[2025] UKUT 224 (LC)

The Shoosmiths Property was brought into the Rating List from 6 June 2017 with a rateable value of £640,000. The ratepayer argued for a rateable value of £179.02 per m², giving a rateable value of £510,000.

The VO’s case is that in fact the 2017 entry is too low and that the property in Category A condition should be valued at least £230 per m² (equating to £656,052), even before an uplift for the Category B fitting out.

The VO’s preferred way to assess the rateable value of the hereditament was to assume that the landlord’s second main capital contribution of £1.6 million related to the Category B fit out works, since it was very close to the actual cost of those works to the tenant (paragraph 20 above). It was agreed between the parties before the VTE that the landlord’s contribution to the Category A works was to be ignored - i.e. not discounted from the actual rent - in assessing the rateable value of the property in Category A condition. In the same way, the VO argued that the contribution for the Category B works should be ignored and that the analysed rent without deducting that contribution reflected the value of the hereditament including the value of the Category B fit out.

Alternatively the VO argued that the rateable value should be assessed by analysing the rent and comparables to arrive at a figure for Category A rent and then to add an amortisation of the actual Category B fit out costs.

The ratepayer argued that the Category B fit out was of no value to the hypothetical tenant in the rating hypothesis. The VTE rejected that argument on the basis of the authority of the Acenden decision. Since, as we have explained, we are neither able (in these appeals) nor minded to depart from the Acenden decision we say no more about the ratepayer’s argument. The issue we have to decide is whether to accept the valuation methodology proposed by the VO.

The VTE did not accept the VO’s proposed methodology; the President took the view that the cost of the Category B fit out did not equate to value. Instead he took as a ceiling his understanding that a figure of £25 per m² had been accepted in and around London to reflect the increased value from Category A to Category B, bore in mind that the cost of fitting out would be greater in London than in Manchester because manpower and materials were more expensive in London, and decided that the Category A rent for the Shoosmiths Property should be increased by £15 per m² to reflect the property in a Category B state. Having decided that the Category A rent was £195 per m² he determined the rateable value at £210 per m², i.e. £595,000.