Part 6: Exemptions - Part D: Agricultural Premises
Instructions on when to undertake DLM on the 2010 and 2017 rating lists.
‘Agricultural land’ and ‘agricultural buildings’, as defined in paragraphs 1-8 of Schedule 5 (Sch 5) to the Local Government Finance Act 1988 (LGFA 1988), are exempt from rating and are not entered in to the Rating List.
The legislation covering agricultural exemption has tried to define farms and agricultural activities in concise, legal language. Although some of the phrases in current use date back to the middle of the 19th century, they still manage to capture the essence of the land and buildings they seek to describe. Subsequent changes in farming practice (eg intensive livestock production, fish-farming etc) have been reflected in amended legislation over the years.
There is no uniformity between rating statutes and the law controlling agricultural holdings or planning, each contains its own definitions in relation to agriculture. It should not be assumed that all activities on farms are necessarily agricultural in the rating context.
Farmers have been encouraged to diversify and there has been an increase in recreational activities on former agricultural land such as independent and franchise operations for war-games/paint-ball combat activities; horse-riding trails; clay pigeon shooting operations, and so on. These will usually be rateable. For more information on the approach to, and treatment of, such uses reference should be made to Rating Manual Section 5; Part 3; Section 385: Farm Diversification.
You should not presume that an activity will be exempt from rating because it is located on a farm. Paragraphs 1-8 of Schedule 5 set a variety of strict tests which agricultural premises need to satisfy before exemption is appropriate.
2.1 Definition
Paragraph 1 of Schedule 5 to LGFA 1988 states that:
“A hereditament may be exempt to the extent that it consists of any of the following -
agricultural land;
agricultural buildings.”
‘to the extent that’ is a phrase common to all the exemption classes within Sch 5. It allows the possibility of exemption for those parts of an otherwise non-exempt hereditament that are used for agricultural purposes with the Sch 5 definition.
Generally, the words should be interpreted in a spatial context, that is in the context of the space used, although they can be construed in terms of time, known as a temporal test.
Such a temporal test will only apply where the hereditament qualifies on certain days, but not on others (see also the provisions of s.42 LGFA 1988), and also in relation to s.67(5) LGFA 1988 where exemption falls to be determined ‘at the end of the day’.
Additionally, s.42(1) LGFA 1988 requires a relevant hereditament to be shown in a Rating List if, amongst other things, at least some part of it is neither domestic nor exempt property.
2.2 Rateable Value of partly exempt hereditaments
The rateable value of a partly exempt hereditament is determined in accordance with paragraph 2(1B) of Schedule 6 LGFA 1988 (added by paragraph 38(4) of Schedule 5 LGHA 1989).
Paragraph 2(1B) Schedule 6 LGFA 1988 requires that:-
“the rateable value of a non domestic hereditament which is partially exempt from local non-domestic rating shall be taken to be an amount equal to the rent which, assuming such a letting of the hereditament as is required to be assumed for the purposes of sub-paragraph (1) above, would, as regards the part of the hereditament which is not exempt from local non-domestic rating, be reasonably attributable to the non-domestic use of property.”
So the rateable value of a partly exempt agricultural hereditament should reflect the rental value of the non-exempt non-domestic property and ignore any value of the exempt or domestic property forming part of the hereditament.
In these cases, it will be necessary to add to the description in the rating list the words ‘part exempt’ to satisfy the requirement in section 42(3) LGFA 1988 for example as ‘Store and Premises (part exempt)’. Also, it may or may not be a composite hereditament (section 42(2)(b) requiring a composite indicator depending on whether there is domestic accommodation within the boundaries of the farm. Although the decision in [Cartwright (VO) –v- Nickerson Zwann Ltd, 2005] RVR 319 found that the omission of the words ‘part exempt’ in the description is not fatal to the entry in the rating list, VOs are advised to adopt best practice and use the ‘part exempt’ suffix.
2.3 Relevance of case law to the general application of the exemption in paragraphs 2-7 Sch 5 LGFA1988 and occasional/temporary use for a non-exempt purpose
The exemption of agricultural land and buildings is defined by the use of the property (land and buildings) in the hereditament. Therefore cases decided in respect of earlier legislation remain relevant, subject to:
a) Paragraph 21 Sch 5 LGFA 88 (which applies to all parts of Schedule 5 LGFA 88) provides, at sub-paragraph 21(3), that:
“Any land, buildings or property not in use shall be treated as used in a particular way if it appears that when next in use it will be used in that way.”
b)The ‘state of affairs at the end of the day’ provisions in s.67(5) LGFA 1988.
Paragraph 21 of Sch 5 and s.67(5) have a similar application to that of s.66(5) and s.67(5) for determining the extent of any non-domestic use of otherwise domestic property in a hereditament. Thus, if there are no physical adaptations to the exempt land or buildings at the end of the day, occasional use for a non-exempt purpose during the day will not be rateable, providing the exempt agricultural use is resumed by the end of the day.
The principles and practice for deciding whether occasional use of otherwise exempt agricultural land for another activity is rateable are discussed in detail below, and examples are given in Appendix 1.
3.1 Definition
‘Agricultural land’ is defined in Paragraph 2(1) of Schedule 5 LGFA 1988 as:
“a) Land used as arable, meadow or pasture ground only,
b) land used for a plantation or a wood or for the growth of saleable underwood,
c) land exceeding 0.10 hectare and used for the purposes of poultry farming,
d) anything which consists of a market garden, nursery ground, orchard or allotment (which here includes an allotment garden within the meaning of the Allotments Act 1922), or
e) land occupied with, and used solely in connection with the use of, a building which (or buildings each of which) is an agricultural building by virtue of paragraph 4, 5, 6 or 7 below.”
NB See 4 (below) for exclusions from this definition contained in paragraph 2(2).
3.2 Mutual Exclusivity of ‘agricultural land’ and ‘agricultural buildings’
In no circumstances can the site of a building be ‘agricultural land’, since the expressions ‘agricultural land’ and ‘agricultural buildings’ are mutually exclusive. See Gilmore (VO) v Baker-Carr and Others (1962 RVR 486).
3.3 The exempt uses of agricultural land in paragraph 2(1)
3.3.1 ‘Land used as arable, meadow or pasture ground only’
‘Arable’ land has either been ploughed or is fit for ploughing. Grass grown in a ‘meadow’ is harvested for conservation (typically as hay or silage) and is consumed by livestock at a later date, whereas grass grown in a ‘pasture’ is grazed directly by animals in the field.
For arable, meadow or pasture to qualify as ‘agricultural land’, it must be ‘used’ as arable, meadow or pasture ground ‘only’.
The importance of the words ‘used’ and ‘only’ was stressed by the Court of Appeal in Bradshaw v Smith (1980 CA 255 EG 699). The Court considered that to be “used as meadow or pasture”, the land should be used for growing grass for the purpose of being either cut or grazed. Any animal may graze the land without it losing exemption - see Hemens (VO) v Whitsbury Farm and Stud (HL [1987] RA 277 and [1988] 2 WLR 72).
3.3.2 Lairage
Land used for lairage (where animals are held prior to slaughter in abattoirs) which is divided into pens and in which the animals are ‘fed’ (in contrast to fields where the beasts may ‘feed’) cannot be grazed as “…pasture ground only” and should, therefore, be rated. See also 5.3.4 (below).
3.3.3 Land Used for Rearing Game
Similarly, land used for the grazing of sheep for six months of the year, but used for the rest of the year for keeping pheasants and partridges, will not be ‘agricultural land’. Game birds do not graze the land, which cannot therefore be said to be used for “… pasture ground only”. See Cook (VO) v Ross Poultry Ltd ([1982] RA 187).
3.3.4 Set-Aside Land
Set-Aside is a voluntary scheme introduced in the UK in 1988 and is designed to provide farmers with an alternative to the production of surplus arable crops. Some farmers may be able to use the rotational fallow option in a planned conversion to organic food production.
There are three options for the use of set-aside land. It may be:
a) set-aside to fallow (ie cultivated, but not used for growing a specific crop) on a permanent or rotational basis, during which case it must be kept in good agricultural condition and environmentally attractive.
As a matter of policy, such land should be treated as coming within the ambit of ‘land used as arable, meadow or pasture ground only’, and therefore exempt from rating.
b) used for woodland.
Generally, this, too, will be exempt from rating, but see paragraph 3.4 of this Section (below) for further details on this aspect.
c) put to a non-agricultural use.
In this case the normal tenets of rating will apply and it is unlikely that any exemption will apply.
3.3.5 Other land uses
Land used occasionally or periodically for purposes other than arable, meadow or pasture ground (or the other purposes defined in paragraph 2(1) Sch 5) is generally rateable, either as a separate or a partly exempt hereditament, subject to both the ‘end of the day’ provisions of section 67(5) LGFA 1988 and the de minimis rule.
NB See also 4.1 (below) and Appendix 2.
3.4 ‘Land used for a plantation, a wood or for the growth of saleable underwood’
‘Saleable underwood’ means woodland from which successive crops are raised from the same roots or stools of the trees being grown eg chestnut coppice, or osier beds (where shoots of a species of willow used in basket work are grown).
Actively managed commercial plantations will clearly be exempt. However, commercial management of woodland need not (and often is not) incompatible with its use for sport or recreation. This dual use may be the trigger for rateability if the exclusion from exemption in paragraph 2(2)(d) of Sch.5 applies. See also paragraph 4.4 (below).
