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

Section 240: cinemas

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

1. Scope

This section covers the valuation of all types of cinema.

1.1 “Traditional”

Most of the “traditional” first run cinemas were built in the inter-war years originally with single auditoria. Many have now been converted to alternative uses or redeveloped, but those still being operated as cinemas have generally been refurbished and converted from single to multi-screen operations, usually with between two and five screens.

As these multi-screen cinemas have been constructed within the constraints of existing buildings, auditoria size and layout may not be ideal. Repair and maintenance costs for a building of this age and size are likely to be considerable, and other running costs are likely to be relatively high compared with a modern purpose-built cinema.

The second run and niche cinemas are generally also inter-war and immediate post-war properties, often located in smaller towns or being second cinemas in larger towns. Often these will have one screen only and will not be significantly improved. A few purpose built cinemas were constructed in the 1960s and 1970s; these are generally small, with between one and three screens and, as for the vast majority of second run cinemas, operated by independent companies.

1.2 Multiplexes

The multiplex cinema concept was introduced from the USA in the mid-1980s. In its July 1994 Report, the Monopolies and Mergers Commission defined a multiplex cinema as “a purpose-built cinema with at least five screens and usually offering extensive free parking.”

For rating purposes all purpose-built cinemas constructed from 1985 onwards with five or more screens should be regarded as multiplex cinemas - subject to the interface with small multi-screens (see 1.3 below). Normally a multiplex will have its own extensive car parking, but where multiplexes are situated in shopping centres or retail/leisure parks this is likely to be shared, or available close by.

Multiplex cinemas are generally located with a high level of accessibility, by road especially, and close to large centres of population. They are designed to reduce working expenses and to boost ancillary confectionery and fast food sales, by including large kiosks with several sale points that are prominently positioned so that visitors to all screens pass them.

The combination of high numbers of admissions, reduced and carefully controlled operating expenses, flexible screening possibilities (due to the large number of screens enabling a single film to be shown on different screens and at varying times), and better marketing of ancillary products, enables multiplex cinemas to achieve higher operating profits than the more traditional cinemas.

1.3 Small Multi-screen

There has been an increasing trend in recent years for cinema operators to open cinemas in smaller towns as the availability of sites in larger towns and cities have become scarcer. These small multi-screen cinemas usually have many of the characteristics of a multiplex cinema and fit the following definition agreed with the cinema industry representatives:

“A small multi-screen cinema will always be located outside the M25, it can have no more than six screens and may be entirely purpose built or a modern conversion from another use. The total number of seats will never exceed 1,250.”

2. List Description and Special Category Code

Primary Description Code: LT

List Description: Cinema and Premises

Scat Code 056 - Suffix S

3. Responsible Teams

This is a specialist class of property, to be valued by Specialists in each Business Unit.

4. Co-ordination

The Class Co-Ordination Team has overall responsibility for the co-ordination of this class. The team is responsible for approach, accuracy and consistency of valuations. The team will deliver Practice Notes describing the valuation basis for revaluation and provide advice as necessary during the life of the rating lists. Caseworkers and referencers have a responsibility to:

  • follow the advice given at all times
  • not depart from the guidance given on appeals or maintenance work without approval from the co-ordination team
  • seek advice from the co-ordination team before starting any new work

5.1 Planning

Cinemas fall under category “D2” of the Use Classes Order. A mixed use with “A3” permission will be required if food and drink are to be offered for consumption on the premises.

5.2 Cinema Licence

Operators are required to obtain a single licence from the local authority. The 2003 Licensing Act removed the requirement for cinemas to have a separate Cinematograph Licence, or for mixed arts venues to have a Public Entertainments Licence. Instead, film is categorised as a ‘licensable activity’ under the act and organisations need to apply for a Premises Licence from their local licensing authority.

The licensing authority will normally grant this licence for a cinema to screen films that have been certified by the British Board of Film Classification (BBFC). Cinemas looking to screen films that have not been BBFC certified will generally have to submit these separately to the local licensing authority for local certification.

