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

Section 350: docks and harbours

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

1. Introduction

This section deals with the assessment of both statutory and non-statutory dock and harbour undertakings, other than those specialised types of undertaking (e.g. marinas and shipyards) which have their own sections in this manual.

Certain statutory docks and harbour undertakings are subject to Regulations made under 64(3) of the Local Government Finance Act 1988 (the 1988 Act) which determine the extent of the dock hereditament. A proportion of these undertakings are subject to Orders made by the Secretary of State under the provisions of Schedule 6, paragraph 3(1) of the 1988 Act. These Orders provide for the rateable values of the undertakings to which they apply to be determined by special statutory provisions. The Orders applied to the 1990,1995 and 2000 Rating Lists. In the case of the 2005 Rating List no Order is expected to be made to prescribe the rateable value by Formula.

For the 1990, 1995 and 2000 Rating Lists those statutory undertakings falling outside the scope of the Rateable Value Orders, together with all non-statutory undertakings, are assessed by conventional valuation methods.

All Docks and Harbours are to be valued by conventional valuation methods for the 2005 Rating List.

2. General Valuation Approaches

2.1 Statutory Docks & Harbours

Statutory docks and harbours were formerly valued as public utility undertakings on the profits basis although, even in the last century, the method presented problems. Decisions of the courts that certain types of income should be excluded from gross receipts, and the fact that profit was not always the prime motive of the undertakers, meant that the profits method could result in unrealistic or nil valuations and when this happened it was the practice to negotiate a “compromise” assessment.

This state of affairs was challenged in 1961 in the Court of Appeal in the case of British Transport Commission v Hingley (VO) (1961 RVR 150). It was held that a statutory dock or harbour undertaking must be valued as a matter of law on the profits basis and that the fact that the basis produced a nil assessment was not a special circumstance justifying the use of a different mode of valuation. Even so, in the 1963 valuation lists there were some instances of “voluntary” assessments being agreed despite a nil answer being produced by a valuation on the profits basis.

Because of the aspects pointed out above, provisions were included in the Rating and Valuation Act 1961 and later re-enacted in s35 of the General Rate Act 1967 allowing the Minister, after consultation with parties concerned, to make an Order for determining the rateable value of statutory docks and harbours. No generally acceptable formula evolved until 1971.

Subject to transitional provisions to cushion the impact of an abrupt change, the Docks and Harbours (Valuation) Order 1971 (subsequently amended by the 1973 and 1976 Orders) provided for the determination, by reference to a fixed percentage of “relevant receipts”, of the rateable values of certain statutory dock or harbour undertakings which were on operational land and occupied by the persons authorised by statute to carry on the undertaking concerned.

Under para 3 of Schedule 6 LGFA 1988 the Secretary of State made orders prescribing the valuation by formula of certain statutory docks and harbours for the purposes of Rating Lists prior to the 2005 List- see Practice Notes. He has also prescribed the unit of assessment in Reg 5 of the Non-Domestic Rating (Miscellaneous Provisions) (No 2) Regulations (SI 1989/2303), referred to below as “Regulation 5”.

2.2 Non-Statutory Docks and Harbours

Non-statutory docks and harbours have not been subject to the obligatory use of the profits basis, although a profits basis has and remains the most readily available method of valuation for many of them. No formula has been set for valuation of these hereditaments which, together with those statutory docks and harbours which are excluded from formula-rating in the 1990 , 1995 and 2000 Lists must be valued conventionally. See the Practice Note for Non-Formula Docks and Harbours, and also where appropriate the following sections of the Rating Manual should be consulted:

400 Floating Hereditaments
640 Marinas
670 Moorings
790 Pleasure Piers
910 Shipbuilding Yards
911 Ship Repairing Yards
1100 Tolls, Ferries & Bridges

3. Reg 5 of The Non-Domestic Rating (Miscellaneous Provisions) (No 2) Regulations - Application and Interpretation

3.1 General

This Regulation defines the hereditament for certain statutory dock and harbour undertakings, effectively aggregating what would otherwise be separate hereditaments.

3.2 The hereditament

“A hereditament is anything which, by virtue of the definition of hereditament in s.115(1) of the 1967 Act, would have been a hereditament for the purposes of that Act had this Act not been passed” (s.64(1) LGFA 1988).

“Hereditament” means property which is or may become liable to a rate, being a unit of property which is, or would fall to be, shown as a separate item in the valuation list (s.115(1) GRA 1967).

The Secretary of State may make regulations providing that in prescribed cases -

a. anything which would (apart from the regulations) be one hereditament shall be treated as more than one hereditament;

b. anything which would (apart from the regulations) be more than one hereditament shall be treated as one hereditament (s.64(3) LGFA 1988).

Regulation 5 is made in exercise of the powers conferred by s.64(3). Where an undertaker occupies any hereditament which contains both operational and non-operational land, then the part or parts situated on the operational land shall be treated as a hereditament (“the new hereditament”) separate from the remainder (Reg 5(3)).

Where more than one “new hereditament” is on the relevant day occupied by the same undertakers, those hereditaments shall be treated as one hereditament (Reg 5(4)).

Those parts (the remainder) situated on non-operational land should be shown as separate hereditaments in the list, as should any hereditaments in the occupation of the undertakers which consist exclusively of non-operational land.

For the definition of “Operational Land” see section 9.9 of RM 2:12. Operational Land.

3.3 Location of the hereditament

Regulation 5 also provides that where “new hereditaments” are located in the areas of more than one charging authority, the aggregated hereditament is to be regarded as being situate in the area of the charging authority which contains, on the relevant day, the larger or largest hereditament in terms of area, measured at ground level. Once determined, this location remains fixed for the life of the rating list, even if the number and relative sizes of the individual “new hereditaments” change.

Accordingly, there is no longer any need to apportion the assessment between charging areas, nor to seek a breakdown of income between charging areas to determine the location of the hereditament.

3.4 Meaning of “Dock or Harbour”

The hereditament must be occupied by a “dock or harbour undertaking”. The Regulation does not define a dock or harbour but according to the Harbours Act 1964 a harbour:

“except where used with reference to a local lighthouse authority, means any harbour, whether natural or artificial and any port, haven, estuary, tidal or other river or inland waterway navigated by sea-going ships and includes a dock, a wharf…… and ……. has the meaning assigned to it by s.742 of the Merchant Shipping Act 1894”.

The s.742 definition is:

“to include harbours properly so called, whether natural or artificial, estuaries, navigable rivers, piers, jetties and other works in or at which ships can obtain shelter or ship and unship goods”.

“Statutory harbour undertaking” is defined in the Statutory Harbour Undertakings (Form of Accounts etc.) Regulations 1969 (“the 1969 Regulations”) as:

“an undertaking or part of an undertaking the activities whereof consist wholly or mainly in the improvement, maintenance or management of a harbour in the exercise of powers vested under the Harbours Act 1964, by another Act or by an Order or other instrument (except a provisional Order) in the person by whom the undertaking is carried on (other than river works powers as defined in s.57 of the Harbours Act 1964), in the performance of duties so vested in him (other than river works duties as so defined) or in the exercise and performance of powers so vested in him (other than river works powers as so defined) and duties so vested in him (other than river works duties as so defined)”.

3.5 Unusual statutory undertakings

The definitions of “dock”, “harbour” and “statutory harbour undertakings” set out at 3.4 are extremely wide. The statutes setting up such undertakings are often local private Acts, many of which are of great antiquity. As a consequence statutory undertakings can range in scale from undeveloped beaches and silted-up river ports to the largest modern dock complexes. Many pleasure piers were built under authority of statutes which bring them within the definition.

Most of the more unusual undertakings will however be removed from the scope of the Regulation because there will be no operational land occupied by the undertaking to which the Regulation can be applied; in some cases, the undertaking may well no longer be carrying out any of the functions described in the 1969 regulations, or be altogether defunct. The very small undertakings which can satisfy these criteria will in any event be excluded by the relevant income threshold (3.6(b) below).

Should representations be made to a VO that a less-than-obvious hereditament ought to be subject to the Regulation the circumstances should be reported to CEO (Rating).