From 1 April 1997, rights of sporting are no longer separately rateable - see section 2 Local Government & Rating Act 1997.
3.5 Poultry farming
To be exempt from rating as ‘land used for the purposes of poultry farming’, there must be more than 0.10 hectare of land on which the birds are either allowed free range or are housed in arks (or similar transportable structures) which are moved from time to time within the boundaries of the land concerned.
Pheasants and partridges are ‘game’, not poultry. If the birds are destined to restock land used for shooting, then the ground used for their breeding and rearing will not be agricultural land. See Cook (VO) v Ross Poultry [1982] LT RA 187. For the avoidance of doubt, game farms, per se, are rateable.
3.6 ‘Land which consists of a market garden, nursery ground, orchard or allotment’
3.6.1 ‘Market Garden’
The term ‘market garden’ is not defined in LGFA 1988. However, the words should be taken to mean a holding cultivated wholly or mainly for the production of vegetables, fruit and flowers for sale in the course of a trade or business. The phrase ‘market garden’ was considered by the Court of Appeal in Hood Barrs v Howard (VO) [1966] RA 212; CA [1967] RA 50, where it was regarded as applying to an area in which produce is grown for sale, as opposed to an area in which produce is grown for consumption by the occupiers.
A watercress bed has been held to be a market garden.
3.6.2 ‘Nursery ground’
3.6.2.1 Definition
‘Nursery ground’ is also not defined in LGFA 1988, but can be taken to mean land in, or on which, young or immature trees and/or young plants are reared (not necessarily being grown in the actual soil of the nursery) until fit for transplanting or sale: the emphasis on young plants should be noted. Even though plants are raised in containers on the land rather than by rootstock in the soil, such ‘grounds’ should be treated as exempt.
In Andsome Garden Products Ltd v King (VO) [1990] LT 30 RVR 31, the Lands Tribunal held that land and premises, used for the preparation of horticultural organic potting compost and the rearing of seasonal bedding plants for use substantially by others for gardening or horticulture elsewhere than on the hereditament, were rateable. This was in contrast to the land, some of which was covered by poly-tunnels, that was considered to be exempt as ‘nursery ground’.
The word ‘anything’ in para 2(1)(d) was possibly included to ensure that the exemption was not limited to market or nursery gardening that took place literally on open ground but included cultivation of products in growing frames, raised beds, trays, pots or boxes. Whatever the word ‘anything’ was intended to include, it was not intended to include buildings
3.6.2.2 Garden Centres
Generally, garden centres where container-grown plants and young trees are displayed and sold retail to the public will not come within the definition of nursery grounds. There may, however, be parts of the more traditional type of garden centre (which may, indeed, have once been called a nursery) where some rearing of seedlings and young plants or trees still takes place. The land on which this work is carried out will be exempt as ‘nursery ground’. It is unlikely that the general public will have access to such areas. In such cases regard should be had to the guidance given in 2.2 above in respect of the valuation approach and the description in the rating list.
3.6.2.3 Turf Production
It has been held that the tending and improving of old turf for the purpose of cutting the turves for transportation did not qualify the land in question as ‘nursery ground’ or confer exemption, either as pasture ground in Butser Turf and Timber Co Ltd v Petersfield RDC [1950] LT 43 RIT 16; or on sea-washed land in Thornton (VO) v Maxwell M Hart (Glasgow) Ltd [1957] LT 50 RIT 724. It has been held, however, by the Divisional Court, that land specially prepared for receiving Cumberland sea washed turf for further cultivation was nursery ground within the definition of ‘agricultural land’, see James & Daniel Provan Ltd v Croydon Corporation [1938] KBD 29 RIT 277.
NB. See also paragraph 10 of Appendix 1 for additional guidance on agricultural exemption in relation to turf production and the distinction that needs to be made between turf cutting and turf growing.
3.6.3 ‘Orchard’
By definition, an orchard will qualify as ‘agricultural land’, unless it forms part of the grounds or gardens of a dwelling-house. In such a case, by virtue of the exclusions in paragraph 2(2)(a) and (b) of Schedule 5, the orchard will be valued as domestic property and not appear as a separate entry in a non-domestic rating list. See also 4.3 (below).
3.6.4 ‘Allotments’ and ‘allotment gardens’
The term ‘allotments’ is not defined in the LGFA 1988, but it is normally used to refer to land held by local authorities or similar bodies under the Allotment Acts 1908-1950 in order to provide residents with land for cultivation. ‘Allotment gardens’ are defined in s22 of the Allotments Act 1922 as “an allotment not exceeding 40 poles (0.1012 hectare) in extent which is wholly or mainly cultivated by the occupier for the production of vegetables or fruit crops for consumption by himself or his family”.
In the context of agricultural exemption, the term ‘allotment’ may be taken to mean any separate parcel of land used for the purposes described above and without limitation on account of area to be exempt.
3.7 ‘Land occupied with, and used solely in connection with the use of, a building which (or buildings each of which) is an agricultural building by virtue of paragraph 4, 5, 6 or 7 below’
Expressly, paragraph 2(1)(e) of Sch 5 LGFA 1988 only applies to the agricultural buildings defined in paragraphs 4-7 of Sch 5. It does not apply to any of the types of buildings defined in paragraph 3 of Sch 5.
Only land which is occupied with, and used solely in connection with the use of, a building which is an agricultural building qualifying for exemption under paragraphs 4-7 of Schedule 5, will be exempt.
4.1 Statutory Exclusions from Exemption
Paragraph 2(2) of Schedule 5 specifically excludes the following land uses from the definition of ‘agricultural land’:
“a) land occupied together with a house as a park,
b) gardens (other than market gardens),
c) pleasure grounds,
d) land used mainly or exclusively for purposes of sport or recreation, or
e) land used as a racecourse.”
These exclusions are looked at individually at 4.2 to 4.5 below.
Previously, in order for the exceptions to the definition of exempt agricultural land in paragraph 2(2)(a)-(c) and (e) of Sch 5 to bite, there had only to be a use that was more than de minimis for the land to be rateable. Now, under the provisions of LGFA 1988, if the use of the land is predominantly agricultural and there is no evidence of any other use at the end of the day, then the non-agricultural use will not be rateable. The earlier case law for these subsections generally applies as before, except in relation to paragraph 2(2)(d) of Sch 5 which excludes land ‘used mainly or exclusively for purposes of sport or recreation’ from exemption. The previous legislation provided that the land should be ‘kept’ mainly or exclusively for purposes of sport or recreation and the decided cases are determined on that basis. In this context, ‘mainly’ should be taken to mean ‘predominantly’.
Some sporting or recreational activities held for a few days in a year may be disregarded (eg a field occasionally used for amateur cricket, village show, motor show and football matches or as a car park in connection with such occasional events), but only where it is clearly a use that ceases to exist before the end of the day and does not resume again without an intervening agricultural use. Setting up and taking down periods not exceeding 14 days or fewer days should be disregarded. A pragmatic view should be taken on whether a rating list should be altered in such circumstances, after having regard to the size, scale and duration of such an event.
See also 4.5 below - Hayes(VO) v Loyd HL [1985] RA 133, but note that race-courses motor, equine or other will be rateable unless de minimis.
4.2 ‘Land occupied together with a house as a park’
‘Land occupied together with a house as a park’ is not ‘agricultural land’. The term, park, can be widely construed. It is not limited to ancient legal park (see the speech by Lord Denning MR in Dixie v Crosby (VO) [1972] RA 1 for a clear exposition of this concept) and may consist of pasture and/or woodland used for recreation.
The question as to whether land is so occupied together with a house is primarily one of fact. The phrase ‘together with’ should be fairly widely applied, not limited to land contiguous to the house and attention should be directed to all relevant circumstances of which the following are cited as examples:
a) if the land is let separately for farming, it cannot be said to be occupied together with the house;
b) if the grassland is used by the owner of the house to graze animals or is cut for hay in order to maintain the land as a park, it is not being ‘used as meadow or pasture ground only’ and is therefore not exempt;
c) whether the land in question has always been regarded locally, and is still so regarded, as part of the park attached to the house;
d) the presence of deer or other ornamental animals;
e) the presence and extent of ornamental timber;
f) the presence of artificial landscaping;
g) the nature and extent of any agricultural operations carried out on the land, eg general improvement of the grassland; ploughing and cultivation of parts of what was parkland or the presence of fencing to protect crops. See Devon (Earl of) v Rees (VO) [1951] LT 44 RIT 74.
4.3 ‘Gardens’ and ‘pleasure grounds’
‘Gardens’ (other than allotment gardens or market gardens) and ‘pleasure grounds’ are not ‘agricultural land’, whether or not occupied together with a house. Whether a parcel of land is rateable as a ‘garden’ or qualifies for exemption as ‘agricultural land’ is a question for determination on the facts in each case. See Hood Barrs v Howard (VO) [1966] RA 212; CA [1967] RA 50 and Drury-Heath v Wallace (VO) [1960] CA 53 RIT 672.
An example of the exclusion of pleasure ground is provided by the Court of Appeal decision in Dixie v Crosby (VO) [1972] RA l.
4.4 ‘Land used mainly or exclusively for purposes of sport or recreation’
Land which is ‘used mainly or exclusively for the purposes of sport or recreation’ will not be ‘agricultural land’. It is the actual use of the land which must be looked at and not the purpose for which the land is used by the occupier. Thus grazing land used by the horses of a commercial riding school will still be exempt agricultural land even though the horses are used for recreational purposes. The riding school stables, etc, will however be rateable. See Young (VO) v West Dorset DC **[1977] LT RA 234 and Hemens (VO) v Whitsbury Farm and Stud **[1987] RA 277 [1988] 2 WLR 72.
