Part 2: Hereditaments valued by the Central Valuation Officer
The Valuation Office Agency's (VOA) technical manual for the rating of business (non-domestic) property.
This section provides information about the Central Rating Lists to staff dealing with local lists.
There are separate Central Rating Lists Regulations for England and Wales. References below are to the Regulations for England. Those for Wales are similar but their numbering is different. The Regulations designate the networks of large regional and national utility company occupations and some other cross boundary occupations that are to be treated as single hereditaments. The designations are:
Part 1 Network Rail Infrastructure Limited (the national rail network) and London Underground Limited
Part 2 Docklands Light Railway and The Tyne and Wear Metro
Part 3 Communications (e.g. British Telecommunications Plc)
Part 4 National and Regional Gas Transportation (e.g. National Grid Gas PLC)
Part 5 Local Gas Transportation (the occupations of one ‘independent gas transporter’ or LGT is not designated in the central list and is therefore assessed in local lists in the usual way)
Part 6 Gas Meters
Part 7 Electricity Transmission (e.g. National Grid Electricity Transmission PLC)
Part 8 Electricity Distribution (the occupations of ‘independent distribution network operators’ or IDNO’s are not designated in the central list and are therefore assessed in local lists in the usual way)
Part 9 Electricity Meters
Part 10 Water Supply (e.g. Thames Water)
Part 11 This designation was in respect of The British Waterways Board’s (BWB) canals. BWB’s functions were transferred to the Canal and River Trust on 2 July 2012 and the central list entries were deleted. New regulations (SI 2012/1291) prescribed the Canal and River Trust’s occupation for the whole of England (in similar terms to the previous BWB designation) into the Birmingham City Council Rating List.
Part 12 Pipelines
NDR Unit involvement will largely be dealing with:
1) BAR’s to enter or delete hereditaments from local lists where the occupier is said to be a designated person in the central lists
2) Checks, proposals or representations from ratepayers to delete assessments from local lists where they claim that they are occupied by a designated person in the central lists.
The general workings of the regulations are as follows but the detailed explanations in the remainder of this section and the regulations themselves should be referred to in dealing with cases of this sort:
1) Firstly, there is an occupation test. Check carefully who is in occupation. The occupier needs to be the exact company designated in the Regulations (the current names are shown in the Practice Note: Revaluation 2010 to this section) in order for any particular property not to be entered in the local list. The company registered from Companies House is a reliable cross-check. The company number is quoted on the Central Lists published on Gov.uk.
2) Companies are often (a) owned by other companies and/or (b) have subsidiary companies that may have very similar names to each other. Occupations of these related companies are not part of the central list assessments and should be entered in local lists. There are growing numbers of such related companies because utilities are branching out into other areas of business. Care is therefore needed to establish the identity of the company in occupation.
3) The Regulations for Network Rail Infrastructure Limited (NRIL) are different to the others because they include in the central list assessment not only the parts of the rail network that (a) NRIL occupy themselves but (b) parts that whilst owned by NRIL are occupied by companies that run passenger and freight services. It is important in respect of these latter occupations to make sure that NRIL own the properties concerned. See Appendix 1 to this section for workaid for NRIL cases.
4) Secondly, there is a use test. The Regulations for most classes limit the scope of the central list assessment to the purposes of the designated person (company) for example, ‘railway purposes’ or ‘acting as an electricity distributor’ or ‘water undertaker’. Because of this limitation there will be excepted hereditaments which although occupied by the designated person (company) are not used for the purposes that are needed for them to be included in the central list assessment.
5) Communication hereditaments are subtly different. The central list hereditament is defined as comprising property of specific nature. The concept of ‘exception’ becomes unnecessary as communication properties of different nature are entered into relevant local lists.
6) Thirdly, whether a property is included in the central list depends on the occupation and use tests described above and not on whether it is ‘operational land’ (but see paragraph below on offices for an exception to this rule). If however the property can be seen to be quite obviously ‘operational land’ this may readily answer the occupation and use tests.
7) It is sometimes assumed that ‘operational land’ is simply property used for the operations rather than the administration side of the company. This is a misconception that can lead to a wrong conclusion. For property to be ‘operational land’ (whether land, buildings and structures) it must have the unique physical features that arise from its utility use, such as being a railway line, a water treatment works, or a gas compressor station.
8) The question of ‘operational land’ is important as regards offices occupied by a designated person (company). Offices must be on ‘operational land’ (for example, over a railway station or within a water treatment treatment works) to be included in the central list assessment. If they are situated in a normal commercial location (for example, a town centre or business park) they should be assessed in the local list.
NB In this section the initials CVO refer to the Central Valuation Officer and VO to local valuation officers.
The day-to-day administration of the central lists will be carried out on behalf of the CVO by the NVU Support Team based at Birmingham office and the Utilities Transport and Telecom team, to whom all enquiries should be directed in the first instance.
