business rates

Viewpoint - 17/06/2020

How should museums be valued for business rates?

Following the landmark ruling in respect of the Royal Albert Memorial Museum & Art Gallery's business rates liabilities, we look at the case in more detail.

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Business rates have long been a bone of contention for museum operators, many of whom are registered charities, owing to the Valuation Office Agency’s (VOA) insistence in using the Contractor’s method to determine individual liabilities.

So when the Upper Tribunal (Lands Chamber) (UT(LC)) gave its long-awaited decision on the appeal for Royal Albert Memorial Museum (RAMM) on 8 January 2020, confirming that museums should in fact be valued using the Receipts and Expenditure method, the whole industry gave a sigh of relief.

Landmark ruling

This was a landmark decision and the culmination of 18 years of discussions, negotiations and disagreements with the VOA since I was first asked by Bill Ferris at Chatham Historic Dockyard to advise him on his Trust’s liability. Bill’s request for advice was followed by an appeal on behalf of Waltham Abbey Royal Gunpowder Mills that ended up in Lands Tribunal (the forerunner to the Upper Tribunal (Lands Chamber)) and more recently the decision of the UT(LC) for four museums and galleries in York occupied by York Museums and Gallery Trust.

The UT(LC) decision for Exeter City Council confirmed the reduction of the Rateable Value for RAMM from £445,000 (which had been agreed on an earlier appeal) to £1.

Leave to appeal denied

The VOA disagreed with the decision and, over a period of five months, put forward several reasons why they should be allowed to appeal to the Court of Appeal. However, on 8 June 2020 the Court of Appeal rejected the VOA’s reasoning and turned down the request to be allowed to appeal. 

The decision of the UT(LC) runs to 70 pages and takes a very detailed look at how to determine the value of an historic property built and occupied as a museum. The museum was first built in the 1860’s by a charity set up for that purpose. But it started out as a museum, library and school of art. In 1870 it was handed over to Exeter City Council because the charity couldn’t meet the running costs. Various extensions were built prior to 1900 when the build costs were all met from donations and gifts. The latest extension was built between 2008 and 2011 with money from the Heritage Lottery Fund.

The decision considered the impact of the high costs of occupation including the costs of maintaining a Grade II Listed building and adopted the use of Receipts and Expenditure valuation as being the method that best reflected the reality of the rent that a museum organisation, or a council, could afford to pay in rent. Because Royal Albert Memorial Museum is inherently loss making the Rateable Value was determined at £1.

Far-reaching implications

There is rather more to this decision and there will undoubtedly be further discussions to be had with the VOA before an agreement can be reached on how to value museums and it has to be borne in mind that all of the decisions so far relate to historic buildings not new museums.

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