Menu
Items of plant and machinery that are identified in the Plant & Machinery Order are rateable and their value is included in the rateable value of the property where they are installed. The Plant & Machinery Order includes many items of industrial machinery, but also includes items of plant such as electrical and air conditioning systems that are installed at many properties, not just at factories.
Where an item is named in the Order it will normally be rateable unless it falls within one of the exemptions identified in the order. Items of plant serving a building are normally rateable unless they are used “mainly or exclusively as part of manufacturing operations or trade processes”, in which case they are exempt.
Air conditioning systems in shops or offices are normally rateable items of plant and machinery but, in Berry (VO) v Iceland Foods Limited (2015) (UKUT 0014 LC), it was argued that the air conditioning system installed at an Iceland store should be exempt on grounds that it was mainly used as part of a trade process. The appeal related to an Iceland store at Speke, Liverpool. The Valuation Tribunal for England had determined that the air conditioning and air handling systems at the store were exempt as trade process plant. The Valuation Officer appealed against that decision.
The Appellant argued that there was no trade process carried on at the appeal property as the storage and display of goods for sale did not involve any trade process.
The Respondent contended that the primary purpose of the air conditioning and air handling systems installed at the property was to enable the refrigeration cabinets to operate correctly by ensuring that the heat expelled by those cabinets did not cause the ambient temperature to rise above 25 degrees Centigrade, above which temperature the refrigerated cabinets would not operate properly, and that the air conditioning and air handling systems were mainly used as part of a trade process and therefore exempt.
The Upper Tribunal was critical of the expert witnesses called to give evidence on engineering and refrigeration issues, for their failure to record agreed and not agreed matters. However, the Tribunal concluded that the display and storage of goods for sale did not constitute part of a trade process and that the plant could not be regarded as exempt. The Tribunal did conclude that the main purpose of the plant was to control heat from the refrigerated cabinets but, as that was not a trade process, the exemption could not apply.
The Tribunal also considered how the air conditioning system should be valued and determined that this should be by the Contractor’s Basis, adopting the statutory decapitalisation rate of 5% and applying this to the cost of the system after making an adjustment to the cost of the system for functions such as the supply of hot water and heating and ventilation of the staff rooms, which were things already reflected in the value applied to the building. The Tribunal considered that this properly reflected the value of the system installed by Iceland and that no further adjustment to the valuation, either up or down, was required. The Valuation Officer’s appeal was allowed to that extent.
The decision gives greater clarity as to the meaning of the “trade process” exemption in the Plant & Machinery Order and, also, determines that where a valuation is by reference to cost the statutory decapitalisaton rate should be applied. It should help all valuers dealing with retail property where such systems are installed.