1.2 Structure of this Section
The main text of the section deals with the historical background and principles of the subject, together with matters such as responsibilities of officers and interpretation, which are of general application to the subject.
Matters which are specific to particular lists by reason of changes in legislation are dealt with in Practice Notes. Practice Notes dealing with specific technical questions concerning transition for the previous lists have been archived.
2.1 Before 1948
Public utilities (with the exception of sewers, which became exempt in the 19th century) have always been assessable to rates, originally employing conventional valuation methods. In practice this involved use of the profits method, which calculated an amount which was deemed to represent the annual rental value of the whole undertaking (referred to as the ‘cumulo’ value) by reference to the receipts and expenditure of the undertaking.
The method was developed in the second half of the 19th century and approved by a series of court decisions specifically to address the issues involved in the valuation of undertakings of this sort. As an adjunct to the method, there developed also a system of apportioning the cumulo RV of the undertaking between the various rating districts in which the undertaking was situated. The particular problems associated with the assessment of the railway system, combined with the consequences of the effective nationalisation of the system in 1914 resulted in special provisions for the rating of railways being incorporated into the Railways Act 1921. This can be regarded as the origin of formula rating.
The remaining classes of public utilities continued to be assessed by the profits method (now more usually referred to as ‘the receipts and expenditure method’) until after the Second World War.
2.2 Between 1948 and 1990
In the late 1940’s such utilities were, for the most part, nationalised, although some remained under municipal control. Following this the numerous local gas and electricity undertakings were amalgamated into a much smaller number of regional undertakings. Similar processes took place involving coal mining, docks and railways and later, in 1974, the water supply and sewerage industries. Throughout this period the making of a profit was not seen as a primary objective of the public utilities and in fact many operated at a substantial loss. As a result, the gap between an assessment upon the profits basis and one which would have resulted from, e.g., the contractors basis grew increasingly wide.
At the same time, the tendency for the utilities to become larger but less in number militated against any form of easy comparison with conventionally assessed hereditaments. Since the utilities were, with the exception of the smaller water companies, in some form of public ownership, a solution to these problems was found in the development of formula rating. This was introduced by the Local Government Act 1948, and involved the prescription by legislation of four elements which otherwise would have been the subject of professional opinion and, potentially, the decision of the Courts.
Those four elements were:
a. The identification of the hereditament.
b. The initial cumulo RVs of the undertakings.
c. The method of altering those cumulo RVs to reflect changes to the hereditaments during the life of the valuation list.
d. Means of apportioning the RVs between rating areas and rating districts.
Certain types of hereditament were ‘excepted’ from the formula provisions these continued to be valued and entered in Valuation Lists in the usual way. All other hereditaments occupied by the relevant undertakings were then exempted from inclusion in any rate. Finally the provisions created a notional hereditament in each rating district and prescribed a method of apportioning a rateable value to each out of a basic rateable value for each National and Regional Board. These notional hereditaments were shown in a separately identified section of each Valuation List.
In addition to the four elements mentioned above later amendments provided for statistically-based methods of revising assessments upon the occasion of a revaluation. The duty of carrying out the calculations under these rules was laid upon the Commissioners of Inland Revenue. VOs, whilst remaining responsible for the entries in their lists, were instructed as to what changes to make either by Controlling VOs in the case of water and dock hereditaments, or Chief Valuer’s Office in the case of telecommunications, gas and electricity. These provisions applied to gas, electricity and water undertakings, the Post Office telephone network, the mines of the British Coal Board and statutory docks and harbours. Railways and canals were treated differently in that they were exempted and the subject of contributions in lieu of rates payable direct to the Secretary of State rather than being the subject of notional hereditaments in Valuation Lists, but the mechanism for calculating the amount for contribution and distribution of the same amongst rating authorities was similar.
Formula rating was never intended to be a more favourable (from the ratepayer’s point of view) alternative to conventional valuation rather it was meant to provide a way round some difficult valuation problems in circumstances where for the most part what was at issue was in effect the transfer of funds between different Government departments.
The system of formula rating described above operated for the revaluations carried out in 1956, 1963 and 1973. The General Rate Act 1967 had been amended by various measures in the 1980’s to allow for the possibility of competing undertakings, but in the absence of any revaluation, the measures never took effect.
2.3 Between 1990 and 2005
By the time of the 1990 Revaluation the situation had changed a great deal. Many of the public utilities either had been or were in the process of privatisation, and assessments of these had to be seen as equitable both between themselves and between them and the commercial world in general. Most assessments were the result of three successive factorisations and the consequences of a fourth factorisation would not have borne scrutiny in the light of the new framework in which the industries were operating. It was impractical to abandon formula rating as an approach for the 1990 Revaluation, but all assessments needed to be completely reappraised, on the basis of a common approach wherever possible.