3.6 Exclusions

The Regulation does not apply to any of the cases referred to in sub-paragraphs (a) to (f) below. Hereditaments excluded from the Regulation should be valued in a similar manner to non-statutory undertakings (see Practice Note 2).

a. Non-statutory dock or harbour undertakings; i.e. those which are not carried on under authority conferred by or under any enactment.

b. Statutory docks or harbour undertakings with a relevant income of £50,000 or less in any accounting period of twelve months which ended between 31 December 1987 and 31 March 1988, or if there was no such accounting period, in the twelve months ending on 31 March 1988 (Article 3(2)(a)). Note that once exclusion or otherwise is established upon this ground, the undertaking will remain outside or within the provisions of the Regulation, as the case may be, irrespective of changes in relevant income in subsequent years.

c. Where the persons carrying on the undertaking use the dock and harbour exclusively or mainly for the purpose of bringing or receiving goods of one or more of the following types:

(i) goods to be used by them for the manufacture of other goods or the production of electricity

(ii) goods they have produced or manufactured

(iii) goods that they are to sell

(iv) goods manufactured or produced by an associated body, and to be sold by that body. a. Any hereditament occupied by persons carrying on the undertaking which does not consist exclusively of operational land. This falls to be assessed separately, irrespective of its treatment for the purposes of calculating the relevant income of the undertaking.

Article 5(5) defines operational land as land which is used for the purpose of the carrying on of the undertaking, not being land which, in respect of its nature and situation, is comparable rather with land in general than with land which is used for the purpose of carrying on of statutory undertakings (within the meaning of the Town & Country Planning Act 1971).

It follows from this definition that any disagreement concerning whether particular premises are situated on operational land of the undertaking will normally arise from the action of the VO in assessing such premises as a separate hereditament. The one exception to this is in the unlikely event of the ratepayers maintaining that there is no operational land to which the Order applies.

In a departure from the procedures which applied to Valuation Lists made under the General Rate Act 1967, any dispute concerning a question as to whether particular premises are situated on operational land is to be determined by the VT. Detailed guidance on the identification of operational land is contained in Practice Note 1 to RM 2:12. Operational Land

b. Any part of the dock or harbour undertaking that is occupied by some other person (including a subsidiary of the statutory undertaker) under the terms of a letting or licence for more than a transient period, and where the occupation is exclusive for the purpose of the occupier, should be the subject of a separate assessment. Whether or not there is a separate occupation is a matter to be decided on the individual facts of the case, and if further guidance is required reference should be made to Westminster City Council v Southern Railway Co (1936) AC 511 HL for the principles involved. Where such a hereditament, situated on land which could qualify as operational land, becomes empty, it should not automatically be deleted from the rating list. If it is the intention of the undertakers to re-let the hereditament in due course, or even if they have no fixed intention as to what to do with it, it should not be deleted from the rating list.

c. New undertakings, which would otherwise qualify to be assessed under the Regulation, will be excluded under (b) since there will be no relevant income for the accounting period in question. It therefore follows that they will not come within the scope of the Regulation unless the Act setting up the undertaking makes specific provision for the Regulation to apply. CEO (Rating) will provide ad hoc advice in these circumstances.

3.7 Definitions

The following definitions are provided in Reg 5(5). “The relevant day” means a day on which a local rating list must be compiled or, where new hereditament would first fall to be shown in such a list for any day later than such a day, the day on which it would first so fall to be shown.

“associated body” in relation to any undertakers, means:

a. a body corporate in relation to which those undertakers directly or indirectly own or control not less than 51 per cent of its issued share capital; or

b. a body corporate in relation to which those undertakers and any other associated body or bodies of theirs directly or indirectly own or control not less than 51 per cent of its issued share capital.

“accounting period” in relation to an undertaking means the period by reference to which the accounts relating to the undertaking are compiled.

“relevant income” in relation to a period means all income by way of revenue included or falling to be included in the revenue or profit and loss account of the undertaking for the period, whether derived from the operations carried on under the authority whether statutory or otherwise, other than –

a. income in respect of pilotage;

b. income from –

(i) investments required to be shown in the accounts of the undertaking (other than investments in subsidiary companies);

(ii) loans or deposits;

(iii) rent or other payments receivable in consideration of the grant of permission for occupation or use of any property of the undertaking, or right over such property, which is or forms part of a hereditament which is shown on a local rating list;

a. any sum receivable in respect of the disposal of land;

“subsidiary” has the meaning given by section 736 of the Companies Act 1985.

In arriving at the relevant income, VOs should bear in mind the following:

Since income from investments in subsidiary companies is excluded from the wider exclusion, such income does form part of the relevant income.

Accounts of undertakings will not normally distinguish between rents and other payments from separately assessed hereditaments and other rents; additional information will be required for that purpose. For this purpose rents to be excluded are those in respect of hereditaments which were the subject of separate entries in the Valuation or local rating lists on any day during the accounting period in question.

Rents or other payments received in respect of hereditaments not entered in local rating lists because either:

a. they are Crown occupations (eg Customs & Excise); or

b. they are otherwise exempt from rating (eg dwellings, but not those included in a composite hereditament); or

c. they are a class of hereditament falling within the Central Rating Lists (eg electricity sub-stations, cross-country pipelines &c.) should be included in the relevant income.

Income received from the undertaker’s own occupation of separately assessed non-operational land (eg car parking charges) is considered to lie outside the scope of the exclusion at (b)(iii) above, and should be treated as relevant income.

“year”, unless the context otherwise requires, means a chargeable financial year, and in relation to any year “relevant preceding year” means the year ending immediately before the year in question.

4. The Formula

See Practice Notes for relevant Rating Lists for application of and exclusions from Formula. There is no Order for the prescription of a rateable value by Formula for the purpose of the 2005 Rating List.

5. Appeals

5.1 Hereditaments valued by Formula

By virtue of Regulation 9(8) of the Non-Domestic Rating (Alteration of Lists and Appeals) Regulations 1990 the ratepayers or an interested person in relation to a hereditament whose value is determined by Formula were entitled to make a proposal for an alteration in respect of that hereditament at any time. Such proposals were therefore not restricted to the circumstances set out at Regulations 9(1)-(7). No such special provisions are made in the Non-Domestic Rating (Alteration of Lists and Appeals) Regulations 1993, and proposals made on or after 1 April 1993 must therefore conform to the normal rules to be valid.

5.2 Other hereditaments

Any proposal made at any time in respect of any other dock or harbour hereditament will be subject to the normal rules concerning validity of proposals, including any proposal whose grounds include a contention that Formula-Rating ought to apply to the hereditament.

5.3 Procedure

Once it has been decided that a proposal has been validly made, then it should be dealt with by normal RCC procedures.

Practice Note 3: 2010

1. Preliminary.

This practice note applies to all Docks and Harbours. In common with the 2005 Rating Lists, no Order has been made for the purposes of the 2010 Rating List for the prescription of rateable values by formula. Conventional valuation methods should be applied for all Docks and Harbours in the 2010 Rating List.

Whilst no Order to prescribe rateable values by formula has been made the legal distinctions governing the extent of the hereditament still apply.

a. Statutory Docks and Harbours that satisfy the criteria in Regulation 5 of The Non –Domestic Rating (Miscellaneous Provisions)(No 2) Regulations 1989. SCat CODE 434 NX and 433 FD

b. Statutory Docks and Harbours that do not satisfy the criteria in “Regulation 5”. SCat Code 435 NX.

c. Non-Statutory Docks and Harbours of any description (i.e. those which are not undertakings carried on under authority conferred by or under any enactment). SCat Code 089 NX.

2. Identification of the Hereditament.

2.1 Introduction

In category (a) above the hereditament remains prescribed in accordance with LGFA 88 sec 64(3) and “Regulation 5”.

In category (b) and (c) the normal rules of identifying a hereditament apply.

2.2 Identification of the hereditament-

Premises occupied by Statutory Authorities in Docks and Harbours.

Statutory Authorities may often be found within Docks and Harbours. Examples of Statutory Authorities include H M Revenue & Customs, Port Health Authorities, Police, and departments within DEFRA.

Where a Statute deems the presence of the Statutory Authority to be essential for the operation of the Dock or Harbour then there will be a requirement on the owner of the facility to provide accommodation. The Act may require the accommodation to be provided free of charge.

These occupations will form separate hereditaments under the conventional principles of rating, (actual, beneficial, exclusive and permanent) - see John Laing and Son Limited v Kingswood Assessment Committee [1949] 1 All ER 224 and Atlantic Steam Navigation Company Ltd v Mondon (VO) 1983 RA 55

When ascertaining the extent of the separate rateable occupation reference should be made to Holywell v Halkyn [1895]AC 177, 125: - “The question whether a person is an occupier or not within the rating law is a question of fact, and does not depend upon legal title. The person legally possessed may not occupy. On the other hand, a person may be occupier either with or without the consent of the owner.”

