Rating Manual section 6 part 3: valuation of all property classes

Section 1005: stud farms

This publication is intended for Valuation Officers. It may contain links to internal resources that are not available through this version.

1. Co-ordination arrangements

Stud Farms as a class are subject to co-ordination arrangements as outlined in the relevant Practice Note to this Section.;

2. Description

For the purposes of this Section, the term Stud Farm includes any land and buildings used for the breeding and rearing of horses or ponies, of any description. The term should not be taken to include the breeding or rearing of any other animals.

Stud farming operations range widely: from an individual mare or stallion kept for breeding, through small multiple amateur/commercial breeders in basic stable or farm yard accommodation to large scale/high value commercial breeders of racehorses in bespoke yards with special veterinary facilities.

Although their levels of sophistication may vary, all stud farms will strive to provide a secure and quiet environment for their horses and ensure that they are isolated from disease.

Locations will also vary, depending upon the type of operation and the progeny sought, but certain characteristics are common. The primary need is good grazing, with an adequate water supply. This grassland needs to be well fenced. Because it is essential to use materials that will not damage the mares and foals, it is usual to find that timber post and rail fencing is employed to create a series of paddocks around the stud buildings.

The buildings are often considered by breeders to be of lesser importance (in contrast to racing, or livery yards), as the aim is to give the growing foals as much light, air and exercise as possible and to allow the mares to produce their milk from grass whenever feasible. That said, buildings will be found, including loose boxes (for resident or visiting mares), stallion boxes (these will be larger and are often better appointed), covering areas/yards (where the mating takes place), foaling boxes, tack and feed rooms, together with covered storage for hay and straw. Some studs will have an office, additional veterinary facilities or other specialist buildings. Quality can vary from poor, converted farm buildings to purpose built accommodation where, apparently, no expense has been spared.

3. Rateability

3.1 General

In Hemens (VO) v Whitsbury Farm and Stud Ltd (1988 RA 277 HL), it was confirmed that horses and ponies, other than those used for farming the land or reared for food, are not “livestock” within the definition in Section 1(3) Rating Act 1971, now paragraph 8(5) of Schedule 5 to the Local Government Finance Act 1988 (LGFA 88). As they are not included within the definition of agricultural buildings contained in paragraphs 3-7 of Schedule 5, buildings used to keep, breed, or rear horses or ponies for any purposes (other than farming land or human consumption) are rateable.

Providing land is used only as grazing for horses or ponies, it can be construed as “pasture land” within the meaning of paragraph 2(1)(a) of Schedule 5 and thereby qualify as exempt agricultural land. This specific exemption should not be confused with the statutory requirements for “stud relief” (see sub-section 3.2 below).

A full explanation of when other land and/or buildings used to keep horses qualify as exempt agricultural land or buildings is given in Rating Manual Section 6 - Part 6, Part D.

3.2 Relief from Assessment, where applicable

In response to horse and pony breeders representations for an extension of the exemption from rating for buildings used for keeping and breeding livestock in paragraphs 3-7 of Schedule 5 LGFA 88, Parliament legislated for partial relief from the payment of rates for farmers who also breed horses and ponies, by enacting Paragraph 2A.- (1) of Schedule 6 to LGFA 1988 (inserted by paragraph 38(11) of Schedule 5 to the Local Government & Housing Act 1989). This relief from assessment applies to:-

“…… any hereditament the whole or part of which consists in buildings which are –

a. used for the breeding and rearing of horses or ponies or for either of these purposes; b. c. are occupied together with any agricultural land or agricultural building.”

Paragraph 2A.- (2) provides that the relief for hereditaments described in paragraph 2A - (1) is to be the amount of rateable value of the hereditament, less the smaller of the following amounts: -

“(a) such amount as the Secretary of State may by order specify for the purposes under this paragraph;

and

(b) the amount which but for this paragraph would be determined under paragraph 2 above [ie paragraph 2 of Schedule 6 to LGFA 88] in respect of so much of the hereditament as consists of buildings so used and occupied.”