This licence should not be confused with the content licences obtained from film distributors that enable operators to screen their films. Operators are required to obtain a theatrical licence agreement from the relevant distributor for each film that they screen. Film societies and other exhibitors in non-traditional cinema venues, are required to obtain a non-theatrical licence.

5.3 Fire Prevention

Before a cinema opens its doors to the public a Fire Safety Risk Assessment must be carried out.

5.4 Health and Safety

A local authority’s rules relating to Premises Licences do not in any way replace or reduce the underlying statutory duty of employers to comply with the Health and Safety at Work etc. Act 1974. This legislation requires, amongst other things, an assessment of the risks to staff, patrons and others who may be affected by their business and identification of measures required to control or avoid the risks. Local authorities are responsible for monitoring compliance with this legislation, usually through their Environmental Health Services. Safety certificates required may include mechanical & electrical, ceiling, heating and ventilation and various insurances which must be kept up-to-date as a condition of a Cinema Licence and an operational building.

5.5 Performing Rights Society (PRS) and Phonographic Performance Ltd (PPL)

Cinemas need a licence from the PRS to cover the playing of music on the films’ soundtrack. PRS is paid at 1% of net box office after VAT for the use of the composers and publishers of music. The operator is also likely to need a licence from PPL for use of recordings and DVDs for ambient music played in the foyer and auditoria.

5.6 Sale of Alcohol

The Premises Licence can extend to the sale of alcohol. Typically this will permit sales in bar/restaurant facilities only. If an operator wishes to allow customers to take alcohol into the auditorium a further extension will be required. Additionally the operator will need a Personal Licence. See RM Vol 5: s825 - Public Houses, for more detail on licensing.

6. Survey Requirements

Cinemas should be measured to gross internal area (GIA) in accordance with the VOA Code of Measuring Practice for Rating Purposes.

In addition notes should be made of the style of operation (main stream or arts cinema), provision of confectionery, food and drink, type of auditorium (sloped floor or stadia seating), number of screens, number of seats, admission prices (and details of concessionary prices), heating, air-conditioning and fire protection equipment, parking facilities and any reliable figures regarding numbers of admissions and gross receipts/average spend per head.

7. Survey Capture

All inspection notes, checklists, plans and other relevant material should be captured in EDRM.

Photographs should be placed in RSA.

8. Valuation Approach

8.1 Rental method

8.1.1 General

Rental evidence exists for both “traditional”, multiplex and small multi-screen cinemas and thus the rental method is the preferred method of valuation.

When adjusting in terms of rateable value it is essential to ascertain what the rent covers as it may include non-rateable fixtures and fittings as well as projection equipment. Rents on multiplex cinemas are invariably of a shell unit, with substantial additional sums being spent on fitting out the premises. Full details of fitting out costs should be sought, with a breakdown between rateable and non-rateable works if possible.

8.1.2 “Traditional” Cinemas

Adjusted rents on traditional cinemas should be analysed in terms of a percentage of maintainable gross receipts at the date of the rent. Analysis and valuation in terms of gross receipts is generally preferred because of the difficulties in accurately reflecting differences in type, facilities, competition and location between cinemas using a price per seat approach.

8.1.3 Multiplex and Small Multi-screen Cinemas

A significant number of multiplex and small multi-screen cinemas are rented. It is understood that the vast majority are shell rents and substantial fitting out costs will have been incurred on both rateable and non-rateable items. Analysis of rents can be difficult because of the varying definitions of “shell rent”. This can vary between a “cold shell” to a “warm” or even “hot” shell depending upon the amount of fitting out the developer adds to the main structure and can therefore be reflected in the rent. In most cases fitting out will include the provision of the mezzanine projection room with plant room above, the sales desk, confectionary sales area, toilets, ancillary office(s), heating, lighting, air-conditioning and fire protection equipment. When investigating fitting out costs it must be ascertained what works were carried out, how the costs were broken down and whether there was any further expenditure on fixtures, fittings and equipment.

An addition to the shell rent will therefore need to be made to reflect rateable fitting out works carried out.

But then there may also be incentives – landlord capital contributions can be very significant.

The very strong footfall generation of the cinema means that its presence is seen as key in new retail schemes.