Contentions that because the accommodation is provided free of charge it is not separately rateable should not be accepted. The four tests of rateable occupation are capable of satisfaction without the need for a specific payment of rent.

It may also be contended that paramount control of these premises resides with the owner of the Dock or Harbour rather than the occupying Statutory Authority. Recourse should again be had to the four tenets of rateable occupation. It is likely that the Statutory Authority will be in paramount control for their statutory purpose and that all four tenets of rateable occupation are therefore satisfied, demonstrating a separate hereditament.

The rateable occupation of the Statutory Authority should be identified as any other Dock or Harbour users such as warehouses let to shipping lines. The premises should be valued under the normal considerations of the hereditament and hypothetical tenancy, having regard to the principles of vacant and to let within the appropriate mode or category.

Where the premises includes both buildings and land careful regard should be made to the application of the four tenets of occupation in ascertaining extent of the hereditament.

Where the rent paid on the premises is restricted by Statute this should not be taken as a material factor that influences the ascertainment of the hypothetical rent. See Orange PCS Ltd v Bradford (VO) [2003] RA 141.

2.3 Occupation by other parties

In order to determine the extent of the undertaker’s hereditament, it is necessary to determine which areas have been so let out as to constitute separate hereditaments in the occupation of other parties. Where another party is in actual occupation of land or buildings, it may in the context of dock/quayside property normally be assumed that the occupation is beneficial. But before it can be concluded that rateable occupation has been relinquished by the undertakers, it is necessary to discover whether: - a. the occupation by tenants/licensees is not too transient. There is no judicial authority which establishes a minimum length of rateable occupation in all contexts, but in practice GVOs are advised to regard quayside/dockside occupations which are anticipated to last for less than 12 months as not justifying separate hereditaments; in such cases rateable occupation should be considered to remain with the landlords. Equally, several operators may have a right to use port land at particular times of the day without one single operator having paramount control. In such cases the landlord will again be in rateable occupation. b. the occupation by tenants/licensees is exclusive. Within some ports there is an arrangement between the undertakers and their tenants/licensees that the latter’s occupation can be disturbed at any time if the undertakers require the relevant land or buildings for the urgent need of the business of the port. Where such disturbance takes place, caseworkers will need to decide whether this interference with the tenant’s enjoyment of the land is such that they are no longer in rateable occupation. Where the disturbance is rare and has little impact on the tenant’s operations then it should not affect rateable occupation by that tenant.

2.4 Premises that are vacant and to let

Within some ports particular premises, for example warehouses, may habitually be so let out as to give rise to separate rateable occupation. When an occupier vacates, leaving such premises vacant, and there is a clear intention on the part of the undertaker to re-let the premises on similar terms, then they should continue to be treated as a separate rateable hereditament, rather than being allowed to “fall back” into the dock hereditament.

The other difficulty likely to arise relates to occupations by subsidiaries of the landlord. Two principles must be borne in mind in such cases:-

(i) a registered company has a separate legal identity, and it cannot be automatically concluded that it is incapable of rateably occupying land on its own account merely because it is 100% owned by its parent; but

(ii) if the use which a company makes of its property is under the close direction of its parent, it may be correct to say that exclusive occupation lies with the parent; this conclusion must be justified on the facts of any particular case. Caseworkers should consider whether the subsidiary is actually running and making operational day-to-day decisions at the property. They should have regard to matters such as the presence of management and operational staff employed by the subsidiary.

Land is only rateable if it falls within the boundary of a Billing Authority. Thus land (including land covered by water) beyond these limits, although beneficially occupied by the undertaker of a dock or harbour will not be rateable and cannot therefore form part of any hereditament. Land below low water mark usually falls outside these boundaries, but there are a number of exceptions, especially in river estuaries. OS plans normally record exact boundaries, but do not necessarily show recent revisions.

2.5 Identification of the Hereditament - Statutory Docks and Harbours satisfying “Regulation 5”.

In category (a), undertakings remain subject to the provisions of Regulation 5 of the Non-Domestic Rating (Miscellaneous Provisions) (No 2) Regulations (SI 1989/2303). The effect of this provision is to create an “artificial” aggregated hereditament which will include all the qualifying lands and buildings of the undertaker so far as they lie within the limits of rateability. It should be noted that the aggregated hereditament cannot include any non-operational land (see Rating Manual section 6 part 3 - section 350), and such land (and buildings thereon) must be separately assessed. It should also be noted that the GVO has no discretion under the Non-Domestic Rating (Multiple Moorings) Regulations 1992 to merge let-out moorings in the aggregated hereditament for a Category (a) undertaking. Category (a) undertakings occupying land bisected by a Billing Authority Boundary are subject to the special provisions of Regulation 5(4); instead of allocating the aggregated hereditament to a particular Rating List on a value-based judgement, the hereditament is to be entered into the List for the Authority in which the largest area lies (measured at ground level).

It frequently happens that a hereditament, situate on land which could qualify as operational land, becomes empty. Such a hereditament should not automatically be deleted from the rating list or merged with the port assessment. If it is the intention of the undertakers to re-let the hereditament in due course, or even if they have no fixed intention as to what to do with it, it should not be removed from the rating list.

2.6 Identification of the Hereditament- Non Statutory Ports and Statutory Ports not meeting criteria in “ Regulation 5”.

In category (b) and (c) undertakings should be regarded as comprising hereditament(s) identified in accordance with normal rating principles. Land which on this basis forms a part of a dock hereditament, but which is non-operational should not be excluded. In some cases the operation of normal principles may result in the occupations of the undertakers falling into several different hereditaments; these should not be aggregated. The only permitted aggregation is where what would otherwise constitute a separate hereditament is bisected by a Billing Authority boundary; in this instance normal rules apply and the GVO(s) must establish where the greatest value lies. Where the occupier of an undertaking lets out moorings within the hereditament so that all the conditions of The Non-Domestic Rating (Multiple Moorings) Regulations 1992 (SI 1992/557) apply, (see Rating Manual section 6 part 3 - section - 670:5.3), the GVO may treat those moorings as in the occupation of the undertaker and comprised in the undertaker’s hereditament.

3. Coordination between the categories.

Coordination between the MV, URT, SRUs, SVU and Group Valuation Offices should continue where there may be implications beyond the particular Docks or Harbour. There is a need to ensure that there is consistency in the level of value and approach for ports and occupations within ports.

4. Valuation Approach.

4.1 Rentals

There are no known cases where the whole or even a substantial part of a port are rented at arm’s length but should this arise and if the rent includes the fundus of the harbour as far as the limits of rateability, and was fixed reasonably close to the AVD, it may provide guidance.

Undertakings, which are wholly or mainly ship repair yards are to be valued on a rental basis (see Rating Manual section 6 part 3 - section - 911).

4.2 Contractor’s Basis

There are practical difficulties in costing civil engineering features which vary widely between different ports according to their exposure to weather. But the basis is, in most cases, unsuitable for more fundamental reasons in that few ports have been designed to meet modern requirements, their present form being dictated by the past and incorporating features which although costly, do not contribute towards the value of the hereditament. There is also a difficulty in that this valuation basis provides no guidance as to the value of land. It is therefore a method best suited to hereditaments which are wholly new developments.

It is also the method best adopted for those docks and harbours which wholly or mainly constitutes shipbuilding yards (but not ship repair yards). Any previously formula-rated docks and harbours which appear to the GVO to fall into this category should be notified to CEO (Rating), together with a brief description of the hereditament, and of the uses to which it is put, and a plan.

4.3 Receipts & Expenditure (“Profits”) Basis

This method is likely to be most widely used for statutory ports where there is a commercial landside operation, since other bases of valuation are not likely to be available in most cases, and because (with few exceptions) most ports are unique in terms of location, this is the only means of determining the value of the land on which they stand. Further advice on implementation of this basis of valuation is given below in para 7.

4.4 Comparative Approach

Comparison between different ports is rarely possible, since there is normally no common unit of comparison.

For statutory ports with limited or no commercial landside operations, an appropriate approach would be by comparison with those types of property similar to those occupied by the undertaking (e.g. harbour master’s office, store, etc). For non- statutory occupations (SCat 089), application of the comparative approach will be the most suitable method although there may be exceptions where the property is unique in terms of size or location (i.e. container terminals).

A basis of analysis has been established for those ports which are wholly or mainly used as marinas, (see Rating Manual section 6 part 3 - section - 640:3). Dry docks may also be compared on a “wetted volume” basis (see Rating Manual section 6 part 3 - section - 911:3.2).

4.5 Ferry Terminals

Ferry Terminals will come within SCat code 089, suffix S, and will be subject to their own PN in due course.

