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What is today's blog about?
This week, we are going to look at the Local Taxation/Assessment competency with Kit Rabbette, Senior Surveyor at Paul Rabbette Limited Chartered Surveyors. This is the first of three articles in our Business Rates series, so stay tuned for more.
Essential reading for AssocRICS and RICS APC candidates.
You can also listen to our CPD podcast on Anchor for more free AssocRICS and RICS APC training and support.
Why is this important?
Woolway (VO) v. Mazars [2015] and the Staircase Tax have been a rating hot topic over the last 5 years.
They are also likely to be one of the main areas of questioning for the Local Taxation and Assessment RICS APC competency.
We will look at this hot topic over three blog posts:
What is a hereditament and why is this important?
Focus on the Woolway (VO) v. Mazars [2015] case
Focus on the Staircase Tax
What do I need to know?
Business rates and technical jargon go together hand in hand. You need to know these basic definitions to satisfy level 1, as well as being able to apply these to achieve levels 2 (doing) and 3 (giving reasoned advice). In this blog article, we will focus on the term, hereditament.
What is a hereditament?
Hereditament means ‘an inheritable property’ and stems from the Latin word hērēditāmentum, meaning to inherit. Today, and in this context, it means a property which is assessed for rating purposes.
How is a hereditament defined by legislation?
However, since the Poor Relief Act 1601 which originally introduced the concept of business rates, there hasn’t been a single piece of legislation which adequately defines what a hereditament is.
Unhelpfully (and confusingly), the Local Government and Finance Act 1988 (the cornerstone of modern rating), simply refers back to the General Rate Act 1967, which in turn refers back to the Rating and Valuation Act 1925 and the Rating Act 1874. Although the Rating Act 1874 does mention hereditament a number of times, it doesn’t actually define it.
The Rating and Valuation (Apportionment) Act 1928 does try to define the term, but only really goes half way. It states ‘where two or more properties within the same curtilage, or contiguous to one another, are in the same occupation…’ ‘…they shall be treated as if they formed parts of a single hereditament’.
What happens where this doesn’t apply?
The 1928 Act fails, however, to deal with the situation where two properties are not within the same curtilage or are not contiguous to one another.
Of course, if two elements are occupied by different parties or are occupied by the same party, and are put to wholly different uses to one another, then they will always be considered as two hereditaments.
Does case law deal with this issue?
From the 1900’s to the 1950’s, various cases dealt with this issue. However, things really started changing in 1957 in the case of Gilbert v. Hickinbottom [1957].
What happened in Gilbert v Hickinbottom [1957]?
The Court of Appeal, lead by Lord Denning, heard Gilbert v. Hickinbottom [1957] which concerned a bakery on one side of a public highway and a mechanic’s workshop, which serviced the bakery’s vans, on the other side of the road.
Should the two properties have been assessed as one hereditament or two?
The case turned on whether the two properties should be assessed as one hereditament or two.
The court considered that the first test should be the geographic – do the two elements touch one another or not? If so, then it is likely that they should be assessed as one hereditament. If not, then it is likely that they should be assessed as two.
What is functional essentiality?
However, there is an element of flexibility with that rule – ‘in such cases the two properties on either side of the road are so essentially one whole – by which I mean, so essential in one use the one to another – that they should be regarded as one single hereditament’.
As such, the court determined that the mechanic’s workshop was so essential to the operation of the bakery that the bakery could not exist without it and, as such, that the two properties should be assessed as one hereditament. This rule became known as ‘functional essentiality’.
What other case law should I be aware of?
This was a ground-breaking case at the time, and, one which has changed the face of rating law ever since.
Crucially, the rules were understood, respected and expanded upon, but subsequent notable cases include:
Midland Bank v. Lanham (VO) [1975] – applying the rule to a bank with associated training suites where it was held that the two elements were functionally essential and should be assessed as one
Trunkfield (VO) v. Camden London Borough Council [2010] – applying the rule to offices that were contiguous but only by a party wall, and did not have interconnectivity between them, where it was held that the two elements should be separately assessed
Vtesse v. Bradford (VO) [2010] – which concerned fibre optic cables and asked whether cables linking two geographically remote offices together fulfilled the geographical test, the answer was a resounding no!
What next?
In our next two business rates blog articles, we will focus on the Woolway (VO) v. Mazars [2015] case and the Staircase Tax.
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Stay tuned for our next blog post to help build a better you
N.b. Nothing in this article constitutes legal or financial advice.