In R W Bishop v Walen (VO) [1988] LT 28 RVR 128 a stable adjoining grazing land was held to be rateable as it was being used for the keeping of a horse for the purpose of pleasure and recreation.
Where land, which is arable, meadow or pasture, is used for sport or recreation to an extent which is less than mainly or exclusively, it will still fail to gain exemption (not being used as arable, meadow or pasture ground only), unless that sporting or recreational use is so insignificant as to be considered de minimis.
This latter point has been the subject of a number of conflicting decisions by the Courts. Lord Evershed’s obiter dictum in Garnett & Others v Wand (VO) [1960] CA 53 RIT 670 was followed by the LT decision in Eden (VO) v Grass Ski Promotions [1981] LT RA 7. An apparently contrary view was expressed by the Lands Tribunal in Moore v Williamson (VO) [1973] LT RA 172.
However, in Forster & Others v Simpson (VO) [1984] LT RA 85 the LT Member, whilst not agreeing that there was any conflict between the two, indicated that he would reject any submission that land kept or preserved for sport or recreation could still be exempt as agricultural where the extent of that activity was less than ‘mainly or exclusively’. He considered that it amounted to an attempt to widen the ambit of the de minimis principle.
The use to which land is put is primarily a question of fact and degree depending upon the circumstances of the particular case, and all relevant facts of the case must be carefully considered.
Examples of such matters can be obtained from the following cases:-
a) In the Lands Tribunal:
Abernant Hotel &Estate Co Ltd v Davies (VO) [1954] 47 RIT 38
Cutts (VO) v Viscount Ingleby & Helmsley RDC [1957]LT 50 RIT 269
Bell (VO) v Viscount Ingleby & Stokesley RDC [1957] LT 50 RIT 269
Bloodworth (VO) v The Marquess of Exeter [1958] LT 51 RIT 822
Eden (VO) v Grass Ski Promotions [1981]LT RA 7.
b) In the Court of Appeal:
Garnett and Others v Wand (VO) [1960] CA 53 RIT 670.
4.5 ‘Land used as a racecourse’
There is no qualification to the words ‘land used as a racecourse’ and therefore the occasional use of land which might otherwise be ‘agricultural land’ for the purpose of racing can defeat the exemption. If it is found, as a fact, that the land is used as a racecourse, then the land should be assessed. See Hayes (VO) v Loyd [1982] LT RA 239, [1984] CA RA 41, [1985] HL RA 133and also Wimborne and Cranborne RDC v East Dorset Assessment Committee [1940] CA 32 RIT 404.
The expression ‘racecourse’ should include not only the racetrack circuit but also the areas used for control, catering, betting, parking, the viewing of races and the convenience of spectators generally.
Once land is ‘used as a racecourse’ it will no longer be agricultural land, unless that use is so trivial or insignificant that the legal maxim de minimis non curat lex can apply. Many point-to-point race meetings will only use the racecourse for one day per year and, when considering whether that use is de minimis, regard should be held to the presence of permanent features such as fences and rails; the organisation and preparation for the event; the importance of the event locally; the number of spectators who attend and the financial return to the organisers.
The facts as found by the Lands Tribunal in Hayes (VO) v Loyd illustrate the kind of circumstances which cannot be ignored as de minimis despite the use of the racecourse for only one day per year. It should be remembered that many of the smaller National Hunt racecourses are only used for a few days per year.
Although these examples relate to equestrian activities, the same considerations will apply equally to land used for foot, bicycle, motorcycle or motorcar races. Such land uses will include grass track racing, jalopy racing, motor-cross and motor-cycle scrambling. There will be others.
If difficulties are encountered, advice is available from the Technical Adviser.
5.1 Definition of an agricultural building para 3 Schedule 5 LGFA 1988
Paragraph 3 states that:
“A building is an agricultural building if it is not a dwelling and
a) it is occupied together with agricultural land and is used solely in connection with agricultural operations on that or other agricultural land,
b) it is or forms part of a market garden and is used solely in connection with agricultural operations at the market garden,
or
c) it is or forms part of a nursery ground and is used solely in connection with agricultural operations at the nursery ground.”
Sub paragraph (c) was added by the Non-Domestic Rating (Nursery Grounds) Act 2018 and has effect in relation to England, for financial years beginning on or after 1 April 2015 and in relation to Wales, for financial years beginning on or after 1 April 2017.
5.1.1 Meaning of ‘building’
The word ‘building’ includes a separate part of a building. This should be taken to refer to such part of the building as is separated from the remainder by an identifiable barrier, eg a wall, partitions or a fence. Separation by use or function will not be sufficient. Thus, where the whole of a single structure fails to meet the definition of ‘agricultural building’, each separate part of the building should be tested against the definition.
For the purpose of the rateability (or otherwise) of agricultural buildings, structures in the nature of pole barns and Dutch barns (ie comprising a roof supported by uprights, but not enclosed by complete walls) should be regarded as buildings whether having earth or constructed floors. See Shaw v Borrett (VO) [1967] LT RA 90; [1968] CA RA 327.
5.1.2 The provisions of paragraph 3(a)
For a building to qualify as an ‘agricultural building’, paragraph 3(a) requires that:
“it is occupied together with agricultural land and is used solely in connection with agricultural operations on that or other agricultural land,
This wording creates three distinct tests:
(i) Occupation Requirement
In order to be exempt a building has to be occupied with agricultural land and that use must be ancillary or consequential in relation to the agricultural operations carried out on that land and/or any other agricultural land.
(ii) User Condition
It is further required the building is used in connection with agricultural operations on the agricultural land with which it is occupied, or on other agricultural land.
(iii) Sole Use
Such a use in connection with agricultural operations on the agricultural land with which it is occupied, or on other agricultural land, must be its sole use.
These three tests are explored more fully in the next three paragraphs.
5.1.3 The Occupation Requirement
‘Occupied together with agricultural land’ should be taken to mean that there must be a complete identity of occupation of both buildings and land.
In Farmer (VO) and Hambleton DC –v- Buxted Poultry Ltd HL [1993] RA 1
Lord Slynn of Hadley after reviewing the Hilleshog and Handley(VO) decision below explained the test as follows (albeit he was considering buildings “occupied together with livestock buildings but it is considered that the same would apply to buildings “occupied together with agricultural land) :-
"I agree with Glidewell LJ that for one building to be ‘occupied together with’ another for the purposes of this Act they must be in the same occupation and the activities carried on in both must be jointly controlled or managed. I also consider that the buildings must be so occupied and the activities so controlled and managed at the same time. These are necessary conditions to be satisfied, but to satisfy each of them separately or together is not sufficient to establish that one building is ‘occupied together with’ another for rating purposes. Nor is there any geographical test which gives a conclusive answer — though the distance between the buildings is a relevant consideration, as the Court of Appeal held.
It is not, however, sufficient to ask generally whether the buildings or buildings and land in question are all part of the same business enterprise. What it is necessary to show is that the two buildings or, as the case may be, the buildings and agricultural land, are occupied together so as to form in a real sense a single agricultural unit. Contiguity or propinquity may go far to show that they are. Thus farm buildings surrounded by land which is farmed with other land nearby though not contiguous or even land in another neighbouring village may well as a matter of fact be found to be ‘occupied together with’ each other. On the other hand, separation may indicate that they are not and the greater the distance the less likely they are to be one agricultural unit."
Therefore, it is necessary to consider:-
(i) Are land and buildings in the same occupation
(ii) Is the land and building jointly controlled and managed at the same time
(iii) Geographically, what is the separation – the greater the distance the less likely that they can form a single agricultural unit
Following the decision in Hilleshog Sugar Beet Breeding Co v Wilkes (VO) [1971] LT RA 275, ‘occupied’ in a rating statute should be taken to mean rateably occupied and the land must be agricultural land within the Sch 5(2) definition - see CE Caldwell (Norlands Farm) Ltd v Garside (VO) [1984] LT RA 48.
The fact that the land and buildings may be separated by some distance does not disqualify the buildings from exemption, but the use of the buildings ‘solely in connection with agricultural operations on the land’ must be beyond doubt. In Farmer (VO) v Hambleton District Council and Buxted Chicken Ltd [1999] CA RA 61, feed pellets produced at a provender mill were distributed to poultry farms between 1 and 110 miles away.
In Handley (VO) v Bernard Matthews PLC [1988] LT RA 222, mills occupied together and used solely in connection with the breeding and rearing of turkeys up to 70 miles distance were held to be not rateable.
5.1.4 The User Condition
In **Gilmore (VO) v Baker Carr and Others [1962] **CA 2 RVR 486, ‘agricultural operations’ were said by Lord Denning to mean “operations by way of cultivating the soil or rearing of livestock”. Although this definition cannot be considered to be exhaustive, it will be sufficiently wide-ranging to cover circumstances normally encountered. Where any operations on land do not come within this definition but are still argued to be agricultural, advice should be sought from the Technical Adviser in the first instance.
In **Eastwood v Herrod (VO) **[1970] HL RA 63, the phrase ‘in connection with’ was considered by the House of Lords. Although this case concerned poultry houses which were subsequently exempted by the Rating Act 1971, it still remains the leading case on the interpretation of the wording appearing in the current form of paragraph 3(a).