The advent of a National Non-Domestic Multiplier rendered pointless the complex task of apportionment to Charging Authority areas, but if the normal local list regulations were to apply, then a process of apportionment would need to be undertaken nevertheless to determine in which list an undertaking should appear. This situation was resolved by the creation of central rating lists for England and for Wales, in which such hereditaments would be entered. These lists contained the aggregate RVs of all the hereditaments formula-assessed by the Central Valuation Officer, and in addition the aggregate RVs of certain long distance pipelines, telecommunication networks and railway undertakings which are valued by conventional methods. The exemptions which used to apply to British Rail and British Waterways were withdrawn and they became assessable to rates, whether by formula or conventionally.
2.4 2005 onwards
The Government had in 1989 announced its intention to return formula-assessed classes of hereditaments to conventional valuation wherever it was practicable to do so. This process was implemented in stages and was completed for the 2005 Revaluation. All classes of property shown in the central rating lists are, with effect from 1 April 2005, subject to conventional valuation under the same rules that apply to local list hereditaments.
Certain hereditaments were formerly the subject of formula rating but entered in local, and not central rating lists. These too are now (since 1 April 2005) valued conventionally. They have their own sections of the Rating Manual and are not dealt with here. They are:
- Power Generators (RM 5a)
- Statutory Docks and Harbours (RM 5a)
For the avoidance of doubt, certain hereditaments which were used for crown purposes and which were the subject of contributions in lieu of rates up until 1967 were not the subject of entries in the central or any other rating lists.
4.1 Primary Legislation
The primary legislation which provides for the making of central rating lists and the appointment of a CVO is at sections 52-54 and 61 of LGFA 1988. Para. 3(2) of Schedule 6 to that Act gives the Secretary of State power to prescribe rules (i.e. formulae) for the determination of the RVs of specified classes of hereditaments, and the consequential disapplication of the general rules set out in Paragraphs 2 to 2B of that Schedule.
4.2 Secondary Legislation
1990, 1995 and 2000 central rating lists
The secondary legislation consists of a series of Statutory Instruments made under the powers referred to at para 4.1. Separate sets of Orders and Regulations were made in respect of the 1990, 1995, and 2000 central rating lists. These are dealt with in detail in the appropriate Practice Note.
2005 and later central rating lists
The Central Rating Lists (England) Regulations 2005 (SI 2005/551) and the Central Rating Lists (Wales) Regulations 2005 (SI 2005/422) apply to lists compiled on or after 1 April 2005.
More recently, The Central Rating List and Telecommunications Apparatus (England) (Amendment) Regulations 2022 (SI 2022/1083) moved twelve telecom companies and one railway from local lists to the Central List England with effect from 1 April 2023.
The responsibilities of the CVO are broadly similar to those of Valuation Officers in charge of local rating lists in that he is required to produce and subsequently maintain the central rating lists, and conduct negotiations and appeals to VT and beyond which may arise from the making of IPPs. The work involved in carrying out these duties is radically different from the work undertaken at a local office. This is because:
i. Special rules apply to the maintenance of the lists.
ii. The lists are not maintained on the Central Database but will be migrated to BST.
iii. The hereditaments are of an unusual nature and in many cases spread countrywide.
Valuation work on the central list is devolved to the appropriate specialist team. Pipeline valuations are undertaken by the NVU Industrial and Crown Team based in Leeds. Other classes are valued by the NVU Utilities Telecoms and Transport Team
Since they are responsible for all matters in connection with the maintenance of local rating lists, it follows that VOs have a duty to ensure that any hereditament that does not fall to be shown in a central list is correctly assessed and entered in the appropriate local list.
VOs must accordingly familiarise themselves with the extent of hereditaments shown in the central lists so that they can correctly identify local list hereditaments in borderline cases and also deal promptly with cases where hereditaments cease to be, or become, included in the central list entry. The advice contained in this Section will be adequate for most purposes but if there is any doubt as to the application of the law the advice of the CVO and Utilities Transport and Telecom Team should be sought. Ultimately such questions are one of fact, and it is for the VO, as the one best able to ascertain the facts, to make the decision as to the treatment of a particular hereditament.
A hereditament passing from the local list to the central list or vice-versa may be material to the central list assessment, as may be alterations to existing central list property, either on its own account or by virtue of its cumulative effect. Where a VO becomes aware of such a change, or takes action on the local list which impinges upon the central list, he should inform the CVO and the relevant valuation team (see Paragraph 5 above) by means of a brief e-mail report addressed to the [email protected] mailbox giving:
a. A description of the hereditament and its use.
b. The rateable value involved.
c. Particulars of any market transaction underlying the change.
d. The case reference
If, on receipt of this information, the CVO requires further information or action to be taken locally, they will request this on an individual basis.
Revaluation is the responsibility of the CVO who may perform the task themself or delegate it in whole or in part to either the NVU Utilities Telecoms and Transport Team , the NVU Industrial and Crown Team or local VOs.
