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

Section 580: livestock markets

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

1. Scope

This instruction relates to the valuation for rating purposes of livestock markets and should be read in conjunction with the appropriate Practice Note.

2. List Description and Special Category Code

Primary Description: CM

List Description: Livestock Market and Premises

Scat Code: 158

Scat Suffix: S

3. Responsible Teams

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

Livestock markets are a sui generis use under the Town and Country Planning Use Classes Order 1987 (as amended).

Livestock markets are highly regulated and the legislation designed to protect animal welfare and provide bio-security impose significant restrictions on the way they can operate. The key legislation covering these issues are the Welfare of Animals at Markets Order 1990, the Animal Gatherings Order 2010 and the Transport of Animals (Cleansing and Disinfection)(England)(No3) Order 2003.

5.1 Methods of Valuation

5.1.1 Profits basis

Markets are not necessarily public utility undertakings (see Hereford Corporation v Taylor (VO) 1960 (53 RIT 771) and the Court of Appeal did not dissent from the view that a market was not a public utility undertaking in its judgement in British Transport Commission v Hingley (VO) and Grimsby CBC (1961 RVR 150).

In Thrapston Market Co v Newton (VO) (LT 1968 RA 415) the Lands Tribunal held “….in the past the Tribunal has accepted valuations of markets by reference to their accounts. But there is no rule, statutory or otherwise, that they should be valued by that method and the Tribunal is free to accept any other method if it thinks fit”.

Prior to the Thrapston case, the Tribunal had determined the assessments of three livestock markets:

  • Taunton Corporation v Sture (VO) (1958 LT 51 RIT 749)
  • Hereford Corporation v Taylor (VO) (1960 LT 53 RIT 771)
  • Oswestry Borough Council v Plumpton (VO) (1962 LT RVR 44)

A common factor in these decisions was that the adjusted accounts indicated a basic rental value but that, in each case, the local authority would make an “overbid” in order to gain possession. However, where a local authority wishes to run a market as a service it is likely to be primarily interested in keeping it solvent rather than in making a profit. Furthermore the authority could, as a matter of policy, depress the fees, tolls, or charges even to a point where the accounts showed a loss. In Bingley UDC v Melville (VO) (1969 RA 681) the Lands Tribunal came to the conclusion that a profits basis did not give the right answer when assessing a local authority cemetery running at a loss. This principle applies equally to markets, although, where it can be established without doubt that in running a particular market the genuine motive is to make a profit, accounts may be a factor to be taken into consideration.

5.1.2. Rental method

Where a rent is paid, that rent should be carefully investigated to see whether the negotiations leading to the terms of agreement were at arm’s length. In particular, a rent paid to a local authority as landlord should receive close scrutiny to see whether, for example, the authority has accepted a rent below market value in order to keep the market open as a service or to attract trade to the town.

Where direct rental evidence of an arm’s length nature is available, this evidence, in addition to giving an indication of the open-market value of the particular market, will assist in the determination of the assessments of comparable hereditaments when expressed as a percentage of the gross commissions earned by the auctioneers who operate the rented market. In the generality of cases no arm’s length rental information will be available and the practice of relating rental value to gross commissions, using the relationship obtained from analyses of rented markets, should be adopted.

This method of determining rental value was used by the High Court in Stride & Son v Chichester Corporation (1960 EG 315) in which the rent which Stride & Son were to pay from September 1959 for occupation of part only of Chichester market fell to be determined under Part II of the Landlord and Tenant Act 1954. In the knowledge that the occupiers’ commissions were nearly £15,000 in 1958 (a peak year) the Court decided that the rent payable over the next 7 years should be £1,500 per annum.

