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

Section 230: chemical works

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

1. Scope

1.1 This section applies to industrial process plants used for the manufacture of chemicals from raw materials or for processing feedstock chemicals to produce higher value chemicals. These higher value chemicals may be final products for sale for consumption, but commonly they are intermediate products which are used as feedstock in further chemical processing.

2. List description and special category code

2.1 List description: Chemical works and premises IF2

2.2 SCAT code: 055. As a split class the appropriate suffix letter should be either V (for major chemical works valued by NSU), or S (for works valued by Unit Specialists).

2.3 Special Category Code 055 should not be used for hereditaments where no significant manufacture or processing (as distinct from storage) of chemicals takes place.

2.4 In circumstances where formerly-extensive chemical works have become fragmented into a number of separate hereditaments the relevant special category codes should be adopted for the individual parts see also 4.4 below for treatment of special cases in these circumstances

3. Responsible teams

3.1 Responsibility for the valuation and referencing of this class of property is split as follows:

  • major chemical works (MCWs) are dealt with by the Industrial and Crown team within the National Specialists’ Unit (NSU)
  • other chemical works (utilising standard industrial buildings and including limited rateable plant and machinery) are dealt with by specialists within the NDR Business Units

4. Co-ordination

4.1 Responsibility for ensuring effective co-ordination lies with both NSU and NDR Business Units. In addition Rating manual Section 1:part 1: para 3.6 sets out requirements for keeping the Unit VO informed of major issues and litigation concerning individual high profile hereditaments.

4.2 Given the wide variety of chemical works in operation it is very difficult to draw up a hard and fast rule for splitting the class between major works and other works. The following guidelines (and potential exceptions) are set out here to assist in decision making, but where any significant doubt exists, the Chemical Works lead specialist in the NSU Industrial and Crown team must be contacted and collective agreement reached as to the appropriate allocation.

4.3 Individual measures such as production capacity, building/plant specification and complexity, total site area, total RV, proportion of RV attributable to specialist plant and machinery are all relevant determining factors without necessarily being conclusive.

4.4 In the 2010 rating list a major chemical works would generally be expected to have an assessment in excess of £400,000 RV, although some assessments below this figure might still be regarded as a major works in view of other factors. In particular, circumstances described in para 2.4 above arise with increasing frequency as elements of major chemical works are sub-let or otherwise “carved out” of the main assessment. For those elements retaining chemical production capacity and thereby requiring special category code 055 the following factors should be considered:

  • 4.4.1 what is the carved-element’s long-term likely future? Is there a possibility of re-absorption into the original assessment or reconstitution with other elements on the site?

  • 4.4.2 is the rateable occupier of the new hereditament represented by the same agent as the remaining MCWs?

  • 4.4.3 Does the Contractors’ Basis (which is applied to all MCWs) remain the most appropriate method of assessment?

The interaction of the above factors may give rise to circumstances in which a relatively smaller hereditament remains allocated to NSU, though it should be emphasised that such circumstances would be the exception rather than the rule.

4.5 The decision on allocation of any given hereditament as between NDR Unit and NSU must therefore have regard to all the surrounding circumstances – this will ensure that the assessment is managed in the most efficient and consistent way possible.

5.1 Given the nature of the industry, Health and Safety legislation is a major consideration in the operation of chemical works. Full details are available from the relevant part of the HSE website but important provisions include:

  • REACH (Registration, Evaluation, Authorisation and restriction of CHemicals) – REACH is a European Union regulation concerning the Registration, Evaluation, Authorisation and restriction of Chemicals. It came into force on 1st June 2007 and replaced a number of European Directives and Regulations with a single system

  • Chemicals (Hazard Information and Packaging for Supply) CHIP Regulations - CHIP regulations are gradually being replaced by the European Regulation on Classification, Labelling and Packaging of Substances and Mixtures – known as the CLP Regulation. The CLP Regulations applies in the UK and elsewhere in Europe and provide a Globally Harmonised System (GHS) for classification and labelling

  • Prior Informed Consent (PIC) - certain chemicals have to be notified to HSE if exported outside the EU, and some of these may require the Prior Informed Consent of the importing country