The primary grounds for a hereditament to be shown in one of the central rating lists are that it is occupied, or if unoccupied, owned by one of the persons named as ‘designated persons’ in the Central Rating List Regulations. Subsidiary companies of designated persons have a separate legal existence and hereditaments occupied by them therefore do not qualify unless specific provision is made by the Regulations in relation to a particular designated person. Note also that some designated persons are themselves subsidiaries of parent companies, and in those cases occupation by the parent company similarly does not qualify.
Where a specific provision of the type referred to above has been made, detailed advice will be found in the relevant Practice Note.
A change of name by a designated person does not of itself invalidate the designation, as the designation applies to the company bearing the name in question on the day appointed in the Regulations. The definitive identifier of a designated person is the company number registered at Companies House, which never changes. Thus Wales and West Utilities Limited is a designated person under the 2005 Regulations because it was known as Blackwater 2 Limited on the date specified in the Regulations. No amendment to the Regulations was therefore necessary when the name changed. Wherever this section or a practice note refers to a designated person by name, the name used is that currently adopted by the designated person, which may not be the one appearing in the Regulations.
8.1 Methods of classification
Once the question of occupation by a designated person has been established, it is necessary to consider whether the hereditament falls within the description of hereditament prescribed in relation to that designated person in order to decide the question of whether the central or local rating list is the appropriate one.
The Central List Regulations adopt one of two alternative methods of classifying those hereditaments that are included in the list entries (‘relevant hereditaments’). These are:
a) By specific description of the hereditaments’ physical characteristics. (Communication, Gas Meter, Electricity Meter, Canals and Pipeline hereditaments), or
b) By description of the use to which the hereditaments are put. (Railway, Light Railway , Gas Transportation, Electricity Transmission, Electricity Distribution and Water Supply hereditaments)
The choice of method used for each type of undertaking is largely dependent upon the nature of the undertaking and also whether the relevant hereditaments consist of the bulk of the undertaking’s occupation or a lesser part of it.
From 1994 onwards, either method was sometimes employed in conjunction with supplementary Regulations made under s64(3) of the Act. This had the effect of merging all the relevant hereditaments of the undertaking (in each country) into a single hereditament, which then formed the basis of the entry in the central list. Where this course is adopted the central list entry relates to the single hereditament so created, rather than to a class of hereditaments. From 2005 onwards this has become the general rule for central list entries, cross country pipelines now being the only instance where the individual hereditaments remain separate.
When the method described at (b) above is employed, the definition of the use that must be identified is qualified by the term ‘wholly or mainly’. The effect of this is that VOs should disregard minor uses falling outside the definition of the class in deciding whether or not the hereditament is a ‘relevant hereditament’. The exception to this rule is where the minor use occupies a specific area within the hereditament that satisfies the definition of an ‘excepted hereditament’ (See paragraphs 8.2 and 8.3).
8.2 Excepted hereditaments
In addition the Regulations make use of the concept of the ‘excepted hereditament’. The definition of excepted hereditaments varies according to the industry, but in each case they consist of hereditaments, or parts of hereditaments, which would clearly be relevant hereditaments on the basis of the definition in the Schedule to the Regulations, but which the Secretary of State, or Assembly (as the case may be) has decided should nevertheless be excluded from the central list entry.
The identification of excepted hereditaments will be the aspect of the central list that concerns VOs most, and these are dealt with in some detail in the Practice Notes.
8.3 Excepted hereditaments – Valuation considerations
Where the whole of a hereditament is required to be shown in the local rating list on the grounds that it is an excepted hereditament, then no special valuation considerations will arise. This will include cases where hereditaments are excepted on the grounds that they are so let out as to be capable of separate assessment.
In many cases, however, an excepted hereditament will consist of part only of a larger premises in the occupation of a designated person. In these circumstances the valuer will need to decide if a hereditament exists, being of a different use and capable of being separately let and if so it is necessary to reflect this fact in assessing its rateable value. The valuer must have regard to caselaw in this matter if the excepted use is on operational land; in particular see para 9.2 excepted offices.
Under the pre-1990 legislation, such artificial hereditaments were quite common, since they existed wherever a hereditament was divided by a rating authority boundary. The correct approach in those cases was to value the whole hereditament, disregarding the division, and then to apportion the rateable (or gross) value between the two lists, so that no alteration in the aggregate value resulted from the need to divide the hereditament between those lists.
The same principle applies when the need arises to divide the assessment of a hereditament between a local and the central list. A typical instance will be where a warehouse or depot occupied by a designated person forms part of its central list hereditament, but the office accommodation must be shown in the local list. In such cases, the rateable value of the offices should be the rateable value that they would have contributed to the larger hereditament, and not a rateable value based upon the rent that they might have commanded as a separate letting (if different).
8.5 An illustration of the application of the above process
The following two illustrations are based upon actual cases.