Review rents can be on a whole variety of bases – compound uplifts, minimum uplifts and open market rents (but then the basis might not be in cinema use).

Historically the standardised format and performance of multiplex cinemas enabled a meaningful analysis in terms of rent per seat. As the market has evolved and widened a move to an analysis in terms of gross receipts, alike with “traditional” cinemas, is now recommended.

8.2 Receipts & Expenditure (R&E) Method of Valuation

Interpreting the rental evidence is fraught with difficulty and it may be found of assistance to undertake full R & E analyses in respect of a sample of the various types of cinema.

The analysis outcomes should be expressed in terms a percentage of gross receipts to enable comparison with other cinemas to be made.

8.3 Valuation Scheme

It is anticipated that for each Rating List the analysis of rental information will enable a scheme of valuation to be agreed with the agents who represent the cinema industry. Refer to the relevant Practice Note for the details.

9. Valuation Support

All valuations should be entered onto the Non-Bulk Server under the relevant Scat Code.

Other support available:

  • Survaid
  • Class Co-ordination Team

Appendix 1 : Code of practice - Information required to be supplied to Valuation Officers

Notice requiring a return for rating purposes: cinemas

This Code of Practice, which is being issued as an indication of the general policy of the Valuation Office, supersedes any earlier Code of Practice and relates to specified information supplied to the Valuation Officer following a notice served under either Section 82 of the General Rate Act 1967 or paragraph 5 of Schedule 9 to the Local Government Finance Act 1988, as amended by paragraph 46 of Schedule 5 to the Local Government and Housing Act 1989. Such information will have been requested by the Valuation Officer in the belief that it will assist him/her in carrying out functions conferred or imposed by or under Part III of the 1988 Act (concerning non-domestic rating), including the compilation of a new rating list, or the maintenance of the rating list now in force.

The Valuation Office acknowledges the wish of the members of the Cinematograph Exhibitors Association of Great Britain and Ireland to preserve what they consider to be the confidential nature of trade information supplied to Valuation Officers in compliance with notices served upon them in accordance with the foregoing paragraph.

The Cinematograph Exhibitors Association of Great Britain and Ireland, together with its agents, acknowledges that this Code of Practice is being issued entirely without prejudice to any requirement to disclose the trade information referred to above by law, and to each Valuation Officer’s statutory duty. The Valuation Officer reserves the right to examine each case on its individual merits.

The information supplied in compliance with such notices will not be disclosed to other Government Departments, without prejudice to any statutory or other legal requirements to the contrary. Whilst any information supplied to the Valuation Office will not as a matter of general practice be supplied to other branches of the Inland Revenue no formal restriction can be placed on the use within the Inland Revenue of the returns or the information contained in them.

The following will be the general practice adopted by Valuation Officers and their staff in dealing with rating cases concerning cinemas.

1.Trade information supplied in respect of a hereditament will not be disclosed to any person other than the parties to an appeal in respect of that hereditament without the written consent of the person supplying the information, or the person/body on whose behalf the information was supplied, except in the following circumstances:

a. In order to deal with the assertions made by any party in negotiations or prior to the hearing of an appeal in relation to the rating assessment of any similar hereditament, the Valuation Officer shall, wherever possible, endeavour to give details of analyses etc which have regard to trade information in such a manner that the trade of a specific hereditament or of any individual cannot be identified.

If it becomes essential for the Valuation Officer to refer to the actual trade of a hereditament, that information (or any other information supplied) will be disclosed in confidence only to the parties to an appeal or their professional advisers.

b. If an appeal cannot be settled by agreement, and it is listed for hearing by the Valuation Tribunal, where the Valuation Officer considers it necessary to refer to trade information of comparable hereditaments in support of the assessment under appeal he will serve notice in accordance with Regulation 39(3) of The Non-domestic Rating (Alteration of Lists and Appeals) Regulation 1990 (Statutory Instrument 1990 No 582).

