Part 4: Material Day
The Valuation Office Agency's (VOA) technical manual for the rating of business (non-domestic) property.
1.1 The Material Day provisions are contained in the Non-Domestic Rating (Material Day for List Alterations) Regulations 1992 SI 1992 No 556 which came into force on 1 April 1992. These have been amended by the Non-Domestic Rating (Material Day for List Alterations) (Amendment) (England) Regulations 2005 SI 2005 No 658 and the Non-Domestic Rating (Alteration of Lists and Appeals) (Wales) Regulations 2005 WSI 2005 No 758 and the Non-Domestic Rating (Alteration of Lists and Appeals) (England) Regulations 2009 SI 2009 No 2268. The amendments came into force on 1 April 2005 and the 1 April 2009 respectively.
Examples in this section are used to illustrate the application of the regulations relevant to the 2010 list unless otherwise stated.
2. Relevance of Material Day
The Material Day is the day on which certain considerations are taken into account for valuation purposes when thinking about making an alteration to a list. This is the same whether the alteration results from a proposal or by a valuation officer notice.
3. Material Day and the Local Government Finance Act 1988
3.1 The concept of material day was introduced by the 1988 Act. Schedule 6 para 2(6) says -
“Where the rateable value is determined with a view to making an alteration to a list which has been compiled (whether or not it is still in force) the matters mentioned in sub-paragraph (7) below shall be taken to be as they are assumed to be on the material day (emphasis added).
For the purposes of sub-paragraph (6) above the material day shall be such day as is determined in accordance with the rules prescribed by regulations made by the Secretary of State.”
3.3 Paragraph 2(7) of Schedule 6 of the 1988 Act deals with matters to be considered as they are on the material day. These are “relevant matters”.
“The matters are -
a. matters affecting the physical state or physical enjoyment of the hereditament,
b. the mode or category of occupation of the hereditament,
c. the quantity of minerals or other substances in or extracted from the hereditament,
d. the quantity of refuse or waste material which is brought onto and permanently deposited on the hereditament,
e. matters affecting the physical state of the locality in which the hereditament is situated or which, though not affecting the physical state of the locality, are nonetheless physically manifest there, and
f. the use or occupation of other premises situated in the locality of the hereditament.”
4. What does all this mean?
4.1 When thinking about altering a list you must consider these relevant matters as they existed on the material day. Therefore, you need to understand when the material day is for a given set of circumstances.
SI 1992 No 556 sets out what the appropriate material day is for each of the different reasons why a list alteration is made. SI 2009 No 2268 (England)and WSI 2005 No 758 (Wales) amend the material day for alterations in the 1995 List which have effect under Regulation 13(2A) or (8BA) of the Non-Domestic Rating (Alteration of Lists and Appeals) Regulations 1993 for England only and the material day for alterations to a list compiled on or after 1 April 2005. See Appendix 2:3:1 for a summary of the different circumstances and corresponding material days.
4.2 Before making any list alteration you must first identify the reason for doing so since this is the key to ascertaining the correct material day. Within the life of a rating list the material day may vary by up to five years. For example, in the 2010 list it may be any day between and including 1 April 2010 and 31 March 2015 depending on the circumstances. As it is the circumstances existing on the material day that must be reflected in any list alteration, and since these are likely to change over time, it is clear that wrongly identifying the material day can have a significant effect on value.
5. Applying the Material Day provisions in practice
5.1 Identification of the Material Day is only the first step in a series of steps ending with a list alteration. Every list alteration has both a material day and an effective date - see RM S2: Pt 5 for advice on effective dates. When considering any alteration of the list, whether as a result of a proposal or a report, both material and effective days must be identified.
5.2 In order to ensure a correct list alteration is made you should follow a sequential thought process. This can be achieved by answering the following questions in this order.
What type of list alteration is being contemplated?
What is the Material Day? See the summary of SI 1992 No 556as amended at Appendix 2:3:1
What are the relevant circumstances existing on that day? These are the relevant matters to be taken into account for valuation purposes and which are specified in Schedule 6 paragraph 2(7) - see paragraph 3.3 above.
What is the RV taking account of those circumstances using values as applicable to the AVD? A valuation should be carried out using values appropriate to the tone of the list. The tone of the list provision is contained in Schedule 6 paragraph 2(4) LGFA 1988.
What is the day from which all those circumstances and value applied? Only at this stage should you consider the effective date for the list alteration. Care must be exercised where there are restrictions on effective date because of the operation of Regulation 14 of the Non Domestic Rating (Alteration of Lists and Appeals) (England) Regulations 2009 for the 2005 and 2010 list (SI 2009/2268) or the equivalence in the NDR (Alteration of Lists and Appeals) (Wales) Regulations (SI 2005/758) applicable to Wales. See RM S2: Pt 5 for guidance on effective dates.
Is there any further action to be taken? Having dealt with the list alteration in hand you should then consider whether any associated further action is necessary. This may be to deal with
(i) another list alteration, the need for which has become apparent through dealing with the first alteration. For example, in settling a compiled list appeal you may have become aware of a material change of circumstance warranting a further alteration in the list
(ii) issuing a transitional relief certificate. See NDR Procedure Manual regarding the operational aspects of issuing transitional relief certificates and Transitional Relief Homepage regarding technical aspects.