In the first case a working water pumping station contained within it a number of listed buildings containing plant of historical importance. These were used as a museum, open to the public but on a restricted basis. The water pumping function fell within Part III of the Water Industries Act 1991 (central list) - the museum function fell within Part I of that Act (local list). The whole premises would, under normal rating law, constitute a single hereditament because the museum buildings were not capable of forming a separate hereditament. Because that single hereditament was used mainly for Part III Water Industries Act 1991 purposes, it was a central list hereditament because use as a museum was not defined as an excepted hereditament in relation to water supply hereditaments, the museum buildings had to be included in that central list hereditament. Note: A different result would have arisen out of a similar situation in the context of museum buildings forming part of a railway station, because the Regulations define museums as excepted hereditaments in relation to railway hereditaments.
In the second case a reservoir was used for storing water for supply purposes. A boathouse with sailing club accommodation (in the occupation of the water authority) was located at the edge of the reservoir. The reservoir was operated within Part III of the Water Industries Act 1991 (central list) the boathouse and sailing club within Part I of that Act (local list). Unlike the first example, the two premises were separate and distinct, and although occupied by the same ratepayer they therefore constituted separate hereditaments under normal rating law. Accordingly, the reservoir hereditament, which was used mainly for Part III Water Industries Act 1991 purposes, was a central list hereditament. The boathouse/sailing club hereditament, which was used wholly for Part I Water Industries Act 1991 purposes, was a local list hereditament.
The Regulations make provision for the interpretation of the relevant hereditament definitions. The definitions are set out in the Practice Notes.
9.1 The statutory definitions
‘Office premises’ means any hereditament constructed or adapted as offices or for office purposes, or used wholly or mainly for such purposes.
‘Office purposes’ includes the purposes of administration and clerical work and handling money and ‘clerical work’ includes writing, book-keeping, typing, filing, duplicating, sorting papers or information or calculating (whether by manual, mechanical or electronic means), drawing, and the editorial preparation of matter for publication.
‘Operational land’, in relation to a designated person, means land which is used for the purposes of carrying on that person’s undertaking, not being land which, in respect of its nature and situation, is comparable rather with land in general than with land which is used for the purposes of carrying on of statutory undertakings (within the meaning of the Town and Country Planning Act 1990).
And any reference to hereditaments used for any purpose includes a reference to hereditaments which are unused but in relation to which it appears that when next in use they will be used for such a purpose.
Operational land is a concept that can cause difficulty, since the definition has its origin outside the rating statutes. For this reason it is dealt with in detail at paragraph 9.9 below.
The following sub-paragraphs expand upon the above definitions, and also comment on the various other types of property that may fall to be treated as excepted hereditaments.
9.2 Office premises
The definitions of office premises and office purposes are quite straightforward, but note that in the latter the use of the word ‘includes’ on two occasions indicates that what follows is intended to be illustrative rather than exhaustive, and any question as to what constitutes office premises should be approached in that light. The Lands Tribunal has held (Halliday (VO) -v- British Railways Board - [1994 RA 297]) that accommodation ancillary to offices but not itself used as offices, e.g. stationery stores, broom cupboards, mess rooms, lavatories and corridors do not detract from the description ‘wholly or mainly used for office purposes’.
Questions arise from time to time about the treatment of office premises where they are excepted hereditaments and they form part only of a larger occupation of the designated person, the remainder of which is not an excepted hereditament and therefore will form part of the central list entry.
In Goodwin (VO) -v- Waltham Forest BC and London Electricity Board [1975 LT RA 53] it was held correct to assess separately the excepted hereditaments. However in Eastern Power Networks v Webb (2019)(1590333376712/282N10) the Vice President of the Valuation Tribunal held the first stage in deciding must to be identify the hereditament in normal rating terms. For instance to ask, Is it capable of being separately let and Is it used for a wholly distinct purpose from the remainder of the premises. It is quite common for subsidiary companies of designated persons to occupy such offices and these would form separate hereditaments and hence should be treated as excepted hereditaments. In Eastern Power Networks, the Tribunal determined there is no legal basis for notional or fictional hereditaments.
In practice it has been found desirable to operate a de minimis concession in respect of certain small offices to avoid singling out for separate assessment small areas of low-value ancillary office accommodation which normal valuation practice would treat as indistinguishable from the main accommodation with which it is associated.
A typical example is the foreman’s office partitioned out of warehouse or workshop accommodation. Such accommodation may be disregarded when considering the existence or extent of any excepted hereditament.
On occasions central list ratepayers have sought to persuade VOs that a distinction should be made between administrative and managerial offices on the one hand and so-called ‘operational offices’ (eg used by engineers, technical operatives and similar personnel) on the other. The Regulations make no such distinction, and none should be conceded.