This property is valued using the non-bulk server. The manual can be accessed here.

5. Valuation Application.

The URT is in consultation with the industry regarding a valuation model based on a percentage of turnover for large statutory ports and container terminals. Properties valued by reference to a percentage of turnover may be valued using the non bulk server bespoke spreadsheet (see 2010 NBS - Docks and Harbours Class) using a range of 5-20% of adopted fair maintainable trade.

However, an assessment the subject of an appeal should be valued by reference to a full Receipts and Expenditure method.

6. Application of a Receipts and Expenditure Method.6.1 Accounts Data

Gross Receipts data is in itself insufficient. GVOs should attempt to obtain full accounts for the undertaking. See Rating Manual section 4 part 2. In the event of the undertakers’ failure to supply at least one year’s accounts, CEO (Rating) should be informed.

6.1 Basic Guidance

For basic guidance on this method of valuation see Rating Manual section 4 part 2 - Receipts and Expenditure Method The basic approach is: -

a. gross receipts from all sources, less

b. working expenses, leaving

c. a divisible balance, from which is deducted

d. the tenant’s share, leaving

e. the rental value.

These individual stages are examined below with special reference to their application to ports.

6.2 Gross Receipts

To supplement the advice given in Rating Manual section 4 part 2, GVOs should note that the first paragraph of Rating Manual section 4 part 2 qualifies the statement that income from all sources should be taken into account by excluding income which does not arise directly from occupation of the hereditament. In the case of dock and harbour undertakings the income, which should be deducted from gross receipts, includes the following: -

(i) rents received from hereditaments (land, buildings or moorings) which are separately assessed;

In practice it is very unusual for undertakers to know with any degree of accuracy which of their let-outs are separately assessed and which are not. Consequently it will be necessary to obtain from the undertakers a list of names, addresses and rents payable for the relevant properties, check that the total agrees with the total shown in the accounts (normally in a note to the profit and loss account), and ascertain which of the properties are in fact separately assessed.

(ii) rents received for domestic use of property (dwellings or domestic moorings);

(iii) income received from swinging moorings (exempt under LGFA Sch 5 para 18);

(iv) income received from tolls on vessels navigating waters, which lie outside the hereditament. For this purpose waters, which lie outside the hereditament, should be regarded as constituting:

(a) all areas outside the boundary of any Billing Authority;

(b) all land covered with water in which the undertaker has no legal interest.

Such income is known as “tolls in gross” and is excluded because the right to earn it does not depend on occupation of land (it would still accrue to an undertaker which surrendered occupation of the rateable hereditament to another party). Tolls in gross will only apply to statutory ports and they generally fall into pilotage income and conservancy income.

Pilotage income will be available and should be shown in the accounts. However, most ports do not charge separately for conservancy and, therefore, an estimate should be made having regard to the conservancy expenditure.

(v) Income earned away from the hereditament (e.g. contract dredging at other ports)

6.3 Working Expenses

See Rating Manual section 4 part 2 paragraph 22, but note in addition:

(i) expenditure on pilotage, conservation and dredging beyond the limits of the hereditament (see 7.2(iv) above), should only be allowed if there are no “tolls in gross” received. If such tolls are received and have been deducted from gross receipts, it should be assumed that they will be applied to conservation/dredging beyond the hereditament, and that this burden will not fall on the hypothetical tenant. Such conservation operations are commonly carried out both within and beyond the hereditament, and it may be necessary to apportion the total cost. This can be avoided where the whole of the tolls/dues are applied to dredging (and not to maintenance of civil engineering features and provision of on-shore services); in such cases it is recommended that GVOs deduct the total toll income from gross receipts, but also exclude the total cost of dredging from working expenses.

(ii) expenditure on capital items such as plant and machinery or chattels should be assumed to be covered in depreciation (see below)

(iii) although maintenance of the hereditament is an allowable working expense, special attention needs to be given where the maintenance expenses relating to civil engineering features such as moles, jetties and quays are very considerable, especially where they appear to eliminate any profit. Expenditure on works, which constitute alterations and improvements rather than repairs, should be excluded from working expenses. Where “tolls in gross” are received and applied in part to repairing civil engineering features, it may be appropriate to eliminate such repairs from working expenditure in whole or in part, and where their elimination makes a considerable difference to final valuation the advice of CEO (Rating) should be sought.

Care needs to be taken in selecting an appropriate figure to allow for dredging. Although at many ports dredging varies little from year to year some ports need to undertake major work every few years. If possible the accounts for several years should be studied to try to arrive at a reasonable allowance under this heading.

(iv) allowance for depreciation should not be made for any part of the hereditament, but is appropriate for all items which the undertaker uses in the business of operating the port and which do not form part of the hereditament. In effect this means that an allowance is made for all non-rateable plant and chattels. Although normally referred to as a depreciation allowance, it should more properly be regarded as an allowance towards eventual replacement. The objective should be to arrive at the sum, which the tenant would set aside in order to acquire replacements when existing items cease to perform satisfactorily. Advice on approaches to this are given in Rating Manual section 4 part 2 paragraph 25. Evidence of the depreciation charge for the non-rateable items may be obtained from the fixed assets notes to the balance sheet which will illustrate the depreciation charge for the year (as opposed to the total depreciation charge) split by categories of assets. As a shortened approach, an allowance of 10% -13% of expenditure before depreciation may be sufficient for tenant’s depreciation.

6.4 The Tenant’s Share

It will not be possible to arrive at a reasoned conclusion without exploring the percentage on tenant’s capital approach (see Rating Manual section 4 part 2 paragraph 30). However, as a shortened method, 6%-9% of turnover should be adopted having regard to the extent of rateable assets at the port and the security of the income.

6.5 Loss making ports

Some ports will operate at a loss and produce a nil on the R & E method of valuation. Such ports still merit a substantive rateable value due to the socio-economic benefit, which they provide to the local community. The hypothetical tenant (most likely a local authority or trust) would pay a rent to secure that benefit. The rateable value on such ports should, most likely, be defended on the comparative or contractors basis of valuation but, as a shortened method, 5% of turnover may provide a rateable value.

7. Entry and Description in Rating List

The description to be used for a hereditament to which this Practice Note relates should include one of the words “dock”, “wharf” or “jetty” (i.e. “Dock Hereditament” or “Office, jetty and premises”) unless it is a marina, mooring(s), shipbuilding or ship repair yard, or a let-out. The property should always be described in accordance with what has actually been included in the valuation.

The table below should assist in deciding which code is appropriate:

Legal Status Prescribed Hereditament? SCat Code PD Code
Non-statutory port No 089 NX
Statutory port No 435 NX
Statutory port Yes 434 or 433 NX or FD

For fuller description of these SCat codes see Section 1, Step (D) (iii) in [R2005 IA 020604 Appendix A - Guide to applying the correct SCat Code (&suffix), Primary Description code (&description) and Rating List Description]

In the absence of formula assessment of Large Statutory Ports, the application of these SCat codes is to be reviewed.

Author – Guy Richardson, Utilities Rating Team

December 2008 (Amended August 2009)

Practice note 1: 2005: Docks and Harbours

1. Preliminary.

This practice note applies to all Docks and Harbours. No Order has been made for the purposes of the 2005 Rating List for the prescription of rateable values by formula. Conventional valuation methods should be applied for all Docks and Harbours in the 2005 Rating List .

Whilst no Order to prescribe rateable values by formula has been made the legal distinctions governing the extent of the hereditament still apply.

(a) Statutory Docks and Harbours that satisfy the criteria in Regulation 5 of The Non –Domestic Rating (Miscellaneous Provisions)(No 2) Regulations 1989. SCAT CODE 434 NX and 433 FD

(b) Statutory Docks and Harbours that do not satisfy the criteria in “Regulation 5”. SCAT Code 435 NX.

(c) Non-Statutory Docks and Harbours of any description (i.e. those which are not undertakings carried on under authority conferred by or under any enactment). SCAT Code 089 NX.

2. Identification of the Hereditament.

2.1 Introduction

In category (a) above the hereditament remains prescribed in accordance with LGFA 88 sec 64(3) and “Regulation 5”.

In category (b) and (c) the normal rules of identifying a hereditament apply.

2.2 Identification of the hereditament-

Premises occupied by Statutory Authorities in Docks and Harbours.

Statutory Authorities may often be found within Docks and Harbours . Examples of Statutory Authorities include H M Revenue & Customs , Port Health Authorities , Police , and departments within DEFRA.