6. Dealing with cases where several factors are in play
It often happens that when you are considering making an alteration there are several different sets of circumstances that need to be taken into account. This may cause confusion but it should be remembered that a list alteration can only ever have one material day. Each different set of circumstances should be considered and if each would have a different material day then it is likely that more than one list alteration will be necessary.
Some illustrative examples will be helpful in explaining the principles – see paragraph 6.2 below.
6.2 Examples (2010 list)
(a) Inaccuracy in the compiled list and an extension has been built at the hereditament post compilation day
Here there are two different sets of circumstances. These have to be dealt with separately since there are two different material days involved. Two list alterations will therefore be needed.
(i) The extension is a material change of circumstances (MCC) and therefore the material day for an alteration to a list compiled on or after 1 April 2010 to take account of it is the day when the extension was completed (Regulation 3(7)(b)(ii)(aa)) if the day is reasonably ascertainable where the alteration is not made in pursuance of a proposal The circumstances to be taken into account are all the relevant matters contained in Schedule 6 para 2(7) of the LGFA 1988 (see para 3.3 above) existing on the completion day of the extension and the valuation is to reflect all of these factors. Consequently, the value should not only reflect the new extension but also reflect the correction in tone on compilation day.
(ii) The compiled list correction has a material day of compilation day (Regulation 3(2) refers) and therefore only circumstances as they existed on that day can be taken into account for valuation purposes. Consequently, the subsequent extension must be ignored.
For alterations of the 2010 list to reflect the above two circumstances, where the alteration to correct the compiled list entry will result in:
1) a decrease in RV, the list may be altered to reflect the compiled list correction (to reflect the matters on the material day of compilation day) , followed by another alteration to reflect the extension MCC at a material day later than the compilation date. Alternatively, the MCC alteration may be dealt with first followed by the compiled list correction although great care must be taken to ensure that the relevant cases are correctly linked so that the MCC alteration becomes the current assessment.
For the 2005 list this can be carried out by a Valuation Officer Notice until 1 April 2011 thereafter alterations to the 2005 list will only be possibly to give effect to proposals.
2) an increase in RV, the effective date would be restricted to the day on which the alteration is made, so a single alteration to reflect both the compiled list correction and the extension as a material change of circumstances should be made with effective from the date of the MCC. Advice should be sought from the Technical Adviser via the Team Leader in case of uncertainty.
For the 2005 list this can only be carried out until 1 April 2011 where there has been an MCC prior to 1 April 2010, however if the MCC date was not known then the alteration would no longer be possible because as at the date of schedule alteration the 2005 list is closed.
(b) List alteration to reflect an extension but a previous, un-assessed, post-compilation extension is found on inspection.
Here there are two different material changes of circumstance that have not yet been reflected in the list entry. However, for an alteration to a list compiled on or after 1 April 2010 and the alteration is not made in pursuance of a proposal, the material day for a list alteration by the valuation officer to take account of an MCC is the day on which the circumstances giving rise to the alteration occurred. In this example, there are therefore two material days for the respective two extensions. The regulations applicable to the 2010 List allow the two extensions to be actioned by two separate alterations reflecting two different material dates with the corresponding effective dates.
For alterations to the 2010 List made following a proposal, the material day is the day on which the proposal was served on the valuation officer. On the day when the proposal was served, the extensions to be taken into account are all those existing on that single day. Both extensions would have to be reflected in a single alteration even though the regulations on effective day applicable to the 2010 List provide for separate effective dates for separate events. All those matters existing on the day the proposal was made must be reflected in any settlement of the proposal, which can only have effect from the day the latest MCC occurred. If the VO believes that a previous MCC had an effect on the value for an earlier day the list may be altered subsequently by means of a VOR case.
It should be noted that references to MCCs in this example do not include changes to the identity of the hereditament itself that are specifically dealt with in Reg 3(4). Reg 3(4) covers the hereditament coming into existence/ceasing to exist; ceasing to be/becoming domestic property or exempt property; ceasing to be/becoming required to be shown in the central list; or ceasing to be/becoming part of a Billing Authority’s area through boundary changes. These type of changes have as their material day the day on which the circumstances giving rise to the list alteration occurred whether following a proposal or otherwise.
(c) List alteration required for an MCC but on inspection an earlier merger of hereditaments is noted
Here there are two different situations to be considered, each with a different material day. The regulations applicable to the 2010 List allow the extension to be actioned by two separate alterations reflecting two different material days from the corresponding effective dates.
Firstly deal with the merger and then deal with the subsequent MCC. The material day for the merger is the day it occurred (Reg 3(4) and 3(8) refer) and therefore the subsequent MCC is not to be taken into account in this list alteration. The second list alteration will reflect the effects of the later MCC.
The fact that there has been an MCC after the merger has occurred but before the list has been altered to take account of it does not prevent the valuation officer dealing separately with the two events. See RM S2: Pt 5 for the interaction with effective day provisions.