Valuation Officers undertake to use this procedure judiciously and to limit the number of hereditaments to which the notice relates to those reasonably required to support the level of assessment of the appeal hereditament.

c. When any person to whom notice has been given in accordance with 1(b) above serves notice on the Valuation Officer in accordance with Regulation 39(4), the Valuation Officer will generally comply provided that he/she intends to support the valuation of the appeal hereditament by reference to trade information and further that he/she is satisfied that the hereditament specified in such notice is comparable in character or otherwise relevant to the appeal hereditament or that the trade information of the hereditament specified in the notice is directly related to the rating assessment of the appeal hereditament.

The Valuation Officer may refuse to comply with such notice if he/she is not satisfied that the hereditament is comparable in character or otherwise relevant to the case of the person who served such notice, or to the appeal hereditament, and the Valuation Officer will not divulge trade information where the assessment of the appeal property falls to be determined solely by reference to rents or costs.

d. If the person who serves notice under paragraph 1(c) above applies to the Valuation Tribunal or arbitrator under Regulation 39(6) where the Valuation Officer has refused or failed to comply with the notice or part of it, he/she may defend his/her decision. If the Tribunal or arbitrator is satisfied that it is reasonable to do so, it or he/she may direct the Valuation Officer to comply with the notice in all or part and in such circumstances the Valuation Officer will, of course, comply subject to any possible appeal.

1.The Association will recommend to members that prior to any hearing by the Valuation Tribunal or Lands Tribunal, they, and their professional advisers, should co-operate with Valuation Officers in the agreement of facts relating to the appeal hereditament, and (so far as they are able) of facts relating to any comparable hereditament to which either side proposes to refer.

2.The Valuation Officer will not object to a request from any other party under regulation 38(3) of the aforementioned regulations to the Valuation Tribunal for the case to be heard in camera where trade information is to be disclosed, (but such an arrangement cannot prevail in the event of an appeal to the Lands Tribunal and beyond).

3.Notwithstanding the foregoing, if the Lands Tribunal or a superior Court make an order for discovery under Rule 40 of the Lands Tribunal Rules, the Valuation Officer will be bound to comply.

Practice Note : 2017 : Cinemas

1. Market Appraisal

1.1 General

The period since 2007 has seen a steady stream of new cinema openings. However because the market is largely saturated many of these are of a new type, perhaps best described as “small multi-screen cinemas”. These are typically found in smaller towns, filling gaps in the market not served by those in larger conurbations.

New cinemas, large and small, predominantly form part of wider development schemes to regenerate/reinvigorate town centres. These developments often include A3/A4 units to complement the cinema occupation. Indications are that, as cinema operators look to diversify, they may wish to see future developments allow them the space to provide more significant food and drink offers

A major change for the industry commencing in 2007 has been the “digitalisation” and the wider introduction of “3D”, the latter producing a wave of new films in this format. Though some were of dubious quality they allowed the industry to sell an “exciting new experience”. Digitalisation is expensive (£80 -£100,000 per screen) and the conversion has taken time with over 90% of screens converted by December 2012. Given that Hollywood had stated all film produced from 2014 would be in the digital format there had been considerable concern at how the small independent operators could fund the conversion and survive. However these concerns appear to have been largely unfounded, mainly due to grants or funding from an industry organised scheme administered by the British Film Institute.

Looking forward, changes in cinema technology are coming faster and faster and allow cinemas the opportunity to provide an experience which home entertainment/cinema systems cannot. In France operators “stream” individual digital films and major events across a network to their cinemas. Whilst this has yet to take hold in the UK we are increasingly seeing individual events streamed live to cinema auditoria. For example The Royal Opera House regularly stream major live events to the Imax Waterloo and similarly this occurs around the country with other major events where there exists significant demand.

The impact of new technology on the industry was further evidenced by the announcement by Vue in February 2015 that their multiplex cinema at Fulham Broadway (100 yds from Chelsea FC) has undergone changes and will shortly open with a 600 seat “eSports Stadium” arena. This is a modern multiplex built as part of a shopping development but which has until now been regarded largely as a disappointment by Vue.