To be used “in connection with agricultural operations on the land” the buildings must be “subsidiary or ancillary to the agricultural operations” and “consequential on or ancillary to the agricultural operations on the land” (Lord Reid). Other phrases used in the speeches were “an adjunct or necessary aid to the agricultural operations” (Lord Morris), “ancillary or complementary” (Viscount Dilhorne) or “incidental” (Lord Guest). The Law Lords rejected the idea that the enterprise taken as a whole, comprising land and buildings together, could be considered a “combined agricultural operation” (see Lord Morris 1970 RA at pp 76, 77).
The concept of ‘in connection with’ is perhaps best explained by Lord Reid during his leading speech in Eastwood v Herrod (VO). At page 69, he says: “The whole object of producing a crop on the agricultural land is to market it in one form or another, and I think that anything done in the farm buildings, including storage and treatment, must be held to be done in connection with the agricultural operations on the land. But here again there must be a limit. Everything is saleable at a price, so even storage for a time or very simple treatment is not strictly necessary. One must have regard to ordinary and reasonable practice. But there comes a stage when further operations cannot reasonably be said to be consequential on the agricultural operations of producing the crop”.
In Farmer (VO) v Hambleton District Council and Buxted Chicken Ltd [1999] RA 61 CA,Lord Justice Roch decided that the conclusion drawn by the Lands Tribunal from the findings of fact that the mill was used in connection with the operations carried on in the poultry farms was ‘unassailable’. The Lands Tribunal decided that in the light of the speeches in the House of Lords in the Eastwood case, the use of the mill for manufacture and distribution of feed to the poultry farms was a use in connection with the operations carried on in these poultry farms provided it was subsidiary or ancillary thereto and was not unconnected with those operations or an independent and separate commercial operation. Those tests were to be applied in a reasonably liberal manner.
‘Other Land’
It is possible that exemption may be sought under paragraph 3(a) for pack houses, provender mills, abattoirs, etc. In such cases, the claim for exemption might fail the ‘used in connection with’ test because the produce from the other agricultural land may have passed beyond the ‘preliminary marketing and disposal of the produce for profit’ stage and thus use of the building is no longer ‘ancillary’ or ‘consequential’ to the agricultural operation on the agricultural land - see W & JB Eastwood v Herrod (VO) HL 1970 RA, at page 69.
Thus, if a potato grower contracts with another grower, with a pack house, to pack potatoes prior to their sale, the user condition will be met. However it will not be met if the grower with the pack house were to buy in substantial quantities of potatoes from other farmers to be packed together with potatoes grown on the land occupied with the pack house. This is because the use of the ‘pack house’ is no longer ancillary or consequential to the operations on the ‘other’ land, ie the limit of the ‘user condition ‘ has been passed. See Secker (VO) v Kent Wool Growers Ltd [1984] LT RA 173,”The dichotomy comes at the point where the ownership of the fleeces passes from the farmers to the ratepayer…”. In such cases, advice should always be sought from the Technical Adviser.
5.1.5 Sole Use
The literal meaning of the phrase ‘used solely’ is tempered by two considerations:
1)The ‘de minimis non curate lex’ maxim
2)The requirement contained in paragraph 8E+W(3) of Schedule 5, viz: “In determining for the purposes of paragraphs 3 to 7 above whether a building used in any way is solely so used, no account shall be taken of any time during which it is used in any other way, if that time does not amount to a substantial part of the time during which the building is used”.
Thus a building should still be treated as ‘used solely’ even if it is used for any non-qualifying purpose for a period of time which is not a substantial portion of the total time during which the building is in use. In this context ‘substantial’ should be taken to mean something more than de minimis but still far less than an equal share. It is emphasised that the test of ‘substantial’ relates to time only, and not to the degree or intensity in which space is used for a non-qualifying purpose. The building, therefore, has to be used solely for qualifying purposes for all but an insubstantial part of the time before exemption can apply. Where there is a simultaneous use for both qualifying and non-qualifying purposes the time during which this dual purpose user takes place is non-qualifying time - see Glasgow Assessor v Berridale Allotments and Gardens Association [1973] RA 236.
The ‘time test’ should be based on a year, having regard to the period of the hypothetical tenancy for rating purposes.
In Hambleton District Council v Buxted Poultry Ltd [1992] 1WLR 330, the issue was whether the use of the provender mill owned and occupied by Buxted Poultry Ltd to supply 92-94% of the mill’s output to 67 poultry farms owned and occupied by the same company amounted to ‘sole use’ because no account need be taken of the remaining 6-8% of the mill’s output delivered to 4 poultry farms not occupied by the company. Glidewill L J decided that the concept of ‘de minimis’ did not apply to the particular part of the legislation in issue, but even if it was relevant 6%-8% could not be regarded as ‘de minimis’.
In the 1999 appeal, the Court of Appeal decided that the use of the mill to produce pellets for an unconnected company, Hermann Growers, which represented approximately 1.4% of the total time the mill was operated, did not amount to a substantial part of the time during which the mill was used.
Subject to the provisions of the de minimis maxim, any building which is used partly for an operation which is not agricultural, or partly for an independent use or business, will not be exempt under Sch 5(3)(a).
Thus an occupier of agricultural land carrying out agricultural operations on that land and occupying a building which is used in connection with those operations and operations on other agricultural land will only be rateable if the building is used for a substantial period of time for a non-agricultural operation. For example, an agricultural contractor using the building to store agricultural grass-cutting machinery, which is used on agricultural land occupied together with that building and also for agricultural contracting operations on land occupied by other farmers, may still be liable to NNDR if the machinery stored in that building spends time carrying out contracting work for a local authority, say for roadside maintenance and grass cutting school playing fields, that is more than de minimis. Of the total time that the machinery is used, 6% spent on such activities could result in a loss of the exemption.
The following decisions may also be of assistance when considering cases for exemption under paragraph 3(a):
C E Caldwell (Norlands Farm) Ltd v Garside (VO) [1984] LT RA 48
Covell (VO) v Streatfield Hood and Littman [1984] LT RA 193
Ipswich** BC** v Eastern Counties Farmers & Tye (VO) [1985] LT RA 111
Whitsbury Farm and Stud Ltd v Hemens (VO) [1985] LT RA 54; [1986] CA RA 203
[1988] HL RA 277
Womersley (VO) v Jisco Ltd [1990] LT RA 211
See also Appendix 1 for buildings used for processing or marketing produce and for stud purposes.
5.1.6 The Provisions of Para 3(b) Schedule 5 LGFA 1988 - Market Gardens
A building qualifies as an ‘agricultural building’ under paragraph 3(b) if it “is or forms part of a market garden and is used solely in connection with agricultural operations at the market garden”.
Where buildings are themselves solely used for the commercial growing of fruit, flowers or vegetables, (eg glasshouses, mushroom houses etc) such buildings will be exempt as they will comprise, or form part of, a market garden, notwithstanding the fact that they may not be occupied together with ‘agricultural land’. Such exemption will also extend to any buildings in the same occupation used solely in connection with agricultural operations carried on in the market garden, if they are situated in such proximity to the market garden that they can reasonably be said to fulfil the requirement of forming part of a market garden.
It is not necessary that the plants should be grown in natural soil; it has been held that a building used for the propagation and growing of mushrooms in trays filled with compost specially prepared from wheat straw and horse manure was a ‘market garden’ - see J Beveridge & Co Ltd v Perth and Kinross Assessor [1967] LVAC RA 482. Nor need the building have what might be regarded as the traditional appearance of a market garden - a disused multi-floor cotton mill utilised for the growing of mushrooms would appear to satisfy the term ‘market garden’. Similarly a building in an urban area growing bean sprouts would satisfy the term ‘market garden’. However, if the product was then packed together with other bought-in vegetables, this part of the premises would not be exempt.
5.1.7 The Provisions of Para 3(c) Schedule 5 LGFA 1988 – Nursery Grounds
The Non-Domestic Rating (Nursery Grounds) Act 2018 has extended the exemption of agricultural premises by the addition of a new sub section Para 3 (c) to Schedule 5 so that a building now also qualifies as an agricultural building if “it is or forms part of a nursery ground and is used solely in connection with agricultural operations at the nursery ground”. The Act has effect to both England and Wales and is retrospective having effect in England for financial years beginning on or after 1^st^ April 2015 and in Wales for the financial years beginning on or after 1^st^ April 2017.
The purpose of this new legislation was to remove the effect on valuation practice for non-domestic rating of the 2015 Court of Appeal decision in Tunnel Tech Ltd v Reeves (Valuation Officer) [2015] EWCA Civ 718 (9 July 2015). Tunnel Tech argued that their process carried out wholly within a building and consisting of growing mycelium from which mushrooms were then cultivated elsewhere was akin to a market garden and should be exempt within Para 3(b). The VO argued that the use of the building was in keeping with a nursery ground and as the activities went on within a building it could not be exempt from rating. The exemption provisions only allowed exemption to be conferred to nursery grounds if they are agricultural land [Para 2(1)(d)].
The judgment noted that paragraph 3(b) did not include nursery grounds in the definition of agricultural buildings. Therefore, a nursery ground that is located entirely indoors did not constitute an agricultural building and was not exempt from business rates. The Court of Appeal dismissed Tunnel Tech’s case.