  • COMAH (Control of Major Accident Hazards Regulations) - where hazardous substances are stored in large quantities that could affect those in the vicinity of the plant COMAH covers requirements to reduce the possibility of accidental release and to mitigate the potential consequences

  • Plant protection products used in agriculture, horticulture and gardens, and biocides such as rodenticides, wood preservatives, and disinfectants are subject to special controls. These controls include product authorisation as well as approval of their active substances at EU level

6. Survey requirements

6.1 Basis of measurement for both MCWs and other chemical works is GIA

6A Safety on site

6.2 All chemical works contain serious safety hazards, so extreme care is required when carrying out inspections.

6.3 Members of the VOA visiting this type of property for an inspection or other reason should undertake a risk assessment, wear the appropriate PSE, and ensure they are aware of all the VOA guidelines on health and safety.

6.4 Where the site has a formal health and safety induction process, this must be undertaken. Individuals should comply with all safety rules and precautions prescribed by the site operator without exception.

6.5 In particular, it is important to maintain very high levels of awareness - be alert for the risk of trips and falls; never touch exposed pipes or other elements of production equipment (for example, it may be very hot or very cold); and avoid physical contact with any liquids or solids encountered in operational areas of the plant.

6B Background – how a chemical works operates

6.6 Common processes typically carried out within works will include:

  • mixing, including dissolving
  • separating, including filtration, sedimentation, distillation, re-crystallisation, reverse osmosis, adsorption
  • heating, including direct firing and use of heat exchangers
  • cooling
  • catalysis
  • biochemical processes including fermentation and enzyme production

6.7 Processes may be run in batch or continuous operation. Batch operations are more likely to be used in smaller works or with particularly high value chemicals such as pharmaceuticals where rigorous quality control and audit must be demonstrated. In this system a batch of feedstock is fed into the process, the process is run to completion using all the feedstock and the product (together with any by-products) is removed. The batch process can then be repeated exactly or, depending on requirements, adjustments may be made to the batch quantity or to the process for the next batch.

6.8 In continuous operation the introduction of feedstock and the extraction of products comprise moving streams of material and processing takes place continuously and simultaneously. This is normally the most efficient means of production on a large scale, particularly if it can be carried out in a near steady state with constant rates of flow of materials, steam, coolant and power.

6.9 In a complex works there may be a mixture of continuous production and batch production depending on the process type, and buffer stores of feedstock and intermediate products will be required to avoid constraints on production capacity.

6.10 Production plant is arranged in discrete blocks, units, lines or streams. The terminology used by a particular operator is not significant. A schematic or process flow diagram gives an overview of the layout of the plant and this will aid understanding of the process and the role of particular plant items. At the most basic level production plant will consist of a series of vessels in which processes take place linked by transfer systems between feedstock storage, processes, and product storage.

6.11 Feedstock storage usually comprises silos, bunkers or tanks depending on the nature of the feedstock. Product storage is similar. Process vessels can comprise reactors, columns and towers and depending on the process these will often need to be manufactured from specialist steels or incorporate specialist linings to resist extreme temperatures and pressures and highly corrosive contents. Transfer systems typically comprise pipework for controlled movement of fluids, gases and steam.

6.12 Production plant and pipework is built on extensive supporting structures of steel and concrete. These may be very lofty, particularly where supporting towers and columns, or where the process flow is assisted by gravity. Process plant often stands in the open, but in some cases production units are enclosed within specialist multi storey buildings to give a controlled environment and/or noise attenuation. In such cases particular care should be taken to ensure the specification of the building is reflected properly in the valuation.

6.13 Additional buildings on site will generally comprise administrative offices and laboratories, mechanical workshops and spares stores and warehouses and possibly blast proof control rooms. There will also be buildings housing service plant such as boiler houses, compressor houses, pump houses and electricity substations. It is usual to find a specialist treatment plant designed to hold and deal with the various streams of effluent from the process prior to discharge of waste water.

6C Unit of assessment

6.14 The identity of the occupier, the purpose of occupation and the extent of property occupied at a chemical works is normally quite straightforward. However it is worth highlighting two circumstances where further investigation may be necessary to determine the correct unit of assessment.