The arena will be used to promote computer gaming tournaments involving the world’s best players. The first such event in this country was held in a temporary venue in East London last year and attracted 4,000 spectators. However, perhaps as a marker of things to come, in the more established market of Asia a recent tournament in South Korea sold out the 67,000 capacity Sangam Stadium and was streamed live online as “pay to view” and had a prize pot of £1.8m. These events have huge appeal to advertisers due to a predominantly male audience between the ages of 16-30. Needless to say Vue states it is considering expanding the concept to other city centre sites in Britain.

Digital technology has also enabled the concept of the “pop-up cinema” through the use of portable screens, projectors and sound system equipment. Most often the concept utilises open car parks to create a drive-in movie theatre in the summer months.

Another area some operators are seeking to exploit is food and drink. Vue have recently revamped four cinemas (three in England - Hull, Westwood Cross and Thurrock) in which they are looking to create a new type of movie atmosphere. They have all got the standard offer plus bigger screens supported by cafe, licensed bar and more comfortable seats. Additionally they now have “satellite screens” with satellite link-up allowing for alternate live screenings of music, sport, comedy and more.

Meanwhile, Odeon are experimenting in their Whitley’s London venue with “Whitley’s Lounge”, a concept involving three screens converted to allow couples to watch a film whilst enjoying a three course meal cooked by a chef on the premises.

Increasingly therefore, where physically possible, cinema premises are being altered/adapted to provide new experiences, bars and cafes etc., in order to maximise existing and new revenue potential.

1.2 Post 2008 Trade Performance

The UK enjoys one of the highest attended cinema markets in Europe, mainly as a result of the dominance of the English language in film production. With this advantage the period after 1984 saw a long period of growth in new cinemas and the closure of under-performing and poorly maintained offerings. This resulted in an admissions peak in 2002, since when they have largely drifted sideways despite the continuing growth in screen numbers.

Post 2008, and the financial crisis, admissions/trade information has proved that the industry is “counter-cyclical”, performing well in a recession as long as a reasonable product is available for showing. At the 2008 AVD there were concerns that the squeeze on available capital for investment in new films would limit the supply. This squeeze began to occur in the US, the main film production area, in 2007. Certainly investors and producers are now more cost conscious, risk averse and therefore more likely to stick with previously successful formulas.

2012 was a good year for the UK cinema industry, largely driven by the James Bond franchise production of Skyfall. However, evidence of a poor 2013 came in January 2014 when the UK Cinema Industry reported its first fall in revenues for 20 years - a drop of 1% to £1.17 billion and a 4% reduction in admissions (admissions were back to a level only marginally higher than 2008). No film grossed over £50m in 2013, whilst three films did in 2012. In addition, a record three films each lost more than £60m. Then in 2014 UK admissions fell a further 2.9%, although revenues increased slightly, causing still more concern and debate within the industry about the formulaic nature of popular franchises in a risk averse production environment. Given the length of time it takes to screen a film from conception, about five years, perhaps these falls are partly related to the financial crisis.

In contrast the industry is optimistic that 2015 could be a record year given the anticipated quality of the films scheduled for release (e.g. the latest James Bond film, Spectre, will be released in late October). At the time of writing, August 2015, the first seven months of 2015 was showing an 11.5% growth in admissions on the same period in 2014.

Despite this some analysts and commentators remain very downbeat about future prospects fearing the young are shunning cinema in favour of smart phones, tablets, online video and gaming and that the industry needs to find ways to engage with audiences interactively. They also point to the growth of VoD (Video on Demand) from the likes of NetFlix and LoveFilm which has sent DVD sales tumbling, although the industry argues that the increased value of digital rights has offset some of the loss.

These issues, along with the continuing growth of pay per view TV and the increased commissioning by the major players in this field of products for sole release on their platforms (e.g. series such as House of Cards and Game of Thrones) resulted recently in the Chairman of Imax publicly encouraging the industry to raise its game and provide that special experience not available in our homes.

In addition, in August 2013, a YouGov report on cinema & TV viewing revealed 7 in 10 cinemagoers were saying the price of tickets had become too expensive and highlighting the 50% growth since 2002. Food and drink at cinemas was viewed as offering poor value for money by 8 in 10. Between 2008 and 2013 average ticket price growth was 26% as opposed to CPI growth in that same period of 20%. In real terms, this equates to growth of 5.5% over that period. Possibly a reflection of the above views and continuing economic constraints, is the fact that average refreshment sales lagged behind - only rising from £1.71 to £1.75 per admission in this period.

