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We have reported previously regarding a dispute as to the rateability of a specialised air conditioning system installed by Iceland, the frozen foods retailer, at one of its stores. The Upper Tribunal (Lands Chamber) determined that the system was rateable as part of the plant and machinery providing services to the store, because it did not fall within the exemption granted to plant and machinery used in connection with “manufacturing operations or trade processes”. Iceland was granted leave to appeal to the Court of Appeal against that decision. The Court of Appeal has now issued its judgment in the matter – Iceland Foods Limited v Jane Berry (VO) (2016) EWCA Civ 1150.
Iceland argued that the decision of the Upper Tribunal was wrong for three main reasons. Firstly, because it had treated the rule relating to trade process plant too narrowly by treating it as an exception to the rules governing rateability of plant and machinery rather than as a proviso for rateability; secondly, because the Upper Tribunal had mistakenly taken the view that the principal characteristic of a “trade process” was something that involved a change in the state of products from one condition to another; and thirdly, because it had viewed the purpose of the air handling system as being too remote from any process because it was cooling hot air produced by the freezer cabinets rather than cooling the products themselves.
The Valuation Officer contended that the decision of the Upper Tribunal was correct because the regulations provided an exception from the general rule of rateability and it was therefore correct to interpret that exception narrowly. The concept of “trade process” was bound to that of “manufacturing operations”, also mentioned in the regulations, and the maintaining of goods in a condition for sale could not be described as a “process”.
The Court of Appeal judgment contains a very thorough review of the history of rating of plant and machinery and of the exemptions afforded from rateability. The Court determined that keeping food in a frozen state for sale was not a “trade process” and that the exemption from rateability did not apply. It would not be correct to say that all trade processes involved a change of state of materials from one condition to another, but there was no “process” of any kind in this case. The exception afforded to “trade processes” and “manufacturing operations” was exactly that, an exception from the general rule of rateability and, as such, it was correct to interpret it narrowly. The fact that purpose of the particular plant in this case was remote from the alleged “trade process” was not something that prevented it from benefitting from the exception, but the fact that there was no activity that could be described as a “trade process” did. Iceland’s appeal was dismissed.
The Court of Appeal’s judgment provides helpful guidance to valuers in deciding when plant and machinery, that might otherwise be rateable, should fall within the exception allowed for plant and machinery used “mainly or exclusively as part of manufacturing operations or trade processes”. There is no absolute requirement for a change of state to qualify an activity as a “trade process” but simply maintaining goods in a frozen state could not qualify as a process.