9.3 Shop premises
Shop premises are less frequently occupied by any of the designated persons named in the Regulations than was formerly the case. Any retail activity apparently associated with, for example, electricity companies, is now carried out by a separate trading company to satisfy regulatory requirements. Accordingly the Central Rating List Regulations for the 2005 lists have only found it necessary to refer to shops in relation to railway and light railway undertakings and water undertakings.
9.3.1 Shops occupied by Railway and Statutory Water undertakers
These continue to be excepted hereditaments and must therefore always form the subject of separate entries in the appropriate local rating list. This is the case even if they form part of a building which also contains premises which are included in the central list entry - it does not matter that, but for the division between central and local lists, the whole would form a single hereditament, and it does not matter whether the land is operational or not. It is considered that any retail use qualifies a hereditament to be treated as being excepted. Arguments that a kiosk is not a shop, for example, should not be conceded.
9.3.2 Shops occupied by other central list ratepayers
Subject to the points below being satisfied, from 1 April 2005, where a shop is occupied by any other central list ratepayer it will form part of their central list hereditament and should not be shown in the local rating list. The points referred to are that the VO must be satisfied that the premises are in the occupation of the designated person, and not a related company (see paragraph 8 above) and that the premises consist of, or form part of, a hereditament used wholly or mainly for the purposes set out in the relevant definition in the Regulations.
9.4 Warehouses
The question of whether or not a warehouse is to be treated as an excepted hereditament needs to be approached with care. The reasons for this are twofold. Firstly, the provisions for excepting warehouses and other storage facilities vary from industry to industry, and secondly the designated person may use warehouses solely for the purpose of storing materials in connection with the repair and maintenance of the assets of the undertaking, or solely for the storage of goods for sale, or for a mixture of the two purposes.
‘Retail warehouses’, where goods are sold to the public, should be regarded as shop premises for the purpose of interpreting the regulations.
The exact application of the excepted hereditament regulations in relation to warehouses is dealt with, ratepayer by ratepayer, in the relevant Practice Notes.
9.5 Car Parks
For the purposes of this section, a ‘car park’ should be taken to mean land used wholly or mainly for the parking of domestic vehicles belonging to or used by employees of or visitors to the central list hereditament, or the general public. It should not be taken to include transport yards or similar areas used wholly or mainly for the storage of commercial vehicles used in connection with the undertaking, which should always be regarded as falling within the central list.
Up to 31 March 2005, car parks occupied by British Waterways were excepted hereditaments, and should always have been the subject of local list entries. This included car parks contiguous with premises falling within the central list entry. With effect from 1 April 2005, the general guidance set out in the following paragraph applies to all central list ratepayers.
Car parks occupied by any other designated person are not excepted hereditaments, and therefore should normally be regarded as falling within the central list assessment. The exception to this general rule is the case where a car park, by virtue of its use and situation, is considered to be part of an excepted hereditament or used for purposes which place it outside the class of relevant hereditaments in respect of which the ratepayer is designated. For example, the car parking occupied with office premises (not on operational land) should be valued with those premises, and not excluded.
9.6 Social and Recreational Land (Staff Welfare)
a) Railways, Gas, Electricity and Water Supply Hereditaments
Where canteens, sports fields, pavilions and club houses are established as being occupied by the designated person, they are to be regarded as being assessed in the central lists, since they do not constitute excepted hereditaments. Occasionally it will be found that all or part of a clubhouse is in the rateable occupation, not of the designated person, but of a staff association or sports club.
Water undertakings may also provide recreational facilities for the general public. These do not fall within the central list if provided wholly or mainly for that purpose. See the Practice Notes for more detail on this point.
b) British Waterways and Telecommunication undertakings
Social and recreational separate hereditaments occupied by these designated persons do not fall within the central list entry and should always be shown in the Local rating list.
9.7 Advertisement sites
See the relevant Practice Notes.
9.8 Unused premises
The provisions concerning unused premises are a new development for the 1990 lists, and are intended to avoid problems of the sort that arose in a number of cases on earlier lists (e.g. British Railways Board -v- Bevington (VO)).
Property which is unused, but owned, by a designated person will still be regarded as falling within the central rating list if its likely next use is one that would fall within the description of a central list hereditament in relation to that person.
It can be presumed that central list property which is no longer used but which is situated within larger occupations which are still in use will continue to lie within the central rating lists because of the rebus sic stantibus rule, unless some overt act, such as demolition or obtaining planning consent for a different use, takes place. Note that relevant hereditaments are sometimes defined in relation to the particular undertaking, and in other cases by use in general. The fact that the particular designated person no longer apparently intends to use the property for purposes in connection with his undertaking will be sufficient grounds for seeking to assess such property in a local list in those cases where the relevant hereditament is defined in relation to a particular designated person. In cases where the definition is wider, the advice of NVU should be sought.