Discussions with agents and others directly involved in the industry suggest that film hire charges have risen in the last 5 years to a typical range of 40% to 50% of box office receipts. Previously 35% to 45% was the norm range.

The consolidation of operators within the industry continues, with Vue acquiring Apollo and Cineworld taking on the Picturehouse chain. The latter deal was somewhat a marriage of convenience allowing Cineworld to have an established presence in the “arts cinema” market - the Picturehouse brand and management structure was left in place. In return, Picturehouse benefit from the availability of finance which in previous years they had struggled to attract, particularly post 2008, thereby hampering their desire to grow the business. As a direct consequence the former Cineworld in Shaftesbury Avenue Central London will re-open in 2015 as a Picturehouse.

More recently rumors are circulating that Vue are seeking to acquire Odeon from the private equity firm of “Terra Firma”. Such an acquisition would undoubtedly require the scrutiny and approval, probably conditionally, by the Competition & Markets Authority (CMA).

The industry therefore continues to face many changes and challenges.

2. Changes from the last Practice Note

For the 2010 Rating Lists a scheme of valuation was agreed with the rating surveyors representing all the major operators and the Cinema Exhibitors’ Association. Agreement was reached some time after compilation.

For “traditional” and small multi-screen cinemas separate valuation scale were based on a percentage of gross receipts.

For multiplexes the scale referenced the level of gross receipts per seat and applied an appropriate RV per seat.

The level of gross receipts was that determined to be the Fair Maintainable Trade (FMT).

Accordingly, there were three different valuation scales to cover the various types of cinema.

For 2017 the scheme for all cinemas is based on a percentage of the gross receipts at the FMT level. This provides greater flexibility to reflect the varying trading performances and property characteristics that present themselves across the sector.

There are two scales, one for “traditional” cinemas and the other covering both multiplexes and small multi-screen cinemas. Previously the level of gross receipts per seat was referenced in determining the scale position of the subject cinema. For 2017 purely the box office income per seat is used as the performance indicator. With many cinemas now achieving a significant proportion of their receipts from “food & beverage” sales this enables a proper reflection of the impact of this upon relative profitability.

In respect of First Generation Multiplex Cinemas (those constructed between 1 January 1985 and 31 December 1993) the 2010 valuation scheme recognised that this group of cinemas is generally less efficient due to age and design and thereby warranted an end allowance. It is also the case that the majority of these are in out-of-town locations (e.g. on leisure and retail parks) and were increasingly losing customer share to new modern cinemas in more accessible and favoured town centre locations. This trend continues, but with the change in the structure of the scales it is now considered that all the disadvantages (locational and physical) are inherently reflected through the level of gross receipts and the respective level of box office income per seat.

3. Ratepayer Discussions

Contact has been made with the leading rating surveyors for the industry. Discussions will be ongoing in the period prior to compilation with a view to exploring the possibility of securing agreement on the scheme before that date.

4. Valuation Scheme

For all cinemas the initial consideration is to determine fair maintainable trade (FMT) i.e. the gross receipts from all sources exclusive of VAT, as at the antecedent valuation date (AVD), 1 April 2015. Valuation scales based on a percentage of gross receipts and derived from an analysis of the available evidence have been produced. The valuation scales are set out in Appendix 1.

4.1 Fair Maintainable Trade

Admissions and gross receipts vary from year to year for a number of reasons, not least being the desirability of the films on offer for public viewing. As a consequence, the actual gross receipts at AVD may not provide a true reflection of fair maintainable trade on a year-to-year basis. To overcome this difficulty, and to reflect the particular market conditions prevailing between 2012 and 2014, it is recommended that fair maintainable trade at AVD is determined on the following basis:

4.1.1 Admissions

The trend of admission numbers over the 3 trading years prior to AVD should be considered. A judgement should be made if any new openings have not fully impacted on the subject’s attendances by the end of the most recent year.

