Rating Manual section 6: valuation practice

Part 6: appendix 1 - Examples of the application of the exemption provisions of schedule 5

The Valuation Office Agency's (VOA) technical manual for the rating of business (non-domestic) property.

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).