As noted in 3.6.2.1 ‘nursery ground’ is not defined in LGFA 1988, but can be taken to mean land in, or on which, young or immature trees and/or young plants are reared (not necessarily being grown in the actual soil of the nursery) until fit for transplanting or sale: the emphasis on young plants should be noted. Often these sites are known as plant nurseries. Even though plants are raised in containers on the land rather than by rootstock in the soil, such ‘grounds’ should be treated as exempt. The effect of paragraph 3(c) is to extend the exemption to buildings used in the same way. These will typically be (but not exclusively) glasshouses or polytunnels used for the rearing of seedlings, plugs or small plants which will be sold on to someone else for growing on to their mature state, for sale to or use by the end consumer. In Tunnel Tech the Court of Appeal agreed with the Upper Tribunal that the operations in the building were those of a nursery ground.
When dealing with garden centres or retail nurseries regard should be had to the principles outlined in 3.6.2.2 above.
5.2 Definition of an agricultural building – Para 4 Schedule 5 LGFA 1988 - Syndicates
Paragraph 4 of Schedule 5 LGFA 1988 provides that a building is to be treated as an ‘agricultural building’ if it is occupied by virtue of a syndicate arrangement of less than 25 (ie no more than 24) persons each of whom is the occupier of ‘agricultural land’ and the building is ‘used solely’ in connection with agricultural operations carried on the land of each of the said persons.
Exemption from rating will apply, therefore, to a building used for purposes, such as, the storage of farm produce, the drying of grain, the cleaning, sorting, grading and packing of fruit and vegetables etc, subject to all the produce dealt with having been grown or reared on lands of all members of the syndicate. So far as the day-to-day management of the use of the building is concerned this can be in the hands of individuals appointed by the members, each of whom is an occupier of some of the land.
5.3 Definition of an agricultural building – Para 5 Schedule 5 LGFA 1988 - Livestock Buildings
Paragraph 5 of Schedule 5 LGFA 1988 extends exemption to any building used for the keeping or breeding of livestock and to buildings used ancillary to such livestock buildings, but the building must be solely so used or, if it is occupied together with ‘agricultural land’ such use, together with its use in connection with agricultural operations on that land, is its sole use. Such a building must, however, satisfy the ‘two hectare’ rule being surrounded by or contiguous to an area of agricultural land which amounts to not less than 2 hectares in size.
5.3.1 Definition of ‘livestock’
‘Livestock’ is defined in paragraph 8(5) as including “any mammal or bird kept for the production of food or wool or for the purpose of its use in the farming of land”.
‘Food’ should be interpreted as meaning food for human consumption. Where a mammal or bird is primarily reared for use as food, but certain portions of the carcass (particularly where they may be considered as in the nature of a by-product) are used for other purposes (eg the use of certain offal in the production of pet food), this should not be taken as disqualifying the animals from the definition of livestock. However, animals (eg rabbits) raised expressly for use in pet food, should be considered as outside the definition.
In the case of A & N Frozen Foods v Alexander (VO) (2014), an agricultural exemption case heard in the VTE before the then President Prof. Zellick, he looked at the interpretation of ‘livestock’ and ‘food’ in deciding that a former cattle barn used for breeding rats and mice as food for reptiles and birds of prey did not qualify for exemption. The appellant argued rats and mice were ‘livestock’ being ‘mammals … kept for the production of food’ and therefore qualified as an ‘agricultural building’ for exemption. The VO argued ‘food’ should be read as ‘food for human consumption’ and that rats/mice were not ‘livestock’ within the meaning of the Act. The President considered a number of cases relating to breeding of other animals or fish and compared the wording of the Act to the later addition exempting fish farms, which specifies ‘food for human consumption’. The case determined that ‘food’ must be understood in the broader context of exemption from rates for agriculture, which deals with the production of food for humans and held that ‘food’ means food for human consumption.
When the VO is of the opinion that the above interpretation of ‘food’ is the sole bar to exemption, advice should be sought from the Technical Adviser.
Horses (other than farm work-horses) are not livestock within this definition, see Hemens (VO) v Whitsbury Farm & Stud Ltd [1985] LT RA 54;[1986] CA RA 203; [1987] HL [1988] RA277; nor are pheasants and partridges which are bred and raised as game birds for release into the wild, because although the birds eventually end up as food they cannot be considered to be kept for this purposes. See Cook (VO) v Ross Poultry Ltd [1982] LT RA 187.
In Duxbury v Bell (VO) [1992] LT RA 147, buildings used for the keeping and breeding of mink were not exempt from rating because they were not agricultural buildings. The mink were not livestock within the meaning of the Rating Act 1971 as they were not kept for the production of food or wool or for the purpose of their use in the farming of land.
Egg hatcheries should be treated as buildings used ‘for the keeping or breeding of livestock’ within paragraph 5(1)(a) provided that the poults will eventually be destined for the production of food. However, cases involving buildings used for the hatching of eggs or rearing of game birds, eider duck, or other species not bred primarily for food, will not fall within the definition.
A laying-house from which the eggs are neither used as food nor to produce poults eventually destined for the production of food will not be a livestock building. An example is where the eggs are used in a laboratory as part of the process for the production of a serum intended for the prevention of fowl-pest.
Providing the buildings are used for keeping livestock for the production of food for human consumption, any other activity carried on such as the monitoring of growth to evaluate genetic potential should not be a bar to exemption of these buildings. However, any offices, laboratories or computer rooms etc associated with the monitoring exercise will be rateable.
In Meat and Livestock Commission v Stirlingshire Assessor [1975] RA 234 (LVAC) pigs kept for scientific purposes were held not to be livestock.
5.3.2 Contiguity to at least 2 hectares of agricultural land
Neither a ‘livestock building’ nor a building ancillary thereto will qualify for exemption under paragraph 5 unless it is surrounded by or contiguous to an area of agricultural land which amounts to not less than two hectares. In compiling this area only land which is ‘agricultural land’ as defined in paragraph 2(1) of Schedule is counted. It does not matter whether the land which goes to form these two hectares is in single or numerous occupations.
When compiling the aggregate of two hectares the following are to be disregarded both as an interruption to the continuity of the agricultural land and as a contribution towards that area:
“Any road, railway (including the site of a railway from which the lines have been removed) or watercourse, any ‘agricultural building’ other than the building in question or any building occupied together with the building under consideration.”
Buildings occupied in connection with bee-keeping must also satisfy this “two hectare” provision.
‘Contiguous’ in this context means ‘touching’ and should not be given its looser meanings of ‘adjacent’ or ‘close to’.
Buildings housing livestock which do not satisfy paragraph 5 (for example, by not being contiguous to two hectares of ‘agricultural land’) will not normally gain exemption unless a close connection can be established between the cultivation of the agricultural land occupied with (but not contiguous to) the livestock buildings and the use of these buildings, so that the use of the latter does not constitute an independent commercial enterprise. See Wilkes (VO) v Nesling [1972] LT RA 135; Ellis (VO) v Kings Farm (Ford End) Ltd [1972] LT RA 34 and, in contradistinction, Denman (VO) v Haylock [1971] 17 RRC 291; Thornton v Wilkes (VO) [1972] LT RA 485.
It should be noted that livestock buildings and ancillary buildings used in connection with livestock buildings, for example hay or straw stores must be surrounded by or contiguous to 2 hectares of agricultural land. This is particularly relevant where exemption is claimed in relation to buildings on industrial estates or surrounded by residential property.
5.3.3 Ancillary buildings
Paragraph 5(1)(b) gives exemption to buildings (other than dwellings) occupied together with buildings used for the keeping or breeding of livestock, provided that they are used solely in connection with the operations carried on in those livestock buildings. Exemption will also be afforded where the buildings are used:
a) partly in connection with the livestock buildings and
b) partly in connection with agricultural operations on ‘agricultural land’
It should be noted that, to qualify under this section, the buildings must satisfy the ‘two hectare’ requirements of paragraph 5(4).
‘Occupied together with’ has the same meaning as in paragraph 3(a) and should be taken to mean that there must be a complete identity of occupation between the livestock buildings and the ancillary buildings [see also 5.1.3 above].
Similarly ‘in connection with’ should be interpreted in accordance with the House of Lords decision in Eastwood v Herrod (VO) [1970] HL RA 63 (see 5.1.4 above).
5.3.4 ‘Used for the keeping or breeding’
A lairage building forming part of an abattoir does not satisfy this part of the definition since it is used for ‘holding’, rather than ‘keeping’ in the agricultural sense or common meaning of the term - see Cheale Meats Limited v Ray (VO) [2010] LT RA 6.
5.4 Definition of an agricultural building – Paragraph 6 Schedule 5 LGFA 1988
Bee-Keeping
Paragraph 6 of Schedule 5 LGFA provides that buildings which are solely used in connection with bee-keeping and are occupied by the person keeping the bees, shall be treated as agricultural buildings provided they are contiguous to at least two hectares of agricultural land.
Buildings entitled to exemption will include those used solely for the extraction, purifying or storing of honey, storage or cleaning of equipment, and the storage of sugar or syrup for the feeding of bees.
5.5 Definition of an agricultural building – Paragraph 7 Schedule 5 LGFA 1988
Buildings Occupied by Bodies Corporate
Paragraph 7 of Schedule 5 LGFA extends exemption to certain buildings used in connection with agricultural operations carried on agricultural land and occupied by a body corporate any of whose members are, or are together with the body, the occupiers of the agricultural land or livestock buildings.
5.5.1 Qualification for exemption
In order to qualify for exemption, such buildings must be solely used for the purposes stated in paragraph 7(1) or 7(2), or a combination of both, and be occupied by a body corporate any of whose members are, or are together with the body, the occupiers of the land or livestock building(s) in question.