The Dodona report advises of the following trend for UK cinemas as a whole:

Year

2011

2012

2013

2014

Admissions per screen

 

45,543

45,192

42,808

40,292

Trend - year to year

-1.22%

-0.77%

-5.27%

-5.88%

Trend - cumulative from 2010

-1.22%

-1.98%

-7.15%

-12.61%

Unless there are exceptional circumstances that do not fit this pattern in very general terms the 2014 figure should be adopted with an addition of 3% to reflect the expectation of an improved year in 2015.

4.1.2 Spend per Head

The year end 2014 figure of spend per head should be applied to the admission figure arrived at above to derive the FMT. All the major operators have either a December or November year end. The typical effect here is to uplift 2014 Gross Receipts by 3%. If an independent operator presents turnover for an early 2015 year end that figure should be utilised without adjustment.

4.1.3 Box Office Income

The proportion that Box office Income (BOI) represents of Total Income shown by the 2014 year end should be applied to the FMT as calculated from 4.1.1 and 4.1.2 to establish an indicative total BOI. The Box Office Income per seat is used as a reference point to determine where in the percentage to RV range, at any particular level of FMT, the subject cinema should be valued. If inadequate trading information is available a 65% proportion should be applied in the first instance.

4.2 Adjustments

4.2.1 Multi-level Multiplex Cinemas

An end adjustment will be appropriate for multiplex cinemas that are constructed with auditoria and/or other related facilities on more than one main floor. This is to reflect significantly higher working expenses incurred in such cases. A main floor is either a floor containing the main box office and principal retailing facilities or a floor affording direct access to one or more screens. A floor level that primarily serves as an entrance/exit to other floors, notwithstanding the existence of limited retail facilities, will not be regarded as a main floor, nor would a floor comprising only a small café or kiosk.

End adjustment for Auditoria and/or other related facilities:

on two main floors - 5% of total RV

on three main floors or more - 7.5% of total RV

An example of this is Cineworld (ex UGC), Mary Ann Street, Cardiff with a 7.5% end allowance, having 5 levels in total and screens on 3 levels.

Another example is Odeon at Kingston with the main box office, retail, café bar and concessions facilities on one floor and screens on two entirely separate floor levels with a 7.5% end allowance.

4.2.2 Film Hire

Film hire charges are now normally in the region of 40% to 50% of box office receipts.

Disproportionately high film hire charges are unlikely to be encountered other than in small traditional cinemas where first run films are hired in circumstances where admissions are relatively low.

Where the film hire charges for any particular cinema fall significantly above this, the box office receipts may need to be adjusted. This is to counter the argument that high box office receipts have been “bought” by showing a higher percentage of first run films.

4.3 Application of the Scheme

Whilst it is intended that this scheme should enable the assessments of all cinemas to be correctly determined, the opportunity for properties to be valued outside its terms is not precluded where exceptional circumstances would otherwise make its application inappropriate, however, the cinema expert in the National Specialists Unit should be consulted using nsumailbox@voa.gsi.gov.uk.

Practice Note 1: 2017 : Cinemas : Appendix A

Revaluation 2017 – Valuation scales

Multiplex and Small Multi-screen Cinemas – Scale A

Gross Receipts/FMT

(from all sources) £

Percentage of GR/FMT

(to be taken as RV) %

 

Min

Max

0

4.00

6.00

1,250,000

6.00

8.00

1,875,000

6.75

8.75

2,500,000

7.50

9.50

3,125,000

8.50

10.50

3,750,000 (and above)

10.00

12.00

Interpolate between scale figures on a straight-line basis

Guidance on application of percentage range at given GRAS/FMT for Multiplex/Small Multi-screen Cinemas (Scale A)

Income Per Seat Range

Proportion of % Range

 

Up to £500

0%

£501

£800

10%

£801

£1,100

20%

£1,101

£1,400

30%

£1,401

£1,700

40%

£1,701

£2,000

50%

£2,001

£2,300

60%

£2,301

£2,600

70%

£2,601

£2,900

80%

£2,901

£3,200

90%

£3,201 and above

 