3.3 Definition of Agricultural Land & Agricultural Building for the purposes of paragraph 2A -(1) of Schedule 6 LGFA 1988

Paragraph 2A.- (3) provides that:-

agricultural land for the purposes of paragraph 2A - (1) should be land of more than 2 hectares which is:-

agricultural land within the meaning of paragraph 2 of Schedule 5 to LGFA 88;

and

is not land used exclusively for pasturage of horses or ponies

agricultural building in paragraph 2.A - (1) should be construed in accordance with Paragraphs 3 to 7 of Schedule 5 to LGFA 88.

In order to ensure qualification under paragraph 2A - (3) and to ensure that land is not used exclusively for the pasturage of horses or ponies, it is not unknown for other grazing animals to be kept at, or imported for a time onto, stud farms. In the latter instance, visiting sheep are sometimes referred to as a “flying flock”.

3.4 Other terms

3.4.1 Breeding

In the larger scale operations, breeding stock may include barren mares (ie those not currently in foal) and new stallions to be used in the next season’s breeding programme, in addition to stallions or mares currently being used for breeding.

3.4.2 Rearing

Whether young stock is being ‘kept’ or ‘reared’ (such animals may be referred to as ‘stores’) will depend on the purpose for which they are intended to be used. Horses and ponies do not fully mature until at least 4½ - 5 years old and may be ‘reared’ until they become fully matured adults, if not put to other work before this age.

For example, some racehorses can start racing as 2 year-olds, whereas event horses, show-jumpers and riding, working or show ponies and horses are usually not used for riding until 4 years of age. In the meantime, they might be used for breeding or showing in hand.

3.5 Summary of the Application of Relief

Broadly, the relief described in sub-section 3.2 above will only apply to stables, foaling boxes, stallion boxes, and covered yards or any other buildings used for breeding or rearing horses and/or ponies, but not keeping them for any other purpose, where:-

a. the stud operations are part of an otherwise exempt working farm, and/or b. the stud buildings are occupied together with over 2 hectares of land which is used predominantly as exempt agricultural land other than for the pasturage of horses or ponies.

Any difficulties with interpretation of paragraph 2A of Schedule 6 to LGFA 88 should be submitted to the Technical Adviser in the first instance.

3.6 Examples of how this Stud Relief works

Practical examples of how stud relief works in practice are set out in Appendix 1 to this section of the Rating Manual.**

4. Method of Valuation

4.1 Rental basis

This is the preferred method of valuation, once rental evidence is established. Although there may be high profits to be made from breeding and rearing horses and ponies, these can only be derived from the quality of the stock. So rents paid for basic stabling are sometimes similar to those paid for equivalent livery or training yard accommodation, although the fundamental business requirements of these various equestrian enterprises do differ significantly.

Other factors affecting rent are the number of animals that can be accommodated at one time, exercise facilities and any other specialised ancillary facilities over and above the basic ‘accommodation’.

Rental values can be analysed per box, reflecting any additional value of normal ancillary facilities, for comparison purposes. Where facilities exceed the basic stable, storage and paddock accommodation, they should be valued separately.

4.2 Contractor’s basis

In addition to a rental basis on basic accommodation, a contractor’s basis may be preferred for any sophisticated ancillary facilities in the buildings where there is no direct rental evidence that provides assistance. The Building Surveyor service will be able to provide costings, as required.

4.3 Receipts and Expenditure method

A method of valuation having regard to gross receipts, will not be appropriate for this class. Any revenue based valuation would require difficult adjustments to the accounts in order to identify and isolate the income and out-goings generated whilst keeping the stallions, mares and foals on the premises, or those attributable to any special facilities available at the stud.

5. Application of the Relief

5.1 When Relief Applies:

It is anticipated that any hereditament qualifying for relief in sub-section 3.5 (a) or (b) above will be a partly exempt hereditament and should be valued in accordance with paragraph 2(1B) of Schedule 6 to LGFA 1988 (as amended) by determining the rateable value of all the non exempt uses, including the stud use. Relief is then given for the use of any buildings used for breeding or rearing horses and/or ponies up to the amount of Rateable Value specified by the Secretary of State or, if less, the rateable value attributable to those buildings qualifying for relief.