Further:
a) The associated land or buildings above must be occupied either by a member of the corporate body, or by the corporate body itself.
b) Themembers who are occupiers of the land together have control of the body. In this context, ‘control’ is to be construed in accordance with in accordance with Sections 450 and 451 of the Corporation Tax Act 2010. [This does not mean that all the members of the body have to be occupiers of the qualifying agricultural land or livestock buildings but that 51% of the members and the controlling interest has to be held by these occupiers, who occupy the qualifying agricultural land and buildings.]
It should be noted that paragraph 7(2) does not confer exemption on buildings which themselves are used for the keeping and breeding of livestock, but only to buildings used in connection with operations carried on in such buildings. ‘Co-operative’ buildings used for the keeping and breeding of livestock should only be considered for exemption under paragraph 5(1)(a).
5.5.2 ‘Two hectare’ rule
Paragraph 7 does not contain a provision similar to paragraph 5(4) and therefore exemption of buildings under paragraph 7 does not depend upon contiguity to two or more hectares of agricultural land.
5.5.3 Meaning of ‘body corporate’ and ‘member’
A ‘body corporate’ will include a limited company or a company limited by guarantee. The most common examples likely to be encountered in connection with paragraph 7 are farmers’ co-operatives. The term ‘co-operative’ in this paragraph should be taken to mean a ‘body corporate’ within the meaning of paragraph 7.
‘Member’ has a great variety of meanings according to the legal context. It includes a shareholder or subscriber of a limited liability company, a provident or mutual trading society or a company limited by guarantee. As stated above, the ‘members’ who occupy the agricultural land or livestock buildings with which the ancillary building must be solely used are required to hold a 51% controlling interest.
The meaning of ‘any of whose members’ in section 4(2)(b)(i) of the Rating Act 1971 (a fore-runner of this current exempting legislation) was construed to include the singular - see Farmer (VO) v Hambleton District Council and Buxted Chicken Ltd [1999] RA 61 CA, where it was held by Lord Justice Chadwick that:
“Far from providing a context which would lead to the conclusion that the ordinary rule that, in construing a statutory provision, the plural must be taken to include the singular, must be displaced, the legislation provisions point strongly the other way”.
Thus ‘any of whose members’ should be interpreted as ‘any one of whose members’.
The decision in Prior (VO) v Sovereign Chicken Ltd LT [1982] RA 299; CA [1984] RA 73 was distinguished.
If a VO has any doubt as to whether an organisation is a ‘body corporate’ or if certain persons are ‘members’ of such a body corporate, advice should be sought from the Technical Adviser in the first instance.
5.5.4 Meaning of ‘persons’
In paragraph 7(4), ‘persons’ should be read as referring only to a plurality of persons - see **Prior (VO) v Sovereign Chicken Ltd **LT [1982] RA 299; CA [1984] RA 73.
Individuals or bodies corporate without members occupying land or buildings will not satisfy the requirements for exemption under paragraph 7.
5.5.5 ‘Sole Use’ in the paragraph 7 context
In both paragraphs 7(6) and 7(7) there is a requirement that the uses in paragraph7(1) and (2) shall be the sole use of the (co-operative) building. The word ‘sole’ must be considered in two respects:
-
The use of the (co-operative) building must be ‘solely’ associated with exempt agricultural land or buildings of members, or of the body corporate. Thus use of such a (co-operative) building in connection with members’ buildings which are not themselves exempt under paragraph 7(1)-(3), or use in connection with agricultural land or livestock buildings occupied by non-members, will defeat paragraph 7 exemption, unless the (co-operative) building is used in these ways for other than a substantial part of the time during which the (co-operative) building is used.
-
The (co-operative) building (or the appropriate part thereof) must be used ‘solely’ for the exempt purpose. One example of a building used for dual purposes, and therefore not qualifying for exemption, could involve the supply of seeds, fertilisers, etc., to members (which on its own would have conferred exemption) together with a builders’ merchant’s business (which is clearly not exempt).
This ‘sole use’ requirement is equally applicable to ‘co-operative’ enterprises and occupation by individuals, but certain problems can arise with ‘co-operatives’. Where, for example, the bulk storage of grain includes that of both members and non-members or where part of the grain has been bought in, exemption under paragraph 7 is defeated by the ‘sole use’ provision. It should not, however, be overlooked that farmers’ co-operatives handle produce coming from the land, and such things as seeds, fertilisers and feeding stuffs passing to the members. The combination of such activities for members will not defeat exemption.
In Courtman (VO) v West Devon and North Cornwall Farmers Ltd [1990] LT 89RA 17, [1990] EG 140, it was held that a mill occupied by a co-operative and used to produce animal feed, 98% of which was used on members farms, was exempt from rating as an agricultural building because that was its sole use. A similar view was taken in Farmer (VO) v Hambleton DC and Buxted Chicken Ltd [1999] RA 61 CA (See also 5.1.4 above.)
However, caution should be exercised in considering exemption where the compounding of animal feeding stuffs takes place on a large scale and employs sophisticated mixing techniques and pelleting. This may constitute a separate independent industrial operation which is no longer in connection with the agricultural operations on the land or in the buildings. Such large scale co-operative feed mills may be rateable. See Ipswich Borough Council and Eastern Counties Farmers and Tye (VO) [1985] RA 111.
Any cases of doubt, particularly in relation to feed mills, should be referred to the Technical Adviser.
The importance of ‘time’ rather than ‘volume’ is underlined by the example of a cold store in connection with a fruit packing and grading co-operative. If the cold store were used to house imported produce, such as oranges, for so short a period that over the year as a whole it is not “a substantial part of the time during which the building is used”, then notwithstanding that nothing other than the imported produce was stored during the period, exemption would not be defeated; if, however, the imported produce was stored there all or most of the year, even in small quantities, exemption would be defeated, unless the quantities were so small and insignificant to be ignored as de minimis.
5.5.6 Distance of separation
Paragraph 7 makes no reference to the building being ‘occupied together with’. Thus separation by distance is not a bar to exemption providing the building’s use ‘in connection with’ agricultural land or buildings is clearly established.
5.5.7 ‘In connection with’
To qualify under paragraph 7, a building must be used ‘in connection with’ agricultural land or buildings. It may not always be easy to decide upon this point but the doctrine of ‘remoteness’ should be kept firmly in mind.
Many co-operatives are concerned to a greater or lesser extent with ‘marketing’. It is considered that a limited marketing operation, such as is necessary to dispose of the produce in bulk through produce markets or even to large retail outlets, could come within the scope of the exemption. But a building used by a multiplicity of salesmen and selling to small retail outlets, or perhaps by direct delivery rounds, would seem to be beyond the scope of exemption. See for example the contrast drawn by the Scottish Courts in connection with the bottling of milk. In Moray and Nairn Assessor v Charles Meldrum and Sons [1968] LVAC RA 562, the bottling of milk for retail sale by the ratepayers on their milk round was held not to be exempt; in contrast, in Fife Assessor v Balfours’ Marriage Contract Trustees [1970] LVACRA 612, milk bottled and sold in bulk to others operating a retail round was held to be exempt.
Buildings used for the storage or maintenance of vehicles whose sole use is the collection (or delivery) of produce from members, or the conveyance of the produce from the co-operative to the ‘bulk’ market, may be treated as exempt. If the vehicles are used, for instance, on a retail milk round exemption will not be appropriate. Canteens used by members or employees of the body corporate engaged in ‘exempt’ operations may be exempted if they are reasonably necessary for the functioning of the premises.
In Corser (VO) v Gloucestershire Marketing Society Ltd [1981] CA RA 83, the Court of Appeal decided that a building used by the co-operative for the daily wholesale auction of members’ produce, together with a substantial proportion of produce from non-members, was not exempt as the use of the building involved the co-operative in ‘merchandising in an independent commercial and business sense’. It is far from clear from the decision whether the Court would have come to the same conclusion had only the produce of members been sold. If retail sales to members of the general public take place, the building will be rateable. However, if a co-operative claims exemption for a building where the produce of members only is sold to the wholesale trade, advice should be sought from the Technical Adviser.
The packing and grading of produce to the special requirements of an individual customer (possibly a retailer and in small packages) should not be a bar to exemption provided these activities relate to primary marketing and not merchandising as an independent and commercial business.
The activities of the co-operative must be solely on behalf of the members and not as agent for a marketing organisation. In Secker (VO) v Kent Wool Growers Ltd [1984] LT RA 173, directly the fleeces arrived at the co-operative premises they were graded and the farmers were paid for the wool. Ownership of the wool had passed from the members to the Wool Marketing Board and thereafter the co-operative were acting as agents for the Board. The premises were held to be rateable. A similar principle applies to egg packing stations - see Roxburgh Assessor v West Cumberland Farmers Trading Society [1977] RA 298.
5.5.8 Second tier co-operatives
Cases will be encountered where a co-operative has as its members, in part at least, other co-operatives. Such enterprises are known colloquially as ‘second tier co-ops’. Where part of the produce handled in a building of such a second tier co-op originates from another co-operative, this will normally defeat exemption because the produce will not come from (or, in suitable cases, be going to) exempt agricultural land or livestock buildings of members of the occupying co-operative. Exceptionally, it may be found that the individual farmers are members of the ‘second tier co-op’ as well as of the ‘member’ co-operative; in these circumstances exemption will not be defeated.