This practice of relating rental value to gross commissions earnable by the tenant was accepted by the Tribunal in the Thrapston case and has been followed by VOs. The details of this approach are as follows:

a. the market is to be considered vacant and to let and it should be assumed that the most likely hypothetical tenant would be either a single auctioneer or a consortium of auctioneers whose prime motive for trading would be to encourage the maximum possible trade and to extract the maximum possible profit

b. the actual average throughput (or, where these figures are impossible to obtain, the estimated annual throughput) should be distinguished as between cattle, sheep, pigs, poultry, deadstock, etc. and, for each group, the average amount of commission chargeable should be ascertained (or estimated)

c. a percentage should be applied to the total commissions calculated from the above information to obtain the sum which the auctioneer could reasonably be expected to pay as rent for the right to sell in the market. In the Thrapston decision, the Tribunal, in accepting the VO’s method, said, “…. the question he had to answer was how much rent such a firm, or consortium of firms, would bid at arm’s length for an exclusive use of the market accommodation subject to the common law rights of the public to enter the market and buy or sell anywhere save in the accommodation that had been let off. He submitted that the rent an auctioneer would pay for the whole of the market accommodation, subject to these considerations, would be linked with the commissions he might reasonably expect to make on the sales conducted”

d. to the rental value of the right to sell livestock should be added the value of any other items not directly concerned with the actual function of sales (e.g. refreshments rooms, vehicle washing facilities, produce markets, rateable tolls, etc.)

e. from the value determined under sub-paragraphs c. and d., any necessary deductions should be made to allow for the effect of any disabilities not already reflected in the number of livestock sold in the market (e.g. additional annual expenditure occasioned by age, obsolescence, bad planning, etc.)

Just as local authorities may be prepared to run markets at a loss in order to maintain a service to the community, auctioneers may, in certain circumstances, be found to be running small markets at an apparent loss for the purposes of maintaining contact with agricultural clients from whom their professional practices stem. Such circumstances will require special consideration and VOs should deal with each case on its individual merits.

5.1.3 Contractor’s basis

The contractor’s basis of valuation is not considered to be a suitable approach and should not normally be used. It may, however, be necessary to have recourse to this method in bringing into assessment, for the first time, a new market the potential of which cannot be gauged until it has been in operation for some time. The decision of the Lands Tribunal in the case of Melville and Rees (VO’s) and Airedale and Wharfedale Joint Crematorium Committee (1963 3 RVR 201) would appear to lend support to the use of the contractor’s basis under these circumstances.

5.2 Tolls

The rateability of tolls is dealt with in RM Section 6 part 3 : Section 1100.

Tolls can only be rateable in the hands of the occupier of the land and cannot be the subject of a separate assessment. See Faversham Navigation Commissioners v Faversham Union (1867).

It was held in The Mayor, Aldermen and Burgesses of the Borough of Oswestry v Hudd (VO) (CA 1966 RA 5) that a distinction can be drawn between the “market” in the sense of the right to hold a concourse of buyers and sellers, and the place where the concourse is held - i.e. the “market place”. The “market” in the former sense is a local monopoly right commonly originating in a grant from the Crown; such grant often confers a right to levy tolls on merchandise at the market and where this right is separately held as an incorporeal right, it is not rateable.

If exclusive possession of a stall or standing is required by a trader, this can be obtained only by the permission of the owner of the soil of the “market place” (not necessarily the owner of the market); any payment for such privilege is known as stallage or piccage. Stallage or piccage is a profit of the soil and is rateable. The owner of the market place need show no grant, prescription nor statutory authority for taking stallage or piccage. The criterion would seem to rest on whether payment of the toll confers on the payer a right to occupy part of the soil of the market. If so, the tolls should be included as a constituent of the assessment of the market.

In cases of doubt or difficulty or where the VO has included tolls in valuation and their inclusion is disputed, a full report, together with a copy of the statute relative to the market in question, should be submitted to CEO (Rating) through the Technical Advisor.

Stalls or standings separately occupied on a permanent basis should be separately assessed - Brooks (VO) v Greggs and Others LT 1991 RA 61 - see also RM 5 : 630

6. Survey Requirements

The size, type, age and geographical location of a livestock market will influence the range and quality of the facilities encountered.

When carrying out an inspection care should be taken to identify any separate hereditaments and where they are found to exist, sufficient measurements should be recorded to enable that accommodation to be valued in accordance with the appropriate valuation scheme.

A comprehensive measured survey of all the accommodation found within the mart will not be required to enable a valuation to be carried out. A detailed record should however be taken of any office accommodation that is not used exclusively by the mart operator for mart related administration (e.g. offices used for the provision of professional and / or agency services) and of any cafe / restaurant accommodation that is not in the paramount occupation of a third party; this accommodation, if present, should be measured to Gross Internal Area (GIA) in accordance with the VOA Code of Measuring Practice for Rating Purposes.

