case Study – Bradford City Council
A further complication is the free entry into national museums and
galleries coupled with some Local Authorities who give free or
subsidised access to their museums. In those cases there are no
receipts on which to base a valuation but even in these cases,
appeals are now being successful in breaking away from
Contractors Method and obtaining substantial reductions. As an
example of this, Bradford City Council has a policy of free entry for
Moorside Mill, home to Bradford Industrial Museum.
its museums. Appeals against the 2005 Rating List for the Industrial
Museum (a former textile mill), Bolling Hall (a manor house with parts dating from the 12th Century) Cliffe Castle
and The Manor House, resulted in a hearing at a Valuation Tribunal. The original 2005 Rateable Values were based on
Contractors Method; the Valuation Officer defended different figures, and the agent on behalf of Bradford Council
presented figures based on visitor numbers, and the income that could have been generated. The Tribunal took on
board aspects of both. The resultant figures including the Tribunal decisions are set out below:
Bolling Hall
Manor House
Cliffe Castle
Industrial Museum
TOTAL
2005 RV
£19,500
£13,250
£55,000
£90,000
£177,750
VO Figure
£3,350
£6,400
£35,250
£68,000
£113,000
Storeys
£1,400
£2,700
£10,000
£15,000
£29,100
VT Decision
£3,350
£5,900
£35,250
£50,000
£94,500
Historically, the Valuation Office had always valued these properties using the Contractors Method. The 2010 appeals
are still to be settled.
The argument on behalf of Bradford Council was that any potential tenant would produce a business plan based on
the number of visitors known to come to the attraction. The Valuation Tribunal agreed this was a sensible approach,
but due to the lack of any actual receipts, felt that they could not adopt the Rateable Values which were derived from
it. The Valuation Office was forced to abandon its argument that the properties should be valued on a Contractors
Method, and came up with four different approaches, one for each property. In the case of Bolling Hall, its approach
included a doubling of the figure it originally thought of. The Industrial Museum was valued in line with other, still
functioning, multi-storey mills but with an allowance for the fact that the location was no longer suitable for goods
vehicles.
The 2010 appeals are still on-going.
Case Studies
There have been notable successes
with rating appeals for museums. In
the main these successes stem from
persuading the Valuation Office, or the
appropriate Tribunal, to adopt a
Receipts and Expenditure approach to
the valuation. This can potentially
result in Rateable Value £0.
Three case studies involving historic
buildings are given in this guide covering
different aspects of the problems found
in dealing with the Valuation Officer’s
approach. The author was directly
involved in the appeals for Waltham
Abbey Royal Gunpowder Mills and
Bradford City Council cases. The Court
of Appeal decision for The National
Trust has been widely reported.

8. Management Successfully Negotiating Business Rates
The Political Background –
Localism Act 2011
Occupied properties receive an 80%
mandatory relief if they are occupied
by charities for charitable purposes.
This is set in statute, but there is some
pressure (especially in Wales) for this
percentage to be reduced.
Local Authorities can grant
discretionary relief which will further
reduce liability and in some authorities
the whole of the remaining 20%
liability may be removed by this
discretionary relief.
From 1 April 2013, Central Government
has reviewed the funding for Local
Authorities. This affects the rates
support grant, council tax relief grants,
and numerous other grants. The
change is described as the Rates
Retention Scheme, and is a
consequence of the Localism Act.
Prior to 1 April 2013 all business rates
collected by Local Authorities were
paid over to the Treasury. The amount
received in rates support grants was
not related to the amount collected,
except that any discretionary relief
granted by the Council was part funded
(25%) by the Council. Therefore Central
Government carried the whole costs of
mandatory relief and 75% of the costs
of any discretionary relief.
From 1 April 2013 only 50% of
rates received is paid to Central
Government, the rest is retained by
the Council. Therefore the Councils
now carry the cost of 50% of the
mandatory and discretionary rate
relief. Therefore if a museum is granted
100% relief from rates, the Local
Authority must find 50% of that lost
rates income. Prior to 1 April 2013, the
cost to the Local Authority was only
5% of the lost income.
The Council is then paid a reduced
support grant (subject to various
adjustments) which will be reduced by
2% in real terms year on year for the
next 10 years or so to promote
efficiency. However, most Councils will
have lost funding at the outset: the
highest loss reported is 8.8%; the
average in the first year is said to be
1.8% loss. These statistics are
potentially misleading as the funding of
each Local Authority will be dictated by
their individual circumstances.