100%

**Traditional Cinemas – Scale B **

Gross Receipts/FMT

(from all sources) £

Percentage of GR/FMT

(to be taken as RV) %

 

Min

Max

0

2.50

4.50

1,250,000

4.50

6.50

1,875,000

5.25

7.25

2,500,000

6.00

8.00

3,125,000

7.00

9.00

3,750,000 (and above)

8.00

10.50

interpolate between scale figures on a straight-line basis

Guidance on application of percentage range at given GRAS for Traditional Cinemas (Scale B)

Income Per Seat Range

Proportion of % Range

 

Up to £400

0%

£401

£700

10%

£701

£1,000

20%

£1,001

£1,300

30%

£1,301

£1,600

40%

£1,601

£1,900

50%

£1,901

£2,200

60%

£2,201

£2,500

70%

£2,501

£2,800

80%

£2,801

£3,100

90%

£3,101 and above

 

100%

Practice Note 1: 2010 : Cinemas : Appendix A

REVALUATION 2010 – VALUATION SCALES

Multiplex Cinemas – Scale A

Valuation Scale

(£ per seat)

RV

(£ per seat)

Gross Receipts

(£ per seat)

RV

(£ per seat)

600

70

2,075

249

700

74

2,200

264

800

78

2,300

272.50

925

83

2,400

280

1050

88

2,525

285

1150

98

2,650

290

1,250

115

2,750

295

1,375

136.25

2,875

300

1,500

157.50

3,000

305

1,600

174.50

3,100

310

1,725

195.75

3,225

315

1,850

217

3,350 (and above)

320 (max)

1,950

234

   
  • interpolate between scale figures on a straight-line basis

Traditional Cinemas – Scale B

Valuation Scale

Gross Receipts

(from all sources)

£

Percentage of Gross Receipts

(to be taken as RV)

%
 

Min

Max

1,000,000 (and below)

3.25

4.50

1,500,000

4.25

6.00

2,000,000

5.50

7.50

2,500,000

7.00

9.00

3,000,000

8.00

10.50

3,500,000 (and above)

8.00

10.50

Guidance on application of percentage range at given GRAS for Traditional Cinemas (Scale B)

and also for small multi-screen cinemas (Scale C).

1) Where FMT £1,000,000 and below

Box Office Income Per Seat Range

Proportion of % GR

 

Up to £200

0%

£201

£300

10%

£301

£400

20%

£401

£500

30%

£501

£700

40%

£701

£900

50%

£901

£1,100

60%

£1,101

£1,300

70%

£1,301

£1,500

80%

£1,501

£2,000

90%

£2,001 and above

 

100%

2) Where FMT between £1,000,001 and £2,000,000

Income Per Seat Range

Proportion of % GR

 

Up to £400

0%

£401

£600

10%

£601

£800

20%

£801

£1,000

30%

£1,001

£1,200

40%

£1,201

£1,500

50%

£1,501

£1,800

60%

£1,801

£2,000

70%

£2,001

£2,200

80%

£2,201

£2,400

90%

£2,401 and above

 

100%

3) Where FMT above £2,000,000

Box Office Income Per Seat Range

Proportion of % GR

 

Up to £700

0%

£701

£1,000

10%

£1,001

£1,300

20%

£1,301

£1,600

30%

£1,601

£1,900

40%

£1,901

£2,200

50%

£2,201

£2,500

60%

£2,501

£2,800

70%

£2,801

£3,100

80%

£3,101

£3,400

90%

£3,401 and above

 

100%

Small multi-screen cinemas : Scale C

(as defined in paragraph 6 of the 2010 Practice Note)

Gross Receipts £ (all sources) excl VAT

Percentage of Gross Receipts (to be taken to RV)

Min %

Max %

750,000 (and below)

6.50

7.50

1,000,000

7.00

8.00

1,500,000

7.75

8.75

2,000,000

8.50

9.50

2,500,000

9.50

10.50

3,000,000 (and above)

11.00

12.00

interpolate between scale figures on a straight-line basis

See Scale B above for guidance on application of percentage range at given GRAS.