Where a Statute deems the presence of the Statutory Authority to be essential for the operation of the Dock or Harbour then there will be a requirement on the owner of the facility to provide accommodation. The Act may require the accommodation to be provided free of charge.

These occupations will form separate hereditaments under the conventional principles of rating, (actual, beneficial, exclusive and permanent) - see John Laing and Son Limited v Kingswood Assessment Committee [1949] 1 All ER 224 and Atlantic Steam Navigation Company Ltd v Mondon (VO) 1983 RA 55

When ascertaining the extent of the separate rateable occupation reference should be made to Holywell v Halkyn [1985]AC 177 , 125: - “The question whether a person is an occupier or not within the rating law is a question of fact, and does not depend upon legal title. The person legally possessed may not occupy. On the other hand , a person may be occupier either with or without the consent of the owner.”

Contentions that because the accommodation is provided free of charge it is not separately rateable should not be accepted. The four tests of rateable occupation are capable of satisfaction without the need for a specific payment of rent.

It may also be contended that paramount control of these premises resides with the owner of the Dock or Harbour rather than the occupying Statutory Authority. Recourse should again be had to the four tenets of rateable occupation. It is likely that the Statutory Authority will be in paramount control for their statutory purpose and that all four tenets of rateable occupation are therefore satisfied, demonstrating a separate hereditament.

The rateable occupation of the Statutory Authority should be identified as any other Dock or Harbour users such as warehouses let to shipping lines. The premises should be valued under the normal considerations of the hereditament and hypothetical tenancy, having regard to the principles of vacant and to let within the appropriate mode or category.

Where the premises includes both buildings and land careful regard should be made to the application of the four tenets of occupation in ascertaining extent of the hereditament .

Where the rent paid on the premises is restricted by Statute this should not be taken as a material factor that influences the ascertainment of the hypothetical rent. See Orange PCS Ltd v Bradford (VO) [2003] RA 141.

Occupation by other parties

In order to determine the extent of the undertaker’s hereditament, it is necessary to determine which areas have been so let out as to constitute separate hereditaments in the occupation of other parties. Where another party is in actual occupation of land or buildings, it may in the context of dock/quayside property normally be assumed that the occupation is beneficial. But before it can be concluded that rateable occupation has been relinquished by the undertakers, it is necessary to discover whether:-

(a) the occupation by tenants/licensees is not too transient. There is no judicial authority which establishes a minimum length of rateable occupation in all contexts, but in practice GVOs are advised to regard quayside/dockside occupations which are anticipated to last for less than 12 months as not justifying separate hereditaments; in such cases rateable occupation should be considered to remain with the landlords. Equally, several operators may have a right to use port land at particular times of the day without one single operator having paramount control. In such cases the landlord will again be in rateable occupation.

(b) the occupation by tenants/licensees is exclusive. Within some ports there is an arrangement between the undertakers and their tenants/licensees that the latter’s occupation can be disturbed at any time if the undertakers require the relevant land or buildings for the urgent need of the business of the port. Where such disturbance takes place, caseworkers will need to decide whether this interference with the tenant’s enjoyment of the land is such that they are no longer in rateable occupation. Where the disturbance is rare and has little impact on the tenant’s operations then it should not affect rateable occupation by that tenant.

Premises that are vacant and to let

Within some ports particular premises, for example warehouses, may habitually be so let out as to give rise to separate rateable occupation. When an occupier vacates, leaving such premises vacant, and there is a clear intention on the part of the undertaker to re-let the premises on similar terms, then they should continue to be treated as a separate rateable hereditament, rather than being allowed to “fall back” into the dock hereditament by deletion of their separate entry.

The other difficulty likely to arise relates to occupations by subsidiaries of the landlord. Two principles must be borne in mind in such cases:-

(i) a registered company has a separate legal identity, and it cannot be automatically concluded that it is incapable of rateably occupying land on its own account merely because it is 100% owned by its parent; but

(ii) if the use which a company makes of its property is under the close direction of its parent, it may be correct to say that exclusive occupation lies with the parent; this conclusion must be justified on the facts of any particular case. Caseworkers should consider whether the subsidiary is actually running and making operational day-to-day decisions at the property. They should have regard to matters such as the presence of management and operational staff employed by the subsidiary.

Land is only rateable if it falls within the boundary of a Billing Authority. Thus land (including land covered by water) beyond these limits, although beneficially occupied by the undertaker of a dock or harbour will not be rateable and cannot therefore form part of any hereditament. Land below low water mark usually falls outside these boundaries, but there are a number of exceptions, especially in river estuaries. OS plans normally record exact boundaries, but do not necessarily show recent revisions.

2.3 Identification of the Hereditament - Statutory Docks and Harbours satisfying “Regulation 5”.

In category (a) , undertakings remain subject to the provisions of Regulation 5 of the Non-Domestic Rating (Miscellaneous Provisions) (No 2) Regulations (SI 1989/2303). The effect of this provision is to create an “artificial” aggregated hereditament which will include all the qualifying lands and buildings of the undertaker so far as they lie within the limits of rateability. It should be noted that the aggregated hereditament cannot include any non-operational land (see Rating Manual section 6 part 3 - section 350:3.6(d)), and such land (and buildings thereon) must be separately assessed. It should also be noted that the GVO has no discretion under the Non-Domestic Rating (Multiple Moorings) Regulations 1992 to merge let-out moorings in the aggregated hereditament for a Category (a) undertaking. Category (a) undertakings occupying land bisected by a Billing Authority Boundary are subject to the special provisions of Regulation 5(4); instead of allocating the aggregated hereditament to a particular Rating List on a value-based judgement, the hereditament is to be entered into the List for the Authority in which the largest area lies (measured at ground level).

It frequently happens that a hereditament, situate on land which could qualify as operational land, becomes empty. Such a hereditament should not automatically be deleted from the rating list. If it is the intention of the undertakers to re-let the hereditament in due course, or even if they have no fixed intention as to what to do with it, it should not be deleted from the rating list.

2.4 Identification of the Hereditament- Non Statutory Ports and Statutory Ports not meeting criteria in “ Regulation 5”.

In category (b) and (c) undertakings should be regarded as comprising hereditament(s) identified in accordance with normal rating principles. Land which on this basis forms a part of a dock hereditament, but which is non-operational should not be excluded. In some cases the operation of normal principles may result in the occupations of the undertakers falling into several different hereditaments; these should not be aggregated. The only permitted aggregation is where what would otherwise constitute a separate hereditament is bisected by a Billing Authority boundary; in this instance normal rules apply and the GVO(s) must establish where the greatest value lies. Where the occupier of an undertaking lets out moorings within the hereditament so that all the conditions of The Non-Domestic Rating (Multiple Moorings) Regulations 1992 (SI 1992/557) apply, (see Rating Manual section 6 part 3 - section 670:5.3), the GVO may treat those moorings as in the occupation of the undertaker and comprised in the undertaker’s hereditament.

3. Coordination between the categories.

Coordination between the URT, SRUs, SVU and Group Valuation Offices should continue where there may be implications beyond the particular Docks or Harbour.

4. Valuation Approach.

4.1 Background

There are no known cases where the whole or even a substantial part of a port are rented at arm’s length but should this arise and the rent includes the fundus of the harbour as far as the limits of rateability, and was fixed reasonably close to the AVD, it may provide guidance.

Undertakings which are wholly or mainly ship repair yards are to be valued on a rental basis (see Rating Manual section 6 part 3 - section 911).

4.2 Contractor’s Basis

There are practical difficulties in costing civil engineering features which vary widely between different ports according to their exposure to weather. But the basis is, in most cases, unsuitable for more fundamental reasons in that few ports have been designed to meet modern requirements, their present form being dictated by the past and incorporating features which although costly, do not contribute towards the value of the hereditament. There is also a difficulty in that this valuation basis provides no guidance as to the value of land. It is therefore a method best suited to hereditaments which are wholly new developments.

It is also the method best adopted for those docks and harbours which wholly or mainly constitute shipbuilding yards (but not ship repair yards). Any previously formula-rated docks and harbours which appear to the GVO to fall into this category should be notified to CEO (Rating), together with a brief description of the hereditament, and of the uses to which it is put, and a plan.

4.3 Receipts & Expenditure (“Profits”) Basis

This method is likely to be most widely used, since other bases of valuation are not likely to be available in most cases, and because (with few exceptions) most ports are unique in terms of location and this is the only means of determining the value of the land on which they stand. Further advice on implementation of this basis of valuation is given below in para 7.