5.2 When Relief does not Apply

Relief does not apply to:

a. ancillary buildings used in connection with breeding or rearing of horses and/or ponies, or, b. any land.

6. Referencing

It is important to properly measure the sizes of individual boxes. Some will be close to the usual average (approximately 3.5m x 3.5m), but others used for foaling, for keeping mares with their foals or as stallion accommodation will be larger. It is necessary therefore to record the number and type of boxes available on the premises, together with their size and mode of construction.

Typical sizes are - Foaling Box ( 4.27m x 4.88m); Mare & foal at foot ( 3.66m x 4.27m, or better still 4.27m x 4.27m); Stallion box ( 4.27m x 4.27m).

Significant deviations from these sizes may be expected in studs breeding smaller ponies or tiny, non-native breeds. Similarly, expect larger sizes for the bigger breeds of draught horse.

All boxes should be well ventilated, with window openings ideally placed at least 1.8m from floor level. This will ensure that there are no draughts at eye-level. Flooring and access routes should be durable, resilient and offer secure footing. There should be as much natural light as possible and artificial lighting should be efficient. Easy access will be required to water supplies, feed rooms or bedding litter storage and the dung heap. Noting these elements will help determine overall quality.

Yard layouts may vary. The traditional English yard will have boxes lining three, or sometimes four sides of an open square. In recent years, the American “barn” has become popular. This has all the boxes in one large, airy building, under one roof. Boxes are arranged opposite each other, in parallel lines and separated by an access way wide enough to accommodate a tractor and trailer. Boxes in adjoining “streets” may be “back-to-back” with each other.

Ancillary facilities will also need to be recorded similarly. These will generally include tack rooms, feed stores, hay and straw barns or other storage areas. Sometimes, sophisticated veterinary facilities or other specialist buildings will be encountered. Again, full details of size, construction and, if possible, costs should be obtained.

A note should also be made of the type and quality of access to the property, as large vehicles will often need to gain access to stud premises. There should be adequate car and lorry parking available.

The area of land that is occupied together with the stud buildings will need to be established, as will the use of any other land and buildings within the hereditament. This may well involve looking at the wider picture and not just the immediate stud premises.

Paddocks should have water laid on and will often have open fronted sheds to provide shade and shelter. Stock at a large stud will be divided into mares and foals, barren mares, foaling mares, stallions or young stock and each group will have its own paddock(s). It is likely that an additional paddock for each group is resting, thus enabling fresh grazing to be available at all times.

The overall quality and “feel” of the hereditament should be gauged. Is it an operation run on a “shoe-string” or is money literally no object? In this context, gold fittings are not unknown!

Practice note: 2017 - Stud farms

1. Market appraisal

As an industry the breeding of race horses has suffered the effects of the economic downturn, through falls in the value of bloodstock sales and a reduction in foal production.

Between 2008 and 2012 Britain’s thoroughbred production dropped by a significant 22%, this decline has since stabilised. The impact on the lower quality, often part-time end of the sector was most apparent with the larger professionally organised studs fairing better.

Volumes and average price of horses sold at public auctions are considered to be key indicators of the health of the market. Britain’s two largest auction houses (Tattersall’s and Doncaster Bloodstock Sales) reported significantly reduced sales between 2008 and 2011, but an upturn in the market from 2011 onwards. The average sale price per lot of £47,000 reached in 2012 is on par with pre recession levels but total volumes sold are still significantly lower.

Demand for top quality thoroughbreds remains strong, with approximately 70% of sales to non-British buyers. The largest source of finance is from the UAE states, Saudi Arabia and more recently Qatar, and whilst some horses are exported the majority remain to be trained and raced in Britain.

Whilst it is clear the lower end of the market is challenging, as with other leisure pursuits - top class sport is increasingly funded by wealthy individuals/ organisations. Such investors appear increasingly willing to develop showcase facilities further widening the gap between the best and more modest facilities.

