Business Rates is unusual in that the valuation for the tax reflects alterations that the occupier has carried out. The tax is often criticised in this respect as discouraging investment and as a form of double counting, whereby an occupier incurs the cost of carrying out works and is then taxed on any additional value those works create. The decision in this case is a helpful reminder that not all works carried out by an occupier will automatically add to value.
The Upper Tribunal (Lands Chamber) decision in The Appeal of Manning (VO) (2014 UKUT 0476 LC) concerned the valuation of offices at Park House, 16 Finsbury Circus, London EC2, occupied by Bloomberg LP. Bloomberg had installed an internal staircase between the three floors that it occupied. The first-tier Tribunal had excluded that staircase from the floor area to be valued for rating as not forming part of the Net Internal Area (NIA) normally used to value offices.
The Valuation Officer appealed against that decision arguing, firstly, that the area of the staircase should be included in NIA; or secondly, that if the area of the staircase was not included there should be an addition to value for its presence; and thirdly, that if the staircase area were to be excluded and no addition to value made for it then that its reinstatement as part of the office space should be considered as “minor works” thereby allowing the space to be valued as offices.
The Upper Tribunal did not accept any of these arguments. The Tribunal found that the staircase represented a “stairwell” and, according to the RICS Code of Measuring Practice, was space that should be excluded when calculating the NIA to be valued. The Tribunal also dismissed the contention that there should be an addition to value for the staircase, pointing out that this would only apply if the basis of valuation was based upon the rental value without the staircase and it could be shown that the installation of the staircase had increased rental value. Finally, the Tribunal found that the “doctrine of minor works” had no relevance to this appeal. The assessment determined by the first-tier tribunal was upheld and the Valuation Officer’s appeal was dismissed.
The decision is a welcome application of common sense to valuation for rating, which sometimes has a tendency to get too complicated for its own good. It is also worth remembering, as the Tribunal pointed out, that not all tenant’s works are improvements. As the Tribunal says in its judgment, “Not every alteration carried out to suit the particular needs of one tenant will add value to the premises from the perspective of the general tenant.” Anybody who has carried out works at their home will be familiar with this comment!