A landmark ruling in favour of a museum in Devon could have a significant impact on the level of business rates paid by museums across the country.
The case, Stephen G Hughes v Exeter City Council, which related to the business rates paid by Exeter Royal Albert Memorial Museum, was heard at the Upper Tribunal.
Legal arguments centred on whether or not business rates for museums should be valued using the ‘Receipts and Expenditure’ methodology.
This method involves basing the fees on the cost of rebuilding any institution, which is the chosen format of the Valuation Office Agency.
However, the court ruled that business rates for museums should, in fact, be valued based on the Receipts and Expenditure method.
As a result, the Museum’s business rates will not take into account a series of £24 million worth of essential repairs that began in 2008. The museum’s rateable value had been set at £510,000 since December 2011, before an appeal saw this reduced to £445,000.
A similar case involving the York Museums and Gallery Trust also challenged the system determining business rates in 2017, with the court ruling that the loss-making museum was not being charged an appropriate rate, reducing the tariff to £1.
It is this precedent that the Upper Tribunal has found in favour of and the Exeter Royal Albert Memorial Museum will now see its rateable value reduced to £1, backdated to April 2015. The reduction is also set to be applied to the 2017 rating list.
Sean Callaghan, Palmers’ Head of Commercial Property, said: “This landmark decisions has the potential to affect many small museums across the country, many of which struggle to balance the books, particularly when faced with large business rate demands.
“Based on the decision of the Upper Tribunal, this will positively impact the way in which museums are valued in future and will mean that those that are situated in historic buildings – which inherently have substantial rebuild costs – will no longer be unfairly penalised with higher rates.”
For help and advice on matters relating to commercial property and business rate valuation appeals, contact our expert team.