2. Changes since the last Practice note

There are no significant changes in approach, although to aid consistency across the network, advice on analysis and adjustment is reemphasised within Section 4 of this practice note.

3. Ratepayer discussions

No discussions have been held with the industry.

4. Valuation scheme

There is no agreed scheme for this class.

The purpose of this practice note is to provide costing information and other valuation material appropriate for this class of property in respect of the R2017 Revaluation. This PN should be read in conjunction with the main section.

Determination of stud relief: Paragraph 2A(1) Schedule 6 LGFA 1988

It is essential that relief should only be applied to actual buildings used for ‘stud purposes’. Buildings at stud farms used for other equine purposes do not qualify for relief.

The principal guidance on Stud Farm Relief is given in RM Section 6 - Part 1 :Section 1005:3 and within Appendix 1.

For R2017 there is currently no published intention to alter the current arrangements, which are as follows:

  • The Non -Domestic Rating (Stud Farms) (England) Order 2009 SI 2009 No. 3177 which states that up to £4200 relief may be applied where appropriate. The position in Wales has not altered.

For the avoidance of doubt, this 2009 Order does not apply to the 2005 (or earlier) rating lists or any hereditament situated in Wales (where the lower limit of £2500 rateable value applies).

Analysis and adjustment

For analysis purposes, land rental values should be adopted within the range of £120 to £200 per acre. Regard should be had to local demand, size and quality (for example sloping site/ suitability for grazing).

When stripping out residential accommodation for analysis purposes, it is incorrect to deduct the full ‘open market value’ of comparable dwellings. An adjustment is required to reflect that rent paid on the domestic part will be lower as it forms part of a larger commercial operation. Moreover, any comparable residential rent will not be arrived at on the same basis i.e. residential lettings require the landlord to carry out external and internal repairs, regular inspection of electrical and gas installations and higher landlord’s insurance costs.

In the absence of better evidence a judgement needs to be made on the facts of the amount to be deducted from the residential element, to reflect any disadvantage of being sited within a commercial operation, for example a 50% deduction may be appropriate. This should reflect these matters together with any planning restrictions in place or noise/ disruption from the adjacent commercial activity.

It is acknowledged that in some locations rental evidence may be limited or require significant adjustment for this class. To ensure a consistent approach across the network, analysis and adjustment has been undertaken by the Class Coordination Team.

The relevant Specialist Equine Caseworker for the unit should be approached when dealing with both maintenance and settlement of this class.

Appendix 1: Stud farms relief

Worked examples

The relevant legislative background is contained in RM 1005:3.2 et seq.

The Order referred to in paragraph 2A.- (2)(a) of Schedule 5 to the Local Government and Housing Act 1989 is contained in a series of Statutory Instruments:

The Non-Domestic Rating (Stud Farms) Order SI 1989/2331 came into force on 4 January 1990 and specified that the deduction to be made from the rateable value was to be £2,500 in both England and Wales.

For England only, the Non-Domestic Rating (Stud Farms) (England) Order SI 2001/ 2586 came into effect on 15 August 2001 and increased the rateable value deduction to £3000. The application of the 1989 Order to England was revoked after this date.

Again, for England only, the Non-Domestic Rating (Stud Farms) (England) Order SI 2004/3151 came into effect on 1 April 2005 and increased the rateable value deduction to £3500. The application of the 2001 Order was revoked after this date.

For the avoidance of doubt, the 2004 Order does not apply to the 2000 (or earlier) rating lists or any hereditament situated in Wales.

The statute has further been amended with effect from 1 April 2010, by the Non -Domestic Rating (Stud Farms) (England) Order 2009 SI 2009 No. 3177 which states that up to £4200 relief may be applied where appropriate. The position in Wales has not altered.

For the avoidance of doubt, this 2009 Order does not apply to the 2005 (or earlier) rating lists or any hereditament situated in Wales.