The Councils have no control over the
amount of rates charged, and little
control over Council Tax increases or
other revenue streams. They do
however have control over whether or
not to grant discretionary relief.
Since 1990 most Councils have
operated a very laissez-faire policy
toward business rates and have been
reactive not proactive. The change in
funding is changing this attitude.
Councils will now be less likely to grant
full discretionary rate relief and many
may choose to refuse any discretionary
relief. Councils will also be more likely
to challenge mandatory relief requests
with greater scrutiny regarding the
purpose of occupation and degree of
use for charitable purposes. This is
unlikely to affect main buildings but
could have an impact on properties
occupied as stores or in temporary use.
There is a growing body of case law on
appeal from Magistrates Courts and
the High Court on this topic.
Empty Properties
Although business rates are a property
tax based on occupation, if a property
is empty then after an initial 3 months
void period (6 months for industrial
and storage properties) the person
with the right to occupy is liable for full
rates. The main exception to this rule is
that it only refers to buildings not land.
Properties where the ratepayer is a
charity may be exempt from the
charge. However this only applies if,
when the property is next likely to be
occupied, it will be occupied for
charitable purposes.
Some charities have been enticed into
entering agreements with landlords to
take leases on empty buildings so that
the landlords can avoid empty property
rates. The Charity Commission has
issued a warning about such practices,
and the Local Authority may refuse to
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9. 9
AIM Success Guides
Case Study –
National Trust Cases
The National Trust successfully
defended the use of the Receipts and
Expenditure method with appeals
that ran to the Court of Appeal on a
point of legal principle. In this case,
the Valuation Office was looking at a
simplified receipts approach taking
3% of the gross receipts. The point of
law being argued by the Valuation
Officer was that a property that was
Castle Drogo, at the centre of the National
occupied and in use could not have a
Trust’s appeal.
value of £0. Both parties agreed
Contractors Method was not appropriate, but on a full Receipts and
Expenditure basis it could readily be shown that the National Trust
property in question (Castle Drogo) made a loss. The Court of Appeal
confirmed that it was reasonable when looking at an historic building to
assume a landlord would accept no rent on the basis that the tenant was
taking on the costs of maintaining, insuring and preserving the property.
This argument has been successfully applied to other museum properties
around the country and the Valuation Office is accepting that other
museums should be valued on a receipts basis, but are still arguing for 3%
or more of gross receipts. The discussions are ongoing, on a property by
property basis, but the majority of museums have not appealed for a
variety of reasons. The reason at the top of the list for not appealing is that
many museums are receiving 100% rates relief and so have no interest in
what level of value has been applied. If the discretionary relief is lost then
an appeal should be considered.
grant charitable relief so that the
charity is exposed to the full charge. If
your museum is approached to
participate in any such schemes, you
need to take expert advice of your
own.
There have been recent High Court
decisions involving charities which have
taken properties as a means to reduce
the landlord’s exposure to empty
property rates. The schemes have
worked for the landlords but the
charities have not been given the
80% mandatory relief because the
properties are not wholly, or mainly,
occupied for charitable purposes.
Conclusion
The above note gives a flavour of
business rates and is by no means
exhaustive.
The political landscape is changing and
there will be greater pressure for Local
Authorities to maximise the rates
revenue in their area and reduce their
exposure to reliefs as far as possible.
Therefore more museums will be faced
with rates bills that only give the
mandatory relief and where there is
doubt, museums will need to ensure
that their occupation of properties
fully complies with the statutory
requirements for any relief to be given.

10. Management Successfully Negotiating Business Rates
The current 2010 Rating List will be in
force until 1 April 2017 or longer and
so the 2010 Rateable Value will affect
rate liability for a minimum of 7 years.
Museums are very difficult to value for
rating purposes; many are not valued
on the basis of their finances (Receipts
and Expenditure) but on the cost of
construction without the benefit of any
allowance for grant aid or other
funding. Those which are valued by
reference to receipts are often valued
on a percentage of gross receipts and
not with regard to the full accounts.
Therefore most museums are
overvalued in the Rating List at the
date of this guide.
Appeals can be made against the
Rateable Value, but need to be
undertaken by a qualified rating
surveyor with experience of the
museum sector and leisure properties
generally.
Comparison between England,
Wales, Scotland and Northern
Ireland
As with England, valuations are
undertaken by the Valuation Office.
