[2025] UKUT 224 (LC)

The next step in the VO’s argument is to use the amortised cost of the Category B fitting out work to determine the value of the property in Category B condition. Ms Wigley KC referred in her skeleton argument to a figure of £224,000 spent by the Mando Group on rateable (Category B) fitting out. The source of this number appears to be the ratepayers Challenge document, where it was said that £395,000 was spent on fitting out; the figure of £224,000 results from subtracting furniture and suchlike. Mr Willetts in his expert report before the VTE, but not in his report in the appeal, cited a figure of £126,343 said to be taken from the contract with the fitting out contractor.

However, rather than using that either of those figures Mr Willetts worked on the basis that fitting out to Category B standard would cost £220 per m². “as advised by the VO Building Surveyors”. Mr Willetts calculated that the Category B addition in Acenden, which he put at £42 per m^2, was the equivalent of a capital cost of £214.65 per m²; he was not able to explain why the cost would be higher in Liverpool than in Maidenhead. Assuming that the cost of capital would be 4.5% he arrived at a figure of £133 per m² for the Property in a Category B state. That would be a £54 per m² uplift from Category A. Mr Willetts acknowledged that that is unrealistically high; and we agree, bearing in mind that the uplift in Acenden, in Maidenhead rather than Liverpool, was £46 per m².

Using the same method of calculation, had Mr Willetts taken the cost of the Category B fit-out to be £126,343 the amortised cost over five years would be £62.50 per m² and over ten years to £32.00 per m^2.. If the cost were treated as £224,000, on the other hand, and again using the same method, the amortised cost over 5 years would be £111 per m². When added to the Category A value of £80 per m² that would generate a rateable value so unreasonably high that that it is easy to see why Mr Willetts did not use that figure.

It seems to us that if amortised costs are to be used as a means of deriving a rental uplift for Category B works then a rate of 4.5% is reasonable. Mr Brankin said that his acquisition calculations were based on a cost of capital of 3.5% but he also remarked that the Government could borrow at favourable rates.