Please be aware, the worked examples as shown below relate to the situation as at 1 April 2005

How the relief operates

The relief applies where the hereditament comprises, in whole or in part:-

a) buildings used for the breeding or rearing of horses or ponies, or for either of those purposes;

and

b) are occupied together with any “agricultural land” or “agricultural building”.

In this context, “agricultural land” means any land of more than two hectares which is agricultural land within the meaning of paragraph 2 of Schedule 5 to the Local Government Finance Act 1988 and is not land being exclusively used for the pasturing of horses or ponies.

“Agricultural building” is to be construed in accordance with paragraphs 3 to 7 of that same Schedule.

The requirement is that the agricultural land should not be exclusively used for the pasturing of horses or ponies. This should be interpreted to mean that other animals should graze the land, but not necessarily at the same time. Sometimes, agents acting for ratepayers may refer to this as the “over-grazing” requirement. If, instead of being grazed, the land is used for some other purpose that still enables it to qualify as “agricultural land” (as defined), then the requirement will still be met.

The words “occupied together with” should be interpreted in accordance with advice contained in Rating Manual Section 6 - Part 6: 5.1.2.

The relief does not apply to any land, which is used for stud farm purposes. Unless the land is exempt under paragraph 2(1) of Schedule 5 to LGFA 1988, it should be assessed and relief must not be set against it. (This restriction does not, of course, apply to land which comprises the site of stud farm buildings.)

The following examples illustrate how the relief applies to the 2005 rating lists in England after 1 April 2005. For the R2005 rating lists in Wales, simply substitute the lower RV relief of £2500. In each of the examples it is assumed that the statutory requirements are complied with and the stud premises are occupied together with more than 2 hectares of agricultural land.

Example No 1

In this case, the land is used as a hard standing for motor vehicles and storage relating to the stud farm, the value of which is not reflected in the value of the buildings.

£RV
Stud Farm buildings 4000
Land (hard standing and storage) 250
Total RV 4250
Deduct "specified amount" for Stud Farm buildings 3500
Entry in List RV 750

In this case the rateable value of the buildings exceeds £3500 and so the valuation is reduced by the full specified amount.

Example No 2

In this example, the land is also used as hard standing for motor vehicles and storage relating to the stud farm, the value of which is not reflected in the value of the buildings.

£RV
Stud Farm buildings 2000
Land (hard standing and storage) 150
Total RV 2150
Deduct value of Stud Farm buildings 2000
Entry in List RV 150

NB: In this case the value of the buildings is less than £3500, so the deduction is restricted to the actual value of the buildings.

Example No 3

Here the occupier of the stud farm also occupies contiguous buildings that are used for another purpose, which is rateable. However, for the sake of this example, a separate assessment is not justified.

£RV
Stud Farm buildings 2000
Storage building 5000
Total RV 7000
Deduct value of Stud Farm buildings 2000
Entry in List RV 5000

NB: Once more, only if the value of the stud farm buildings was £3500, or more, would the valuation be reduced by the full specified amount of relief.

Example No 4

Here the only rateable property is the stud farm itself.

£RV
Stud Farm buildings 2250
Total RV 2250
Deduct value of Stud Farm buildings 2250
RV NIL

NB: In this case an entry for £ Nil would be made in the rating list.

Description in the Rating List

When altering the rating list, VOs should endorse the description with the letters “(PR)” immediately after the words “Stud Farm”. This obviates the need to inform occupiers that partial relief has been applied and will also be a helpful indication for persons who might otherwise seek to use the assessments as comparables for some other class of property.

Appendix 2: Equestrian properties inspection checklist

Checklist of details required to complete inspection - for use on site as an aid memoir

A link to this checklist is available.

Appendix 2: Equestrian properties inspection guide

Inspection guide providing advice

a. preparation for inspection b. inspection c. post inspection

A link to this checklist is available.

Practice note: 2010 - Stud farms

1. Co-ordination

Stud Farms are a Group co-ordination class and, as such, responsibility for ensuring that the appropriate co-ordination takes place lies with individual Groups. As there is known to be only limited rental evidence for this class, it is important that Groups co-ordinate across boundaries, using fully the procedures described in RM Section 6 - Part 1 and Practice Note 1 - Revaluation 2010.

