ICELAND, the leading frozen food specialist, has recently won a landmark victory, reducing its liability for business rates paid on its premises, which could have far-reaching implications for other businesses in the retail and other sectors, says commercial property agent Prop-Search.
The Supreme Court has ruled that Iceland’s air handling system, which is used in connection with its refrigeration units, should be regarded as plant and machinery used in connection with a trade process and would, therefore, not be rateable. It ruled that trade processes are not limited to industrial processes, given the wider definition in the regulations, and that it covers ‘the continuous freezing or refrigeration of goods to preserve them in an artificial condition’.
Samantha Jones, an Associate Director of Prop-Search, said: “This is the second case to successfully challenge a business rates decision in the Supreme Court in the last year, demonstrating the risk of businesses paying over the odds for their business rates. The case was heard against a backdrop of significant concern in the market due to increasing business rates in a challenging market and the Chancellor agreeing to bring the review period forward.”
As a general rule, plant and machinery that forms part of the property cannot be taken into account when calculating the property’s rateable value. The 2000 Valuation for Rating (Plant and Machinery) (England) Regulations create an exemption from this general rule for plant and machinery that, broadly speaking, can fairly be described as part of the ‘tools of the trade’ of the business, rather than as part of the property. The exemption dates back to the Wood Report of 1993, which was commissioned by the Government to update and harmonise the law and practice around the rating of plant and machinery.
Iceland had challenged a Valuation Officer’s decision not to grant it any reduction in rateable value to reflect its use of an air handling system to keep cool the refrigeration units at what the court described as a typical retail warehouse in Liverpool. Both the Upper Tribunal and the Court of Appeal had held that the exemption in the regulations should be interpreted ‘quite narrowly’. It was the view of these courts that the exemption was designed to cover manufacturing and other activities that ‘bring about a transition from one state or condition to another’ rather than, as in this case, keeping goods in a suitable condition to be offered for sale.
The Supreme Court however disagreed. It found that there was nothing in either the regulations, or the report on which they were based, limiting the use of the exemption to industrial-type activities at the expense of other types of commercial activity.
Samantha Jones said: “It will be interesting to see how the recent decision of the Supreme Court translate into the decisions being made by the Valuation Office and lower courts in matters of this nature. Every case will need to be considered on its facts and against the broader market context, but successful challenges could collectively save businesses millions of pounds.”
Further information or advice can be obtained from Prop-Search on 01933 223300 or 01604 492000 or at www.prop-search.com