How do I rate thee? Let me count the ways

6 November 2017

Business rates, or non-domestic rates, are charged on most non-domestic properties and are calculated by looking at the property’s “rateable value” i.e. its open market rental value. The use of a property is taken into account when calculating its rateable value. How is the rateable value calculated, then, when a property has a number of different uses? This was considered in a recent Upper Tribunal (Land Chamber) case, Hughes (VO) v York Museums and Gallery Trust (Rev 1) [2017] UKUT 200 (LC).


The case centred on a number of separate sites in York all occupied by the York Museums and Gallery Trust (the Trust) including the Yorkshire Museum, a thirteenth century abbey known as St Mary’s, a medieval guest house (known as the Hospitium), the York Art Gallery and the York Castle Museum.

Often, museums and historic buildings such as these do not pay rent. As such, business rates for historic buildings and museums have traditionally been valued by reference to the cost of rebuilding rather than the open market rental value. Given many of the buildings are Grade I or II listed, this has ensured that the rateable value of buildings like these has stayed consistently high.

The Valuation Office Agency (VOA) brought the appeal to the Upper Tribunal in an attempt to distinguish the shops and cafes at the above properties, as well as the Hospitium, from the rest of the sites, thereby increasing the valuation and business rates payable. The Trust argued that the valuation should be based on net income received by the properties rather than the cost of rebuilding.


The Tribunal considered, among other things, whether the Hospitium was used for a purpose sufficiently different from the remainder of the Yorkshire Museum site for it to be charged business rates as a separate property. In deciding whether the Hospitium should be treated as a separate property, the Tribunal considered several recent authorities on the subject. The Supreme Court in Woolway v Mazars [2015] UKSC 53 held that non-adjacent floors in the same building occupied by the same occupier should be treated as two separate properties for rating purposes. However, Trafford MBC v Pollard [2007] RA 49 acknowledged that although the difference in the use of two parts of a property was the key consideration, there are other factors which must also be taken into account including the use of each part and the physical separation of the parts.


The Tribunal held that while it would appear, on the face of it, that as the Hospitium was not open to the public, and was used to host private events, it should be rated separately from the remainder of the site (comprising the Yorkshire Museum and gardens including St Mary’s), in practice it is not uncommon for museums to be used for private events, such as weddings. Furthermore, the Tribunal found that the “spatial, visual and historic relationship” between the Hospitium, the gardens and St Mary’s comprised a “single historic landscape” within a defined boundary and should be treated as one property for rating purposes.


This is an important case for those with interests in historic and listed buildings which have conventionally been rated by reference to the cost of rebuilding, in particular where the VOA could argue the property should be split up into separate parts for rating purposes. The Tribunal’s decision to rate the properties depending on their net income instead significantly reduced the rates which had been demanded by the VOA, saving the Trust money which is essential for the maintenance and upkeep of the properties involved. It remains to be seen how far reaching this decision will be and whether it will help the numerous other museums, charities and non-profit trusts which are still rated according to the cost of rebuilding. It may also have an impact on other properties which are split into separate parts for rating purposes.