The Special Category Code 269 should be used. As a Group Class the appropriate suffix letter should be G.

2. Valuation Guidance

Reference should be made to Rating Manual section 6: part 3 - section 1005, which refers to the method of valuation for this class. It should be remembered that the fundamental business requirements for stud farms differ from those of other equestrian enterprises (eg racing stables, riding schools and livery stables) and care is required not to confuse rental evidence from these differing markets.

Further valuation guidance may be issued by way of a later Appendix to this Practice Note if a clear pattern emerges from analysis of rental evidence across the country.

3. Determination of the extent of Relief: Paragraph 2A(1) Schedule 6 LGFA 1988

The principal guidance on Stud Farm Relief is given in Rating Manual section 6: part 3 - section 1005 and Appendix 1 thereto.

For R2010 there is no published intention* to alter the current arrangements, which are as follows:

The Order referred to in paragraph 2A. - (2)(a) of Schedule 5 to the Local Government and Housing Act 1989 is contained in a series of Statutory Instruments:

  • Non-Domestic Rating (Stud Farms) Order SI 1989/2331 came into force on 4 January 1990 and specified that the deduction to be made from the rateable value was to be £2,500 in both England and Wales.

  • England only, the Non-Domestic Rating (Stud Farms) (England) Order SI 2001/ 2586 came into effect on 15 August 2001 and increased the rateable value deduction to £3000. The application of the 1989 Order to England was revoked after this date.

  • for England only, the Non-Domestic Rating (Stud Farms) (England) Order SI 2004/3151 came into effect on 1 April 2005 and increased the rateable value deduction to £3500. The application of the 2001 Order was revoked after this date.

  • statute has further been amended with effect from 1 April 2010, by the Non -Domestic Rating (Stud Farms) (England) Order 2009 SI 2009 No. 3177 which states that up to £4200 relief may be applied where appropriate. The position in Wales has not altered.

For the avoidance of doubt, this 2009 Order does not apply to the 2005 (or earlier) rating lists or any hereditament situated in Wales.

*But it should be noted that late changes immediately prior to the compilation date of a new rating list are not unknown.

Practice note 1: 2005 - Stud farms

1. Co-ordination

Coordination responsibilities are set out in the Rating Manual section 6: part 1.

Stud farms are a Group class for R2000. The R2000 Special Category Code 269 should be used. As a Group Class the appropriate suffix letter should be G.

2. Valuation Guidance

Reference should be made to Rating Manual section 6: part 3 - section 1005, paragraph 4 which refers to the method of valuation for this class. It should be remembered that the fundamental business requirements for stud farms differ from those of other equestrian enterprises (eg racing stables, riding schools and livery stables) and care is required not to muddle up rental evidence from these differing markets.

Further valuation guidance may be issued by way of a later Appendix to this Practice Note if a clear pattern emerges from analysis of rental evidence across the country.

3. Determination of the extent of Relief: Paragraph 2A(1) Schedule 6 LGFA 1988

There are three distinct stages necessary before the extent of relief can be considered, viz:-

a. identify the hereditament

b. identify any buildings to which relief applies

c. identify which parts are exempt and ascertain the rateable value of the non exempt parts following Paragraph 2(1B) Schedule 6 to LGFA 1988

Further guidance is given in RM Section 6 - Part 3 :Section 1005:3 and 5 and Appendix 1 thereto.

From 1 April 1990 the amount of £2500 was specified by the Non-Domestic Rating (Stud Farms) Order 1989 SI No.2331 and, despite several reviews, this remained unchanged for the 1995 and the compiled 2000 Rating Lists.

In England, however, 1989 SI No.2331 was revoked on 15 August 2001 and replaced by the Non-Domestic Rating (Stud Farms)(England) Order 2001 SI No.2586 and the rateable value deduction increased to £3000.

In Wales, there are no plans to introduce a similar change.