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The Upper Tribunal (Lands Chamber) has ruled that three museums and art galleries in the northeast of England should be assessed at nominal rateable values. The Tribunal rejected the Valuation Officer’s argument that the social and socio-economic value of the museums to the local area should be reflected in their rateable values. It also rejected the Valuation Officer’s approach of using a shortened receipts method of valuation. This is the third time in recent years that the Upper Tribunal has confirmed nominal values for museum hereditaments, but the first time that the Valuation Officer’s ‘social value’ argument has been considered in any detail. The decision is likely to set a strong precedent for the rating of museums and other cultural venues across England and Wales, saving them thousands of pounds in business rates. This case confirms that the full receipts and expenditure method of valuation is appropriate for assessing the rateable value of museums and it rejects the notion that it should be adapted to capture ‘social’ or ‘socio-economic’ value provided by museums to their local area. This means that if a museum, art gallery or other cultural venue makes no financial surplus it is likely to be able to argue successfully that its rateable value should be assessed at a nominal value and that its rates liability should be zero. Tyne and Wear Archives and Museums had challenged the rateable values that had been assessed by the Valuation Officer for Shipley Art Gallery, South Shields Museum and Art Gallery and Laing Art Gallery at £94,500, £62,500 and £193,000 respectively. The Valuation Tribunal for England allowed all three appeals and assessed each hereditament at a nominal value. This was on the basis that even on a notional receipts and expenditure basis (that is, factoring in notional admission charges where none were in fact charged) there was no positive balance available for rent. The Valuation Officer appealed to the Upper Tribunal, again seeking positive (albeit reduced) rateable values. The Tribunal rejected the appeals. On the issue of socio-economic value, the Tribunal considered that the methodology used for measuring social value for public funding purposes did not translate into value to the local authority itself. Further, there was “no methodology available to translate that value to the local authority into willingness to pay any rent at all, let alone how much, on the part of the local authority”. The comparable evidence relied on by the Valuation Officer did not demonstrate that rents were paid on the basis of an overbid for socio-economic value. As to the percentage of gross receipts method, also known as ‘shortened receipts”, the Tribunal referred to its recent decision in BNPPDS Limited v. Andrew Ricketts (VO) [2022] UKUT 129 (LC) and accepted the respondent’s arguments that this method was only reliable after a rigorous analysis of suitable comparable evidence, which was not available in this case. The Tribunal also agreed with the respondent that the storage analogy used by the Valuation Officer was not appropriate and was beyond the scope of the hypothetical letting: the premises are assumed to be vacant and to let and the hypothetical tenant (as opposed to the actual tenant) does not yet have a collection to store. The rating of museums had been considered in recent years in Hughes (VO) v. York Museums and Gallery Trust [2017] UKUT 200 (LC) and in Hughes (VO) v. Exeter City Council [2020] UKUT 7 (LC). Whilst the Exeter decision left open the theoretical possibility of factoring in socio-economic value, the evidence and argument presented by the Valuation Officer did not amount to the ‘rabbit from the valuation hat’ which the Tribunal considered most likely need to be produced to give rise to positive rateable values in these cases. Jenny Wigley QC appeared for the respondent, Tyne & Wear Archives and Museums. The Upper Tribunal decision may be found here.