A description of the agricultural hinterland and the nature, location and accessibility of the mart should be prepared.

A site layout plan which records the use made of all the land and buildings found within the site boundaries should be produced.

A full description of all land and buildings should be recorded; this description should include details of the age, condition, method of construction and the quality / type of finish involved.

A detailed photographic record should be taken in all cases providing permission is first obtained from the mart operator.

The number, frequency and type of sale days should be established and details of the commission rates charged for each type of sale activity should be obtained. The Livestock Market Form of Return (VO6043) should be issued so that the total income received from all the activities carried out within the mart can be determined.

The number of sale rings, the adequacy of the penning areas (covered /open) and the ease of circulation and access for unloading / loading should be recorded.

The method used for effluent disposal should be established and details of the bio-security measures in place should be noted.

Finally, any factor which the mart operator identifies as an issue which restricts or significantly increases the cost of operation should be noted.

7. Survey Capture

Surveys, plans, Forms of Return (VO6043) and any lease documentation should be stored in the property folder of the Electronic Document Records Management (EDRM) system.

Photographs should be uploaded onto the Rating Support Application (RSA).

8. Valuation Approach

The approach to be followed is set out in the relevant rating list Practice Note.

9. Valuation Support

All valuations for the 2017 Rating List should be entered onto the Non-Bulk Server (NBS) (Class - Livestock Markets (Scat Code 158)).

Other support available:

  • Survaid
  • Class Co-ordination Team

Practice note: 2017 - livestock markets

1. Market Appraisal

Livestock Markets operate in a difficult business environment; their performance and viability are affected by a variety of factors which are inextricably linked to the challenges faced by the wider agricultural industry.

As at 1 April 2015 there were 124 operational marts in England and Wales under the control of 84 companies.

The movement in stock prices and changes to the level of commission charges that have occurred since 1 April 2008 has seen turnover levels, for the majority of marts, rise significantly. As at 1 April 2015 there was however some concern within the industry that these turnover levels may not be sustainable given fluctuating stock prices and the uncertainties which existed over future trends in stock numbers and the size of the national herds.

Many of the challenges facing the industry at the AVD were very similar to those which existed at the last revaluation.

Mart operators rely heavily on the support of the local farming community for their success. Any shift in loyalty can have a dramatic impact on the viability of the business. Operators, as a consequence, need to remain competitive at all times and deliver the level and quality of service necessary to ensure that they do not lose market share to deadweight sales, direct selling and / or other operators. The requirement to remain competitive puts pressure on the level of commissions that can be charged which in turn can impact on overall profitability.

Bio-security, movement restrictions and strict regulatory controls to improve traceability and animal welfare continue to affect the way marts can operate and put pressure on margins. Whilst onerous the success of these measures is evidenced, by the fact that, with the exception of Bovine TB, the livestock industry was relatively disease free at the AVD.

Operating costs, particularly water and effluent charges are continuing to increase and have to be largely absorbed by the operator.

Changing attitudes and trends and the impact of government / EU policies ( e.g. the removal of subsidies) are also areas of concern as these can affect the level of sheep and beef production which in turn can then have a knock-on effect on turnover /profitability.

Despite these challenges and concerns, marts continue to operate.

The current geographical distribution of the marts across the country is not expected to alter but it is likely that a small number of marts will close in the future as a result of acquisitions and mergers.

A number of marts have relocated to purpose built out-of-town developments funded to a large extent by the re-development value of their previous sites. There are some marts that could potentially do likewise but in the immediate short term such a move would appear unlikely as they depend on the marts securing firm funding and complying with / satisfying strict planning requirements.

Re-location, whilst an attractive option and one which potentially offers the opportunity to grow the business is not a quick fix nor a viable option for the majority of marts. Diversification and /or further rationalisation are the two main ways that existing marts can look to increase turnover.

Some marts have been successful in securing and protecting turnover by diversification but the location and physical characteristics / layout of a significant number of marts, particularly the more traditional / older ones, prevent this happening.