4.4 Comparative Approach

Comparison between different ports is rarely possible, since there is normally no common unit of comparison. But for those ports which are wholly or mainly used as marinas, a basis of analysis has been established (see Rating Manual section 6 part 3 - section 640:3). Dry docks may also be compared on a “wetted volume” basis (see Rating Manual section 6 part 3 - section 911:3.2).

5. Valuation Application.

The Utilities Rating Team has devised a valuation model based on the receipts and expenditure method. However, an assessment the subject of an appeal should be valued by reference to a full receipts and expenditure method.

6. Application of a Receipts and Expenditure Method.

6.1 Accounts Data

Gross Receipts data is in itself insufficient. GVOs should attempt to obtain full accounts for the undertaking. See Rating Manual section 4 part 3 paragraph 10. In the event of the undertakers’ failure to supply at least one year’s accounts, CEO (Rating) should be informed.

6.2 Basic Guidance

For basic guidance on this method of valuation see RM Section 4: App2. Receipts and Expenditure Method The basic approach is:-

(a) gross receipts from all sources, less

(b) working expenses, leaving

(c) a divisible balance, from which is deducted

(d) the tenant’s share, leaving

(e) the rental value.

These individual stages are examined below with special reference to their application to ports.

6.2 Gross Receipts

To supplement the advice given in Rating Manual section 4 part 3 paragraph 21, GVOs should note that the first paragraph of Rating Manual section 4 part 3 qualifies the statement that income from all sources should be taken into account by excluding income which does not arise directly from occupation of the hereditament. In the case of dock and harbour undertakings the income which should be deducted from gross receipts includes the following:-

(i) rents received from hereditaments (land, buildings or moorings) which are separately assessed;

In practice it is very unusual for undertakers to know with any degree of accuracy which of their let-outs are separately assessed and which are not. Consequently it will be necessary to obtain from the undertakers a list of names, addresses and rents payable for the relevant properties, check that the total agrees with the total shown in the accounts (normally in a note to the profit and loss account), and ascertain which of the properties are in fact separately assessed.

(ii) rents received for domestic use of property (dwellings or domestic moorings);

(iii) income received from swinging moorings (exempt under LGFA Sch 5 para 18);

(iv) income received from tolls on vessels navigating waters which lie outside the hereditament. For this purpose waters which lie outside the hereditament should be regarded as constituting:

(a) all areas outside the boundary of any Billing Authority;

(b) all land covered with water in which the undertaker has no legal interest.

Such income is known as “tolls in gross” and is excluded because the right to earn it does not depend on occupation of land (it would still accrue to an undertaker which surrendered occupation of the rateable hereditament to another party). Tolls in gross will only apply to statutory ports and they generally fall into pilotage income and conservancy income.

Pilotage income will be available and should be shown in the accounts. However, most ports do not charge separately for conservancy and , therefore , an estimate should be made having regard to the conservancy expenditure.

(v) Income earned away from the hereditament (e.g. contract dredging at other ports)

6.3 Working Expenses

See Rating Manual section 4 part 3 paragraph 22, but note in addition:-

(i) expenditure on pilotage, conservation and dredging beyond the limits of the hereditament (see 7.2(iv) above), should only be allowed if there are no “tolls in gross” received. If such tolls are received and have been deducted from gross receipts, it should be assumed that they will be applied to conservation/dredging beyond the hereditament, and that this burden will not fall on the hypothetical tenant. Such conservation operations are commonly carried out both within and beyond the hereditament, and it may be necessary to apportion the total cost. This can be avoided where the whole of the tolls/dues are applied to dredging (and not to maintenance of civil engineering features and provision of on-shore services); in such cases it is recommended that GVOs deduct the total toll income from gross receipts, but also exclude the total cost of dredging from working expenses.

(ii) expenditure on capital items such as plant and machinery or chattels should be assumed to be covered in depreciation (see below)

(iii) although maintenance of the hereditament is an allowable working expense, special attention needs to be given where the maintenance expenses relating to civil engineering features such as moles, jetties and quays are very considerable, especially where they appear to eliminate any profit. Expenditure on works which constitute alterations and improvements rather than repairs should be excluded from working expenses. Where “tolls in gross” are received and applied in part to repairing civil engineering features, it may be appropriate to eliminate such repairs from working expenditure in whole or in part, and where their elimination makes a considerable difference to final valuation the advice of CEO (Rating) should be sought.

Care needs to be taken in selecting an appropriate figure to allow for dredging. Although at many ports dredging varies little from year to year some ports need to undertake major work every few years. If possible the accounts for several years should be studied to try to arrive at a reasonable allowance under this heading.

(iv) allowance for depreciation should not be made for any part of the hereditament, but is appropriate for all items which the undertaker uses in the business of operating the port and which do not form part of the hereditament. In effect this means that an allowance is made for all non-rateable plant and chattels. Although normally referred to as a depreciation allowance, it should more properly be regarded as an allowance towards eventual replacement. The objective should be to arrive at the sum which the tenant would set aside in order to acquire replacements when existing items cease to perform satisfactorily. Advice on approaches to this are given in Rating Manual section 4 part 3 paragraph 25. Evidence of the depreciation charge for the non-rateable items may be obtained from the fixed assets notes to the balance sheet which will illustrate the depreciation charge for the year (as opposed to the total depreciation charge) split by categories of assets. As a shortened approach, an allowance of 10% -13% of expenditure before depreciation may be sufficient for tenant’s depreciation.

6.4 The Tenant’s Share

It will not be possible to arrive at a reasoned conclusion without exploring the percentage on tenant’s capital approach (see Rating Manual section 4 part 3 paragraph 30). However, as a shortened method, 6%-9% of turnover should be adopted having regard to the extent of rateable assets at the port and the security of the income.

6.5 Loss making ports

Some ports will operate at a loss and produce a nil on the R & E method of valuation. Such ports still merit a substantive rateable value due to the socio-economic benefit which they provide to the local community. The hypothetical tenant (most likely a local authority or trust) would pay a rent to secure that benefit. The rateable value on such ports should , most likely , be defended on the contractors basis of valuation but , as a shortened method 5% of turnover may provide a rateable value.

7. Entry and Description in Rating List

The description to be used for a hereditament to which this Practice Note relates should be “Dock Hereditament” unless it is a marina, mooring(s), shipbuilding or ship repair yard, or a let-out, in which case it should be described in accordance with the manner in which it has been valued.

The table below should assist in deciding which code is appropriate:

Legal Status Prescribed Hereditament? Scat Code PD Code
Non-statutory port No 089 NX
Statutory port No 435 NX
Statutory port Yes 434 or 433 NX or FD