Cases where VOs may need, or be requested by ratepayers, to take action will concern:
i. premises situated on non-operational land, and
ii. excepted hereditaments
In the former case, e.g. a warehouse or workshop formerly part of the central list entry might be vacated and placed on the market. In such circumstances it would be appropriate for the VO to enter the premises in the local list without waiting for the disposal to take place.
In the latter case, a hereditament formerly let out and already the subject of a local list entry may become vacant and the designated person may seek its removal from the local list on the grounds that he is occupying the premises himself, or intending to do so, for purposes which would bring the premises within the scope of the central list.
In such cases, VOs should satisfy themselves that the designated person satisfies all the tests for rateable occupation and that the actual use falls within the description of relevant hereditaments before conceding the point. A mere statement of intention is not sufficient.
When approaching the question of the use to be attributed to unused premises, VOs should remember that what is important, in the context of a proposal, is the facts as they were at the material date, and not with the benefit of hindsight. For the same reason, once vacant premises have been identified they should be kept under periodic review.
In attempting to establish the intentions of a designated person concerning the future use of unused premises VOs should take note of such acts as statements to the press or in published reports, the instruction of estate agents or the making of an application for planning consent.
9.9 Operational Land
9.9.1 The Town and Country Planning Act 1990 Provisions
The definition of operational land to be adopted in considering whether or not premises form part of a central list hereditament is the definition set out in the relevant set of Regulations that govern the list in question. This definition is the one set out in paragraph 9.1 above. Confusion has sometimes arisen because, at the end of that definition, reference is made to the Town and Country Planning Act (1971 or 1990, as the case may be) and these Acts contain more complex definitions of operational land. For the avoidance of doubt, the reference in the Regulation is to the definition, in those Acts, of the term ‘statutory undertaking’. In the 1990 Act, this is set out at section 262. The reference does not have the effect of adopting the definition of operational land contained in s. 263 of the same Act.
Telecommunications networks are not included in the definition of ‘statutory undertakings’, and for that reason no reference is made to operational land in the definition of their hereditaments.
9.9.2 The original purpose of the provisions
The concept of operational land was developed to enable statutory undertakers to undertake essential operational works using planning permission granted to them by special or general development orders, whilst confining them within the bounds of normal planning restrictions in relation to other types of development.
The definition has been adopted for rating purposes to ensure that, broadly, offices forming part of a waterworks or railway station are treated as lying within the central lists, whilst those that are indistinguishable from normal commercial development are rated conventionally.
9.9.3 Applying the provisions
Apart from the difficulties posed by the convoluted form of the language, it must be remembered that the definition is grounded in planning law rather than rating law.
The mere fact that a statutory undertaker occupies land for operational purposes does not mean that that land is ‘operational land’. If it did, then all offices would be on operational land and the distinction made in the excepted hereditament definitions would be pointless.
Only two cases have been the subject of Lands Tribunal decisions where the question of whether or not the hereditament was situated on the operational land of the ratepayer.
Halliday (VO) -v- British Railways Board - [1994 RA 297] concerned the case of a railway booking office situated on the first floor of a two storey shopping mall adjacent to a main line railway station. The mall had been developed on the site of the old station forecourt. The office was located in a modified shop unit at the head of the escalators and adjacent to the main pedestrian access to the footbridge serving the platforms. The levels below consisted of another shop unit and a public highway running in a tunnel. The accommodation was used for ticket sales and also for ticket collectors to account for money collected on trains.
The Tribunal held that:
- The hereditament was office premises.
- In the context of the hereditament, ‘land in general’ meant use as a shopping mall.
- The land comprised in the ticket office was more like land in general than it was like land used for the purposes of carrying on a statutory undertaking. It was therefore not operational land.
- The ticket office was therefore an excepted hereditament and should be shown in the local rating list.
Barratclough (VO) -v- Tees and Hartlepool Port Authority - [2004 RA 1] concerned the case of the headquarters office building of the port authority which was situated in a square which contained a mixture of commercial and professional offices, and also other uses, close to the main railway station in Middlesborough. It was purpose-built at the end of the 19th century, and incorporated many special features for its purpose, including an extremely large boardroom which was the subject of a Grade 2* listing. The building was located approximately 400 yards from the main gates to the former Middlesborough Docks, which were in the course of re-development. It remained centrally located for the direction of operations at all the authority’s ports, which were distributed over an area of several square miles. The Tribunal held that the land was not operational in nature and that the building did not form part of the dock hereditament.
To qualify as operational land, the land has not only to be occupied for operational purposes but also has to be used in such a way that its planning classification is unique to a statutory undertaking in other words the land use must be sui generis.
Obvious examples of land which falls within the description of operational land are railway tracks and stations, water towers, pumping stations and reservoirs, the sites of electricity substations, electricity pylons etc. These clearly are peculiar to statutory undertakers.
Typical examples of land that is not operational in nature, even though occupied by a statutory undertaker and in many cases falling within the central list hereditaments include workshops, factories, warehouses, garages, transport depots and storage land. Broadly if land could, realistically, be used by a person other than a statutory undertaker without there being a material change of use, then it will be regarded as ‘land in general’ and accordingly is not operational land.