6.15 Firstly there has been a trend in recent years for the operation of combined heat and power (CHP) plant to be undertaken by specialist energy services companies. CHP plant can provide significantly improved efficiency in the use of fuel in comparison with traditional boiler plant. Depending on the circumstances the CHP may satisfy the requirements of a separate hereditament. This is likely to be the case if, for example, the energy services company has taken a lease of a site within or adjacent to the chemical works, has built the CHP plant itself and is in control of operation of the CHP plant for fulfilment of its contracts for supply of steam, heat and electricity to the chemical works (and with possible export of surplus electricity to the grid). It will be necessary to obtain full facts regarding occupation to determine whether a CHP installation should form part of a single hereditament with the chemical works (as in-house CHP) or if it satisfies the requirements of separate hereditament (as stand-alone CHP).

6.16 Secondly it may be necessary to obtain full facts regarding any pipeline links for conveyance of feedstock, water, and products to and from the chemical works. If in separate occupation these will be a separate unit of assessment. If the pipeline is in the same occupation as a chemical works advice on the appropriate unit of assessment should be obtained in the first instance from the Chemical Works lead specialist in the NSU Industrial and Crown Team. The history of the chemicals industry in the UK is characterised by development of works in clusters, and also separation of former extensive multi function single works into separate focussed operations. This creates a situation where works may be interconnected by pipelines supplying feedstock.

6D Plant and machinery

6.17 See RM Section 6: part 5 for general advice on identification of rateable plant and machinery forming part of the hereditament. Rateable plant and machinery is identified in accordance with the provisions of SI 2000 No. 540 in England and SI 2000 No. 1097 (W.75) in Wales.

6.18 From inspection of chemical works it will be apparent that there are significant amounts of civils and infrastructure plant such as foundations, settings, supports, pipe racks, fixed gantries, platforms, chimneys, conduits, ducts and cooling ponds. These are all clearly rateable. Also rateable is service plant under Class 2 including water supply and treatment works, effluent treatment, fire protection, and Class 3 items such as railway tracks, lifts and hoists.

6.19 There will also be a mass of obviously non-rateable items including computers, telemetry and control equipment, pipework, pumps, gas compressors, fans, electric motors, secondary transformers, secondary switchgear, cables, cranes, mobile plant and such.

6.20 Large numbers of “chambers” named in Class 4 such as acid concentrators, bins and hoppers, bunkers, furnaces, kilns, ovens, condensers and scrubbers, evaporators, filters and separators, precipitators, reactors, retorts, silos, tanks, towers and columns may or may not be rateable depending on the nature of the plant. The main issue here is identification of those items of plant which are rateable under Class 4 by virtue of their structural nature. Rateability will depend on the facts of the case and RM Section 6: part 5: PN6:2005 contains advice in this regard. One point which should be borne in mind is that vessels may have specialist protective linings which would be damaged in the event of disassembly required to facilitate a move. Thus an item named in Class 4 Table 4 and below 400 cubic metres will still be rateable if it is not readily capable of being moved and re-erected in its original state.

7. Survey capture

7.1 Survey data for MCWs is recorded manually in binders in the custodianship of the NSU’s caseworker support team.

7.2 Survey details for other chemical works are held on RSA and EDRM in the same manner as other bulk-class hereditaments

8. Valuation approach

8.1 The primary method of valuation for MCWs is the Contractor’s Basis – this reflects the highly specialist nature of the occupation. It will incorporate a significant proportion of rateable plant and machinery and this is likely to include specialist process plant such as reactors, towers and columns. Some process plant may be contained within specialist multi level buildings of bespoke design.

8.2 A hereditament comprising conventional factory style buildings with conventional ancillary offices, stores, possibly some tanks and other vessels will not constitute an MCW (but see also 2.5 below). Such hereditaments fall to be valued on the Rental/Comparison method, in common with non-specialist industrial accommodation.

9. Valuation support

9.1 Valuations for MCWs are held on the non-bulk server (NBS).

9.2 Valuation details for other chemical works are held on RSA in the same manner as other bulk-class hereditaments.