Practice Note 2 : 2005 : Docks and Harbours - Ports Review

1. Introduction
1.1 This Rating Manual Practice Note covers the review of Docks and Harbours undertaken consequent on the ending of formula assessment. The 2005 Rating List entries for statutory ports have been compiled using conventional valuation methodology.
1.2 This guidance note seeks to set out the background to the review, its implications for the network and give practical assistance to parts of the network involved in the review and beyond.
2. A Joined-Up VOA
2.1 The range and type of non-domestic property within the perimeters of ports is extensive and responsibility for its valuation falls across Groups and Specialists. A joined-up and collaborative approach between these various units is essential to ensure that everything that should be assessed actually is assessed. Ports and property within their boundaries should be treated in the same way as any other conventional "estate", with the individual bulk class and specialist rating teams taking responsibility for their own classes, but liaising with each other as necessary.
2.2 It is essential that the various rating teams involved in the ports review work together to ensure both timeliness and consistency of approach/outcome across the network. There is a relatively small number of port operators around the country and they need to experience consistent outcomes regardless of where the port is located.
3. Background to the valuation of statutory ports
3.1 There are two drivers for the review; the way statutory ports are valued and identification of the correct unit of assessment.
a. Valuation Prior to the 2005 Rating List the valuation of qualifying statutory docks and harbour undertakings were undertaken by reference to regulations made by the Secretary of State. The Docks and Harbours (Rateable Values) (England) Order 2000 (SI 2000/951), and The Docks and Harbours (Rateable Values) (Wales) Order 2000 (SI 2000/948) as appropriate, provide that the formula does not apply where the relevant income of the dock or harbour undertaking is less than £1,000,000 pa at the 2000 List AVD. These orders established a “formula” based approach to the valuation of qualifying statutory undertakings. The formula takes into account the relevant income and expenditure of the undertakings (as defined in the Orders). No such orders have been made for the prescription of rateable values by formula for the 2005 Rating List and all undertaking are to be valued by reference to conventional valuation methods.
Unit of Assessment Reg 5 of the Non-domestic Rating (Miscellaneous Provisions) (No 2) Regulations (SI 1989/2303) creates an “artificial” aggregated hereditament which will include all the operational land and buildings occupied by the qualifying1 statutory port and where appropriate this will include operational land located in other billing authority areas as a single assessment for rating purposes. This remains unchanged for the 2005 Rating List.
4. The Need for a Review
4.1 Assessment via a formula meant that it was unnecessary to inspect ports, the assessment being determined by a consideration of accounts and having regard to any property for which the port undertaking received rent but which appeared as a separate entry on a local list. To ensure that local list entries correctly reflected the units of assessment that actually exist, it is necessary to undertake a review. Conventional assessment of ports means that the assessments will not capture and reflect the value of any property beyond that which is in the port statutory undertaker’s occupation for operational purposes.
4.2 It follows that land and buildings either occupied by the statutory operator for non-operational purposes; or let out so as to constitute a separate hereditament, should not form part of the port assessment. In such circumstances these occupations are likely to form separate hereditaments, as Reg 5 does not apply to non-operational occupations.
4.3 Hereditaments within a port therefore variously come within the remits of URT, SRU, Group and other specialists as appropriate.
5. URT
5.1 The URT has taken the initiative in setting up a systematic review and liaising with the port operators and VOA network. The review process for each port will take the following route:
1. URT write to the statutory port occupier explaining the background to the review and requesting information relating to occupations within the port. This stage was completed for all ports in May 2006 and, where a reply was still outstanding in October 2006, subsequent reminders were sent to those ports yet to reply.
2. Upon receipt of information from a port the URT will undertake an initial review of the data. This involves making an inspection, linking occupations to separate assessments already in the rating list and identifying occupations which warrant further investigation where it is considered they are likely to be capable of separate assessment for rating purposes.
3. Having completed an initial review of the port, the URT will produce a document for release to the host Group and Specialists likely to be involved in the port review. The document will include:
a. Details of the URT inspection findings
b. A schedule of port occupiers which have been identified as existing separate list entries
c. A schedule of port occupiers where it is considered a separate rating assessment is likely to be appropriate; together with occupier details and contact numbers
d. A digital mapping summary of URT findings to date (see below)
e. A checklist of questions to ask to assist in determining who is in paramount occupation if there is a doubt.
Group, SRU, SVU or MV
5.2 All groups involved in this exercise should appoint a Ports Coordinator. This role should ideally be undertaken by a Band 2. They will take overall responsibility for the end-to-end process. All SRUs will be involved in the review and should each appoint a Ports specialist who will take the lead in the SRU’s contribution to the review and coordinate with other units.
5.3 The Group Ports Coordinator or GCSM should liaise with those Billing Authorities affected by the review. They should make the BAs aware of the review; keep them informed of progress and likely changes to the list when known.
5.4 Whilst all the port operators are aware of the review, individual occupiers may not be. Inspection letters should therefore refer to the reason for the required inspection and referencers and caseworkers should be able to explain the reason for the review and answer basic questions posed during inspections.
5.5 On receipt of information from URT, a joint meeting of the Group and any Specialist Port coordinators should be arranged to discuss practical issues including a consideration being given to issuing any FORs promptly.
5.6 Arrangements should be made to inspect and survey the properties considered likely to warrant a separate assessment in their own right, plus any currently separately assessed hereditaments if what is seen on site clearly does not match what is shown in the rating list (eg small RV but large, new building). The URT has prepared a checklist of questions that should be asked so as to help decide who is in paramount occupation of the property, the occupier or the port undertaker – see [Appendix 2.2.] A dedicated referencer should be allocated to this area of work wherever possible and they will need to work closely with the Band 2 Co-ordinator at all times.
5.7 In cases of doubt as to whether a property constitutes a separate hereditament or is in the paramount control of the port operator and therefore should be included in the port assessment, technical advice should be sought from the Technical Adviser. Often the port operator reserves rights to itself to use a property for port purposes and it may be considered that this means the port is in paramount control. However, in many cases such rights have rarely been exercised and the reality is that the exclusive nature of the occupation is not disturbed. Substance, rather than form, should be investigated (see checklist of questions referred to above and Guidance Note on Paramount Control at [Appendix 2.1].
5.8 Groups, SRUs, SVU or MVs should then prepare their valuation(s). It should be noted that there is a need to issue transitional relief certificates under Reg 17. This means that both a 2005 list value and a 2000 list value are required.
5.9 All involved need to liaise throughout the process as it may be necessary to revise the initial allocation of responsibility between Group, SRU, SVU, MV and URT depending on the results of the investigations. Before finalizing valuations liaison and coordination on value and approach should take place with colleagues involved in port reviews in neighbouring areas. Port operators and some of their occupiers operate nationally and it is important that values are consistent, or, if different, there is a known reason which can be explained to the ratepayer.
5.10 Any necessary amendments to the Digital Mapping record (which shows ownership of responsibility amongst Group, SRU, SVU, MV and URT) should be made.
5.11 Once valuations have been prepared, a list of the hereditaments to be separately assessed and their 2005 RVs should be provided to URT by each unit. Only once URT has this information will it be possible for the URT to finalise the review of the 2005 port assessment, since the port will effectively comprise everything within the port boundary, which is not separately assessed.
URT
5.12 When URT have received from all units involved (Group, SRU, SVU and MV) details of values and occupier names of hereditaments to be separately assessed, from all units involved (Group, SRU, SVU and MV) the port assessment will be revised.
5.13 URT will then pass details to Group of the revised port value and the details provided by other units as to required list alterations. This arrangement means Group get a single source of amendment details.
Group
5.14 Irrespective of the likely numbers of separate assessments identified by the review, action taken to alter the rating list must be undertaken as a single reconstitution of the port assessment. To do otherwise would affect the position for transitional relief. The majority of separate list entries will be Group properties and because all the list entries are local list entries, they all fall within the statutory responsibility of the GVO. Therefore, Group will undertake the mechanics of giving effect to the list alteration via RSA and the issuing of notices.
5.15 The review is to be actioned as Compliance Work. The RV change at each port should be identified by each Group participating in the review according to their area of responsibility. A spreadsheet has been prepared (see Appendix 3) to log the before and after RVs for each unit. It is the responsibility of the Group Port Coordinator to ensure this is completed at the end of the review and submitted by e-mail to Helen Ashbery at URT.
5.16 Any queries subsequently arising and going to Group that relate to non-Group hereditaments can be passed to the appropriate Specialist. The Digital Mapping colour coded layout plan will assist in being able to find quickly which Specialist the query should go to.
6. Digital Mapping
6.1 The URT have been able to secure a dedicated “layer” within digital mapping to assist with the review and subsequent ongoing maintenance of each port.
6.2 This is a live document, which can be accessed from any desktop in the network. It will be used to establish the footprint of the port and all individual assessments within it as at the compiled list date and beyond.
6.3 A separate guidance document for the use of digital mapping has been produced by the URT (see [Appendix 1].
7. Overriding Requirements of the Review
7.1 Timetable - This process is required to be completed as soon as possible and at the latest by 30 June 2008.
7.2 Sharing best practice – The URT will facilitate workshop style meetings at regular intervals throughout the review process to enable all those involved to discuss the issues they have identified, solve problems and share best practice. These meetings will provide opportunity for those involved to build a network of contacts on whom they will be able to call for support and assistance through the review period and beyond.
7.3 Changes to unit of assessment on appeal – where an appeal is made to challenge the separate assessment of a hereditament within a port boundary, and, having first raised any technical queries on unit of assessment with the Technical Adviser, the caseworker involved is persuaded that the property concerned should after all be assessed with the port, the caseworker must liaise with URT before actioning the proposal. URT need to know whether the port assessment will need to be reviewed as a consequence. There is a danger that in these circumstances the new entry is deleted but no corresponding revision is made to the port assessment to reflect that property. Where the issue cannot be resolved and a Valuation Tribunal hearing is necessary, depending on the circumstances, it may be appropriate for a member of URT to be involved as an expert witness.
8. Beyond the Review
8.1 The review will bring the rating list entries for separate assessments within port boundaries up to date. However, it is important that this review is not seen as being a “one-off” once and for all issue to be addressed by the network and then forgotten. Ports should be treated in the same way as any other commercial "estate" for rating purposes. Changes in occupation should be tracked throughout the life of a list and actioned as soon as we become aware of them.
8.2 The review process will result in a better understanding within the VOA network of the valuation issues surrounding the ports and an ability to deal with ongoing requests to review assessments at ports. Further, the review will have improved communication and liaison within the network on port related issues and this should be built on, as should the initial contacts with the port operators and their occupiers.
8.3 Future maintenance will require continued internal communication between URT, Groups and Specialists to ensure that any alterations to the list are considered fully by all involved.