5.5.9 Investigation of claims for exemption under Paragraph 7
The onus of establishing that a building occupied by a body corporate satisfies the requirements of paragraph 7 rests with that body. Where a claim for exemption is made under the section in respect of a (co-operative) building, the VO should require the claimants to furnish a list of all agricultural land or buildings in connection with which the (co-operative) building is used, stating the name of the occupier of each farm or building in order to identify whether the occupier is a member of the body corporate, and showing the extent (if any) to which the (co-operative) building is used for any other purpose.
Before allowing exemption, the VO ought to ascertain that the land and each building listed is exempt under paragraphs1 to 5. However, with large co-operatives this could prove unjustifiably time-consuming and, provided it is not too small a sample to be considered representative, there should be sufficient information obtained to confirm that none of the relevant agricultural land or buildings in the VO’s own valuation area should be treated as rateable. The VO should also obtain written confirmation from the co-operative that all the land and buildings outside the valuation area with which the co-operative land and building are used are occupied by the body corporate or by a member of the body.
1. Buildings used in connection with the marketing of produce
1.1 General
Providing that they are occupied together with and used solely in connection with agricultural operations on agricultural land, buildings used for the storage, drying, cleaning, grading or packing, preparatory to marketing the produce, will qualify as ‘agricultural buildings’.
Buildings which are used for such purposes and which are occupied together with, and used solely in connection with, the operations carried on in one or more livestock buildings which are ‘agricultural buildings’ under paragraph 5(1), whether in connection with operations in such agricultural buildings only or also in connection with agricultural operations on land, are themselves ‘agricultural buildings’ by virtue of paragraphs 5(1)(a), 2(b) or 7.
1.2 Farm shops
Since retail marketing is not regarded as part of ‘agricultural operations’, farm shops (and other buildings and non-agricultural land associated with the retail sale of produce) are liable to be assessed. By operating a shop, the farmer is engaging in a business which is not consequential upon, or ancillary to, agricultural operations, whether or not the items are grown on the farm. See the judgements of Lord Reid in W and J B Eastwood v Herrod (VO) [1970] HL RA at page 70 and Ackner LJ in Corser (VO) v Gloucestershire Marketing Society Ltd [1980] CA 257 EG 825.
Although prima facie all farm shops are rateable, it may be that the nature and/or the scale of retail operations is such, that the farm shop etc can be treated as coming within the de minimis principle, in which case the occupation should not be rated. Borderline cases should be submitted to CEO Technical Centre for advice.
The farm shop should not be granted exemption solely on the grounds that it is so used for a short period of time only in each year.
2. Processing buildings
2.1 Certain processes go beyond what is essential preparation for the marketing of agricultural produce and constitute a separate and distinct operation. Lord Reid said in W & J B Eastwood v Herrod (VO) [1970] HL RA 63 “one must have regard to ordinary and reasonable practice”.
Buildings used for the manufacture of crisps from potatoes, the manufacture of jams and preserves from fruit, the deep freezing of produce for long term cold storage, the making of sausages or the curing of bacon, should be treated as rateable.
2.2 Cheese-making buildings on farms
Buildings situated on a farm which are used for the manufacture of cheese may be agricultural buildings under Sch 5 para (4) or para (7) providing all the milk used in the cheese-making process comes from the dairy herd grazing on the land which is occupied together with the buildings. In the case of co-operative buildings, under Sch 5(7) all the milk must be produced by the members.
In Covell (VO) v Streatfield Hood and Littman [1984] LT RA 193 the LT found that the making of cheese on the farm “constitutes a single coherent and continuous operation of agricultural production”.
Before conceding exemption on cheese-making buildings, VOs should ensure that the facts are similar to those in the Covell decision. In many cases, cheese is manufactured from milk from various sources and this will defeat exemption.
Any retail selling of the cheese through a farm shop will be rateable.
2.3 Poultry processing buildings
The production of the oven ready fresh or frozen bird is now ‘ordinary and reasonable practice’ and exemption will extend to buildings used for killing, plucking, eviscerating, dressing, packing and blast freezing together with essential short term cold storage (in terms of days) prior to despatch. Long term cold storage to meet optimum market conditions should not be treated as exempt.
Certain turkey producers are now extending their product range by converting the turkey meat into roasts, steaks and burgers. The buildings where these further processes take place will not be exempt. In cases where the whole production of the factory goes on to make the turkey roasts etc, exemption may still be conceded for the buildings (or separate parts of a building) - used for killing, plucking, eviscerating etc.
In Garner (VO) and Another v Buxted Poultry Ltd [1991] LT RA 105, [1991] CA RA 267 a poultry processing factory which processed the poultry from rearing farms situated between a quarter and 120 miles away was held exempt from rating as an agricultural building
2.4 Buildings used for the processing and/or marketing of agricultural produce but occupied by commercial firms
With the increasing competitiveness and specialisation in methods of processing and disposal of agricultural produce, there has been a tendency for buildings situated on farms or intensive livestock holdings to be in the rateable occupation of commercial firms (not being the occupiers of the holding) whose business is the preparation for marketing and sale of the produce grown on the particular holding. Where these circumstances obtain, a building will not qualify as an ‘agricultural building’.
Where it is not immediately apparent whether the commercial firm or the farmer is in occupation of a building used for any of these purposes, enquiries should be made to establish the relevant facts as to occupation. Where necessary, documentary evidence should be obtained to establish the terms of agreement between the parties.
3. Artificial insemination centres
Buildings used as artificial insemination centres for the breeding of livestock (as defined in Sch 5(5) - see para 5.3.1) should be considered agricultural buildings under Sch 5(5) provided they satisfy the ‘two hectare’ rule. In some circumstances such buildings may be exempt under Sch 5 para 3 or 4, provided they are occupied together with sufficient agricultural land to provide for the grazing of the stock and are used solely in connection with the agricultural operations on that land.
In this context the agricultural product is considered to be the semen, and all buildings such as the semen store, laboratories for testing, and administrative offices will be exempt if used solely in connection with the operations on the hereditament.
Buildings which are used in connection with operations off the hereditament should be treated as rateable, eg garages for inseminators’ vehicles, or offices in which inseminators’ records, farmers’ accounts etc are dealt with. See Hamphire Cattle Breeders’ Society Ltd v Watkinson [1968] LT RA 581.
4. Farms for breeding and/or rearing fur-bearing animals
Land which forms part of a farm for the breeding and/or rearing of fur-bearing animals will only be ‘agricultural land’ if it fully satisfies the definition in paragraph 2 of Schedule 5.
Land which is used mainly as exercise ground but also provides some food, together with land used as a ‘cordon sanitaire’, should be treated as rateable. See Gilmore (VO) v Baker-Carr and Others [1962] CA 2 RVR 486 and Cook (VO) v Ross Poultry Ltd [1982] LT RA 187.
The decision of the LT in Hallam v James (VO) [1958] LT 52 RIT 6 should not be followed.
The definition of livestock in paragraph 8(5) of Schedule 5 precludes buildings used for keeping or breeding fur-bearing animals from being exempt under paragraph 5 unless the animals are primarily kept to produce food. Thus, for example, where rabbits are kept, enquiries should be made to ascertain whether the animals are primarily kept for their flesh or for their pelts.
5. Stud farms
Buildings used for the breeding and rearing of thoroughbreds, hunters and other horses and ponies used for showing or pleasure purposes are not agricultural buildings within Sch 5 para (3)(a)
Horses (other than those used for farming the land or for human consumption) are not livestock within the definition in Sch 5 para (8)(5) and buildings used for the keeping and breeding of horses will not be agricultural buildings under Sch 5 para (5).
The land on which the horses graze and exercise may be ‘agricultural land’ providing it is used as meadow or pasture ground only but the breeding and rearing of thoroughbred horses is not considered to be an agricultural operation and the horse-breeding buildings are not used solely in connection with the agricultural operations on the land within Sch 5(5).
Many stud farm buildings will be surrounded by agricultural land in the same occupation. In most circumstances the actual occupiers of the surrounding paddocks will be the most likely prospective tenants of the stud farm buildings or at least in the market bidding for them. This will not result in a reduced bid; this was argued by the ratepayers in Hemens (VO) v Whitsbury Farm & Stud Ltd [1985] LT RA 54 [1986] CA RA 203 HL [1988] RA 277; it must be assumed that the hypothetical landlord would not be willing to receive less than a reasonable rent. See Austin Motor v Woodward (VO) [1968] RA LT 133 at page 164.
The Land Tribunal’s views on these matters generally are illustrated in the Whitsbury case and in Evans v Bailey (VO) [1981] LT 260 EG 611. A more recent review is found in Bishop v Walker (VO) (unreported).
The Bishop case concerned a 1973 list appeal by the owner of a stable building which stood in about 0.75 of an acre of pasture also in the ownership of the appellant. The land and buildings provided grazing and shelter for a horse owned by the appellant’s daughter. It was held that the occupation of the adjoining land for grazing purposes was only incidental to the occupation of the stable, and part of the building was used for storage of hay grown on other land, therefore the stable was not an agricultural building used solely in connection with agricultural operations ie. grazing on the land, although the land itself was not rateable, being agricultural land. The member also concluded that a horse was not ‘livestock’.
6. Gallops and training grounds
Gallops are well prepared and maintained stretches of grassland used for the exercise and training of racehorses. The better gallops will be situated on upwardly sloping land where the horses can be made to ‘work’. The training of National Hunt horses takes place during the winter and the land may be used for grazing of sheep or mowing during the summer. (Cattle would not be grazed as their heavier weight may damage the carefully prepared surface).