In the first instance, the appeals are
heard by the Valuation Tribunal
responsible for the particular location
in Wales.
Scotland
Scottish property law is radically
different to the English and Welsh legal
framework. The principles of valuation
are effectively the same but the
primary legislation is Local Government
(Scotland) Act 1975.
Appeals against the 2010 Rateable
Values had to be made before 1
October 2010. There are very limited
grounds of appeal after that date.
Scotland has a uniform business rate
applied to the country, and standard
allowances. However the valuations
are undertaken by assessors who are
officers of the local councils.
Appeals in the first instance are to the
Valuation Appeal Committee. The next
revaluation is 2017.
The Scottish Assessors Association
website is www.saa.gov.uk
England
Primary legislation is found in the Local
Government Finance Act 1988. The
detailed provisions for appeals are set
out in Statutory Instruments. The
current rights of appeal are open
ended until the next Rating List comes
into force.
The valuations are undertaken by the
Valuation Office, an executive agency
of HMRC. Appeals, at first instance,
are heard by the Valuation Tribunal
England.
The Valuation Office Agency website is
www.voa.gov.uk
Wales
The same primary legislation applies
as in England. There are separate
Statutory Instruments for Wales but
from a practical viewpoint, there is no
regulatory difference. Rights of appeal
mirror those in England.
Northern Ireland
As with Scotland, there is a different
legal framework for rates in Northern
Ireland. Unlike England, Scotland and
Wales where there are separate
systems of property tax for domestic
and non-domestic properties, there is
still a single system applied in Northern
Ireland.
The current revaluation is from 2003
and the initial time period for appeals
is closed. However, there is a
commitment to review Rateable Values
if representations are made setting out
detailed reasons for believing the
valuation to be wrong.
The valuation and charging of rates is
dealt with by the Land and Property
Services Northern Ireland Agency.
Both valuation and collection of
non-domestic rates is carried out by
Land and Property Services Northern
Ireland (LPSNI).
Appeals can be made
against the Rateable
Value, but need to be
undertaken by a
qualified rating
surveyor with
experience of the
museum sector and
leisure properties
generally.
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AIM Success Guides
Unlike the other three nations, the
current valuation list for non-domestic
properties became operative on 1 April
2003 and is based on rental values as
at 1 April 2001.
There will be a revaluation on 1 April
2015. This will reflect hypothetical
rental values effective on 1 April 2013.
It is intended that the exercise will
redistribute the overall rates burden
although it is not expected that the
overall tax take will alter significantly.
LPSNI is also responsible for collecting
the rates. There are two rates used to
calculate liability, regional rate set by
Northern Ireland Executive and district
rate set by the District Council.
There are no transitional phasing
provisions and therefore the
calculation of rates bills is simple and
any reduction in Rateable Value will
produce a proportionate reduction in
liability. There are a number of reliefs
available to business ratepayers, in
particular, charitable or not-for-profit
relief (if occupied for public benefit).
Commonality Between the
Countries
The Valuation Office (for England and
Wales), Scottish Assessors, and Land
and Property Services Northern Ireland
are all independent of each other and
each work in their own way with
different guidance on how to value
different property types. But as stated
at the beginning of this guide, the basic
principles of valuation apply to all four
countries.
Much of the ethos and guidance for
rating valuation is derived from case
law and the decisions of the higher
courts, especially Lands Chamber
(Lands Tribunal), Court of Appeal or
Supreme Court (House of Lords) will
influence valuation practice equally in
all four countries. Therefore decisions,
such as the Court of Appeal in Hoare
(VO) v The National Trust 1998 RA 391,
affect every legislative area.
The main differences are the
calculation of the rates bills and the
rights of appeal.
The Land and Property Services
Northern Ireland website is
www.dfpni.gov.uk/lps
Storeys Edward Symons is part of the ES Group which is the collective
name for Edward Symmons LLP, Storeys Edward Symmons and Aaron Fox.
The group employs specialist surveyors and valuers across 10 offices, with
a wide range of niche experts advising on all aspects of property and
business assets, including business rates, receivership and insolvency,
leasing and asset management.
Colin Hunter MRICS IRRV (Hons) Director
Email: colin.hunter@storeys-es.com
DDI: 0113 2376906
Website: www.es-group.com

12. Management Successfully Negotiating Business Rates
AIM Association of Independent Museums
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Copyright © 2014 Colin Hunter MRICS IRRV (Hons)
AIM Editor – Diana Zeuner
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