Practice Note 2 : 2005 : Appendix 1 : Docks & Harbours : URT digital mapping protocols

The URT has been able to secure a dedicated layer within digital mapping for use as part of the port review exercise.

The use of a dedicated layer enables recorded maps to be maintained as evolving documents and can be accessed via any desktop PC in the network.

Access can be gained as follows:

  1. Access digital mapping as normal

  2. Go to Case and click on Open.

  3. Within Case Type select Ports and click Apply Filter

  4. This will produce a list of references - VOR and a unique Digital Mapping reference number

  5. Select a reference number as appropriate and click on Open

The following guidance should be adopted by all those involved in the review of each URT port. Digital mapping plans have two levels: Under Review and Post Review.

Under Review:

  1. A red line will identify the edge of the statutory port’s area.

  2. Occupiers within the port’s area that are already assessed for business rates will be highlighted green with a green border or edge.

  3. Occupiers within the port’s area that are not considered to be assessed, or for whom the current assessment is thought to be incorrect, will be highlighted red with a purple border or edge.

  4. Pipelines, conveyors or cables will be shown as a labelled yellow line.

  5. Berths and quays under exclusive or priority agreements will be highlighted yellow with a yellow border or edge.

  6. Plan numbers will be shown in red and match reference numbers in excel file of occupiers.

  7. Occupier names will be shown in blue.

Examples of this colour scheme can be seen below:

Post Review:

  1. A red line will identify the edge of the statutory port’s area.

  2. Plan numbers will be shown in red and match reference numbers in excel file of occupiers.

  3. Occupier names will be shown in blue.

  4. Group office properties will be highlighted green with a green border or edge.

  5. SRU properties will be highlighted orange with an orange border or edge.

  6. SVU properties will be highlighted blue with a blue border or edge.

  7. Mineral Valuer properties will be highlighted black with a black border or edge.

  8. URT properties (other than the statutory port itself, i.e wind turbines or container terminals) will be highlighted red with a red border or edge.

  9. Crown / Telecom or other specialist properties will be highlighted yellow with a yellow border or edge.

Examples of this colour scheme can be seen below

Practice Note 2 : 2005 : Appendix 2 : Docks & Harbours

1. Review of Statutory Ports: Some Guidance on Paramount Control

1.1 The purpose of the ports review is to establish the correct unit of assessment for the statutory port in accordance with The Non-domestic Rating (Miscellaneous Provisions) (No.2) Regulations (1989) (SI 1989 No. 2303). The Regulations create an “artificial” aggregated hereditament which will include all the qualifying lands and buildings of the undertaker so far as they lie within the limits of rateability. For land and buildings to be included in the port hereditament, the port should use them for operational purposes. In order to determine the extent of the hereditament, it is necessary to determine which areas have been so let out as to constitute separate hereditaments in the occupation of other parties.

2. Occupation by other parties:

2.1 For occupations by other parties, the decision on whether or not the occupation should be separately assessed should be taken on the basis of conventional rating law and practice. VOs need to be impartial in their decisions and ensure correct assessments relating to the legally correct number of hereditaments are inserted in rating lists. The decision should be taken on the facts of each case and not on the preference of the port or occupier.

2.2 The four ingredients of rateable occupation are actual, beneficial, exclusive and not too transient. Actual occupation is a question of fact and if it exists it will normally be assumed, in the context of dockside property, to be beneficial. Disputes are more likely to arise around the questions of exclusivity and transience and it is in these areas that detailed research into the facts should be undertaken.

3. Transience:

3.1 In terms of transience, the Lands Tribunal have found that the length of occupation is not a conclusive test and each situation had to be viewed against its own facts and circumstances. Essentially you are trying to distinguish between the “transient” or “wayfarer” and the settler, and this judgement should be made in terms of the intention or expectation at the time the occupation is first taken. Evidence surrounding the actual periods of occupation over the previous years should be considered.

4. Exclusive:

4.1 The issue of exclusive occupation needs to be resolved in terms of who is in paramount control; the port or the user. Usually within statutory ports, the arrangement between the port and their tenants/licensees is such that the latter’s occupation can be disturbed at any time if the port requires the relevant land or buildings for the urgent need of the business of the port.

4.2 The decision of the House of Lords in Westminster Council v Southern Railway Co exhaustively considered the whole question of when parts of a large hereditament were ‘so let out as to be capable of separate assessment’. The critical question is whose purpose is being achieved, the landlord or the user? To use the analogy from the Serviced Offices IA (RAT IA 290107), the best way of considering this is to ask whether the port user is availing him or herself of a service or is actually occupying an individual unit. A man who stays in a hotel room is availing himself of a service; a person who rents a furnished flat is taking occupation. The degree to which the landlord can interfere with the user’s use of the property is relevant. If the landlord is only providing a desk or room but not a designated room this will indicate the landlord is in control. If the landlord retains the right to move the office user to a different office unit but in practice rarely or never does so, this will not defeat the facts showing the office user has de facto occupation.

4.3 For a port, VOs will need to judge whether the port retains and exercises such control over the parts of the port that it is not possible to regard the users as being in control of their own space.

4.4 Example 1: User A enters a contract with the port to import 20,000 tonnes of cargo each year through the dock but the port controls the cargo. Whilst within the dock area the port can and does locate the cargo anywhere then user A is contracting a service only. It is unlikely that user A will be in paramount control.

4.5 Example 2: User B enters a contract with the port to import 20,000 tonnes of cargo each year through the port, the cargo is stored in a dedicated terminal manned and operated by user B’s staff and whilst the port may use part of the terminal when there is available space, this rarely happens. User B is in occupation of the terminal. It is likely that user B will be in paramount control.

4.6 Example 3: User C enters a contract with the port to import 20,000 tonnes of cargo each year through the port, the cargo is stored in a dedicated terminal but user C has no staff on site having chosen to contract the port to staff the facility and undertake the day-to-day dockside operations. This is a very grey area and will need detailed investigation. The port may be retaining control or may be contracted to manage the site on behalf of user C in which case control will be with the user.

5. Statutory Occupations:

5.1 Premises occupied by statutory authorities will form separate hereditaments under the principles of rating law and practice. Grapevine issues in September 2001 and January 2006 highlight the issues, as does the rating manual. Bodies include HMRC, Port Health Authority, Police (UK and Juxta-posed), Special branch, Immigration, DEFRA, etc.

6. Vacant Premises:

6.1 Separately assessed accommodation which falls vacant should continue to form separate hereditaments. For property to be merged with the port assessment, the port operator must use them for operational purposes. This must be physical occupation for the purpose of and in association with the main port business. Liability for rates is not relevant.

Relevant Questions:

Occupier 1.1 Who?
1.2 Are you connected to the landlord?
1.3 How long have you occupied?
1.4 Who was the previous occupier?
1.5 How long did they occupy?
1.6 Prior to this site, have you previously occupied another part of the port? If so, where and how long for?
Use 2.1 What type of property is it and what is it used for
2.2 Does anyone else have the right to use the property? (Port or third party)
2.3 Has anyone else actually used the property? Has the right been exercised?
2.4 When and how often?
2.5 If use by another occurred, did it affect or interfere with the occupier’s use of the property? Was it at a time when the space was surplus to requirements?
Title 3.1 Lease, Licence [formal or informal], Commercial Agreement
Nature of occupation 4.1 Sole or shared with port or other third parties
4.2 Who exercises control - movement/storage of goods, staffing, security etc
4.3 Who employs staff within the occupied area
4.4 Does the port authority have any involvement
4.5 Does the port "disturb" occupation - if so, how often in the last 3 years
4.6 Who transports goods in to/out of the accommodation?
4.7 Access - restrictions?
4.8 Unloading/loading vessels - who does the stevedoring?
4.9 Can anyone do the stevedoring?
4.10 Transfer to/from berth - who is responsible?
4.11 Who manages the movement of the cargo? Who decides where cargo is placed within the occupation?
4.12 Who employs the people within the occupied area?
4.13 Who is responsible for security of the occupied area?
4.14 When the landlord has used part of the occupied area, has it been at a time when the area was surplus to the tenant’s needs; ie if seasonal changes
Quays/wharves 5.1 Does the user have a ‘priority agreement’’?
5.2 How often do ‘other’ users use the quay/wharf? – length of time at berth