Despite this agricultural use during the summer the land will not be exempt as agricultural land as it is not used as meadow or pasture ground only.
The early cases of Tattersalls v Marlborough AC (the Manton case) [1930] KBD 11 RIT 149 and Jarvis v Cambridgeshire AC [1938] KBD 29 RIT 315, where it was found that exercising horses was a natural use of meadow or pasture, were not followed by the Lands Tribunal in Forester & Others v Simpson (VO) [1984] LT RA 85. The Tribunal preferred the Court of Appeal decision in Bradshaw v Smith [1980] CA 255 EG 699 para 4.
In Forester & Others v Simpson (VO) the LT decided that the training of racehorses was a business and not a sport or recreational use of the land.
The gallop should be regarded as a hereditament separate from the surrounding land used for agricultural purposes and any question of the use as a gallop being de minimis should be considered only in relation to the hereditament and not in relation to the farm as a whole.
The term ‘all weather gallop’ can be ambiguous, but it is usually used to describe a strip of land where the top soil has been removed and replaced with a surface such as wood shavings. In no circumstances can this be considered ‘agricultural land’.
Where gallops on common land are of such a nature that the land cannot be treated as ‘agricultural land’, it will be necessary to be satisfied that there is beneficial occupation sufficiently exclusive for the purpose before treating the land as rateable.
7. Garages
Garages used for the housing of vehicles used solely in connection with agricultural operations on ‘agricultural land’, qualify for exemption. Garages for vehicles used wholly or partly for other purposes do not. The following cases are in point:
Parry v Anglesey Assessment Committee [1948] KBD 41 RIT 144 and 544
Dr Neil Hamlin v Howard (VO) [1951] LT 44 RIT 345
Counter v Taylor (VO) [1959] LT 52 RIT 242
Maber v Wand (VO) [1963] LT 3 RVR 429
Forrest (VO) re The Appeals of [1981] LT 21 RVR 66
8. Vineyards and winery buildings
Vineyards are exempt as ‘agricultural land’. Provided all the grapes processed come from the viticulturists’ own vineyards the processing of the grapes should be regarded as incidental to the agricultural operation of growing the grapes. Processing in this context is to be taken to include bottling and storage of wine awaiting sale and buildings used for this purpose are exempt under Sch 5 para (3)(a).
If the viticulturist processes other grapes which are produced by other vineyards, none of the buildings will be exempt and, if he engages in selling wine by retail or wholesale (as opposed to selling to a wholesaler), the buildings used in connection with such activities will be rateable.
However, VOs should have regard to the de minimis principle (see appendix 2). Whilst each case must be considered on its own facts and circumstances, any processing of other grapes or retail sales may be disregarded as insignificant if they represent no more than 5% of the total.
9. Grain stores
From 1 April 2000 grain stores and other such buildings used for the storage of agricultural produce by the EEC Intervention Board, and occupied by them, are not agricultural buildings and will be entered in the local rating list.
Prior to this they were treated as occupied by the Crown, and the Crown Property Unit made a contribution in lieu of rates in respect of such buildings.
Where buildings, or parts of buildings, house Intervention Board produce on a basis of storage contracts (often short term), where rateable occupation has not passed to the Board, such hereditaments will be assessed in the normal way.
10. Land used for turf cutting and Turf Growing
Land used for turf cutting is not defined as any agricultural use of land in para 2(1) and requires planning permission as the removal of top soil is considered development - see Meriden and Solihull AC and Meriden RDC v Tyacke [1950] LT 43 RIT 306. This decision may be contrasted with Henshaw (VO) v Halton BC & Watmore [1984] 24 RVR 237 where land growing turf on an intensive bi-annual cycle was held to be exempt as agricultural land until the turf was cut, which under the provisions of the 1988 legislation would give rise to an entry in the Rating List.
It has been held that the tending and improving of old turf for the purpose of cutting the turves for transportation did not qualify the land in question as ‘nursery ground’ or confer exemption, either in pasture ground Butser Turf and Timber Co Ltd v Petersfield RDC [1950] LT 43 RIT 116; or in sea-washed land, Thornton (VO) v Maxwell M Hart (Glasgow) Ltd [1957] LT 50 RIT 724. It has been held, however, by the Divisional Court, that land specially prepared for receiving Cumberland sea washed turf for further cultivation was nursery ground within the definition of ‘agricultural land’ - see James & Daniel Provan Ltd v Croydon Corporation [1938] KBD 29 RIT 277.
In Henshaw (VO) v Halton BC & Watmore [1984] LT 24 RVR 237, although the LT agreed with the LVC decision that land growing turf on an intensive bi-annual cycle could be described as nursery ground, it would seem that the LT preferred the view that the land was ‘arable’, even though this point was not argued by the ratepayers.
Where a turf company is allowed to enter a field for the purpose of taking turf, it is probable that this company is a licensee and that the farmer is the rateable occupier. See, for example, the discussion on this point in Lewis v Rubery (VO) [1951] LT 44 RIT 566.
If it is considered that land used for turf-cutting is rateable, it should be noted that the list must be altered while turf remains to be cut. Where the turf remaining to be cut is approaching exhaustion, the value to be adopted should be arrived at in accordance with Gilbard (VO) v Amey Roadstone Corporation Ltd [1974] CA RA 498; Farnham Flint and Gravel Co v Farnham Union [1901] CA distinguished.
This will involve establishing the rate at which the turf is being cut and valuing the land on the basis that cutting at that rate will continue for at least a year, even if the turf will be exhausted before then. Once the turf is exhausted, no further rates will be paid and the assessment can be deleted from the list.
11. Land used as an agricultural showground
Agricultural show grounds are frequently subject to agricultural use at other times of the year. However, where the use of the hereditament is primarily a permanent show ground in the paramount occupation of the Show Society and it will be rateable as an agricultural show ground as in the case of United Counties Agricultural Society v Knight (VO) [1973] LT RA 13.In the case of a showground with no permanent features other than a building used for storage, the land shall be treated as exempt if it reverts to agricultural land after the use as a showground has ceased. The building however will be rateable.
The United Counties case also provides an example of the distinction to be drawn between an occasional use of land which has physical adaptations not commonly necessary to the use of the land as agricultural land which was held to be rateable, as in the case of Hayes v Loyd (VO) [1982] LT RA 239 [1984] HL RA 133; and the use of an adjoining farmers land for car parking on the two days of the show only, which was held not to defeat the exemption.
The United Counties and Hayes v Loyd cases should be distinguished from the earlier decision in Honiton and District Agricultural Association v Wonnacott (VO) [1955] LT 48 RIT 589; De-Rating & RA (1955) 130, where an annual agricultural show was held on agricultural land, one day a year, was held to be non-rateable because there was no permanent physical adaptation of the site for show purposes. Temporary rings and stalls were set up and removed within one day of the show.
All these cases were decided on the legislation pre-LGFA 1988, but the principles are still relevant. However if all physical adaptations are removed so that there is no physical evidence of the use as a showground which can be taken into account in the ‘state of affairs’ at the end of the day, then the land will be exempt if when next in use it is agricultural (section 67(5) LGFA 1988).
Although not producing all-embracing guidelines, in a number of decisions the Courts have disregarded elements of ‘non exempt’ use when considering the exemption of ‘agricultural land’ or ‘agricultural buildings’. However it is clear that the principle of ‘de minimis non curat lex’ should only be applied after having regard to all the facts and circumstances of a particular case.
Thus, see Garnett v Wand (VO) [1960] CA 53 RIT 670concerning the use of pasture ground for sports purposes and United Counties Agricultural Society v Knight (VO) [1973] LT RA 13 in relation to car parking on two days a year in connection with an agricultural show.
As a stark contrast, in Moray and Nairn Assessor v Charles Meldrum & Sons [1968] LVAC RA 562, it was held by all three Scottish Law Lords that the sale of five or six pints of milk a day at a dairy was too significant to be disregarded under the de minimis rule.
The President of the Lands Tribunal in W Darlington & Sons (Holdings) Ltd v Langridge (VO) [1973] LT RA 207 indicated that 12% user “killed the de minimis argument”, but it should be noted that his words in no way indicate that he would have accepted the 6% user originally claimed as de minimis.
In Hambledon District Council v Buxted Poultry Ltd [1992] 1WLR 330 Glidewell LJ decided that the concept of ‘de minimis’ did not apply to the particular part of the legislation in issue, but if it was relevant 6-8% of output of a provender mill supplied to poultry farms other than those owned and occupied by Buxted Poultry Ltd could not be regarded as ‘de minimis’.
In Farmer (VO) Hambledon District Council and Buxted Chicken Ltd [1999] RA 61 CA the Court of Appeal decided that the time taken to produce pellets for an unconnected company of 1.4% did not amount to a substantial part of the time the mill was operated.
For most practical purposes, any activities which would result in rateability of land or buildings may be disregarded as de minimis if they represent no more than 5% of the total time. In cases where a number of minor activities take place, these should be aggregated before considering the application of the de minimis principle.
The test of ‘percentage of time’ rather than ‘quantity’ is preferred; otherwise farming enterprises or co-operatives engaged in a small fixed percentage of non-qualifying activities would cease to be exempt as they became larger. The LT decision on this point in Home Grown Fruits v Paul (VO) [1974] LT RA 329 should not be followed.
In any cases of difficulty, advice should be sought from the Technical Adviser.