In a determination made by the Secretary of State for Energy in 1979, he found that the terms of an Electricity Board’s planning permission and the notation on the Development Plan, in relation to the particular case, were not relevant in determining whether or not the land was operational. This is because it is the nature of the land which is being determined, not the nature of the permission which authorises its use - in many cases the identification of land in development plans as ‘land used by statutory undertakers’ merely follows the fact of its use.
Similarly, a Northern Ireland Lands Tribunal decision, Excip v Commissioner of Valuation Northern Ireland (2019) VR/11/2019 confirmed two rooms occupied by Excip within an office block on the port estate were confirmed as being correctly separately entered into the Valuation List from the port assessment as Excip were in separate rateable occupation.
9.9.4 The extent of operational land
Once VOs have identified the existence of operational land, they will need to identify the extent of that land in order to establish whether any offices that may be present are ‘on’ that land.
Because it is a planning concept that is being dealt with, it is necessary in such cases to think in terms of the planning unit involved rather than in the narrower confines of the rating hereditament. Land cannot be simultaneously both operational and non-operational, so once a use has been identified which renders land operational in nature, then any hereditaments standing on that land must be regarded as being situated on operational land. This explains the provision in relation to railway undertakings occupying offices on the operational land of another railway undertaking, which in the context of the rating concept of ‘land’ would be an impossibility.
Note, however, that the word ‘on’ implies an essentially vertical juxtaposition - offices situated on operational land are excluded from the definition of excepted hereditaments, but offices on land adjacent to operational land are not.
As an example of how this works in practice, one can consider the case of the Headquarters offices of London Underground Limited. They are located in a building at 55 Broadway, London SW1, which is built over the St James’ Park Underground Station. This renders the land operational in nature and means that the offices fall within the central list hereditaments of the undertaking, notwithstanding that on the ground floor, there are separately assessed shops, and the building contains offices occupied by London Buses Limited which are separately assessed.
9.9.5 Procedure for settling disputes
9.9.5.1 Historical background
Under the General Rate Act 1967, when a dispute arose as to whether or not land was operational, the question was referred to the appropriate Secretary of State, who considered the representations of the VO and the ratepayer and then made the appropriate determination. Once made, a determination could only be overturned by judicial review. Since the Secretary of State was in effect acting as an independent expert, submissions (which were made in writing) could effectively be limited to a recital of the relevant facts.
9.9.5.2 The present provisions
The Local Government Finance Act 1989 has not given Ministers any powers similar to the 1967 Act. Questions as to whether land is or is not operational must therefore be referred to the VT, and upon appeal to the Upper Tribunal (Lands Chamber). These bodies have little experience of adjudication upon this type of question, and there is little precedent to which they can be referred. Therefore it will be necessary for VOs, in presenting such cases, not only to present all the relevant facts, but to be in a position to explain the operation of the law. To enable VO’s to do this, they must ensure that they are thoroughly familiar with the advice contained in this Section and relevant practice notes.
9.9.5.3 Precedents
The decisions of past Secretaries of State are not legal decisions and cannot be quoted as precedents before the Courts, although a past finding in respect of a particular site will be admissible as a matter of fact, and would normally be regarded as highly persuasive unless the circumstances of use have changed. Where, however, circumstances have changed VOs should resist any argument of the ‘once operational, always operational’ type.
Findings of the Land Tribunal, now the Upper Tribunal (Lands Chamber), can be regarded as precedents insofar as they concern the interpretation of the rating statute. It is important that the guidance set out in this practice note is closely adhered to.
VOs should send copies of any VT and Upper Tribunal (Lands Chamber) decisions concerning the identification of operational land to Director of National Valuation Unit.
10.1 Checks and proposals to alter Local Lists
When a check or proposal is served seeking the removal or the division of a hereditament on the grounds that it ought to be in whole or in part the subject of a Central List, the VO should proceed, but in addition should inform the Utilities, Transport and Telecom team of any action they intend to take. The report should contain the information listed at paragraph 6 above.
In deciding questions of value, it is considered that the correct approach is one of apportionment. Since the division into separate hereditaments is an artificial one brought about by the operation of statute (as was formerly the case where boundaries intervened) no allowance should be conceded for fragmentation or shared access. The old form of description used in such circumstances, “part also in…”, should not however be used.
10.2 IPPs to alter Central Rating Lists
In the event of such a proposal being served on a VO, they should return it to the maker, advising that it should be served upon the Central Valuation Officer.
Where a billing authority makes a report to a VO requesting any action in relation to a hereditament which is shown in a Central List, the report should be forwarded to the NVU support team. If the VO considers that part of the hereditament should be shown in a local list, they should act on the report in the usual way, but only in relation to the part to be assessed in the local list.