The outlook for the future of the livestock market industry remains challenging but its survival should be secured providing:

  • it receives the continued support of the farming community
  • there are no major disease outbreaks and
  • the marts are proactively managed to develop opportunities for growth and control outgoings / minimise risk and exposure to debt.

2. Changes from the 2010 Practice Note

Apart from an adjustment to the percentage which should be applied to income received from car boot / market stall operators there are no changes to the approach that was adopted for the 2010 Rating List.

3. Ratepayer Discussions

The Livestock Auctioneers Association have been provided with details of this valuation scheme but the contents have not been fully agreed; it is anticipated that further discussions will take place prior to the draft list being published

4. Valuation Scheme

The limited rental evidence that is available suggests that the rateable value of a Livestock Market should still be determined by applying a percentage to the fair maintainable gross commissions that are capable of being generated from on-site sales.

In the absence of reliable direct rental evidence to the contrary, it is recommended that all Livestock Markets should be valued in accordance with the following guidance.

4.1. Income from Livestock Sales.

A percentage taken from the table below should be applied to the total gross commissions, exclusive of VAT.

Unlike the previous two revaluations there have been no countrywide disease outbreaks in the years immediately preceding the AVD that will have resulted in a distortion in trading patterns. In determining what level of fair maintainable gross commissions to adopt as at 1 April 2015, careful consideration will need to be given as to whether, given the nature and location of the mart concerned, the trends and figures suggested by the year end 2014 and 2015 returns will be sustainable. Valuer judgement will be required to ensure that the figures adopted accord with the requirements of the rating hypothesis.

The level of gross commission should not be adjusted to reflect bad debts unless there is clear evidence that the level of non-payment is significantly in excess of the norm for the particular type of market and that it is not due to poor financial management by the operator.

TOTAL GROSS COMMISSIONS (Livestock Element only) PERCENTAGE APPLIED TO WHOLE (The percentages should be interpolated at the close margins between the bands).
Below £250,000 7.5%
£250,001 - £350,000 10%
£350,001 - £500,000 12.5%
£500,001 - £800,000 15%
£800,001 - £1,000,000 17.5%
Above £1,000,000 19%

The percentage adopted should reflect the physical and locational characteristics of the property.

The percentage should be adjusted upwards or downwards by a maximum of 2.5% where the buildings or the layout of the mart is not commensurate with the typical quality expected of a mart achieving the scale levels of trade. Downwards up to the maximum of 2.5% for properties which suffer from poor layout and inferior buildings and upward to the maximum of 2.5% for properties which contain modern / superior buildings or facilities.

For marts with gross commissions in excess of £500,000, it would be expected that the norm would be a mart with good facilities, communications and hinterland. An example where an upward adjustment would be appropriate is a very old mart but partially improved with say a state of the art sheep building, built in 2000. Similarly a more modern mart with layout, buildings and facilities below expectation would require a downward adjustment.

Typical beacon description:

Standard Older Mart

Usually in its historic location, buildings fit for purpose, adapted to a reasonable basic standard to ensure compliance with regulations for health, safety and disease prevention. Some covered pens and often a variety of open span sheds but not necessarily with a covered sales ring, adequate access and vehicle parking and washstand.

Improved Older Mart

Possibly in an historic location but with evidence of considerable investment to improve the standard of the facilities; some of the buildings will have been improved to a modern equivalent standard. A valuation uplift over the standard basis would be expected.

Modern Mart

Generally (but not exclusively) built from the early 1990’s and probably close to good road networks. Modern standard buildings fit for purpose and designed to accommodate easy throughput for large-scale animal sales. All necessary facilities present with improvements carried out where necessary to ensure compliance with regulatory standards. Penned areas mainly under cover; site / layout large and flexible enough to accommodate other ancillary and complimentary uses.

4.2. Income from other sources.

The terms of occupation of any ancillary activity need to be ascertained in order to decide whether a separate unit of assessment is appropriate. Where the mart operator is in paramount control of the facility, the income / gross commissions received from non-livestock sales should be treated as follows:

Lorry washes:

Access to lorry washes is a statutory requirement for livestock markets; if this facility is used solely in connection with mart business it should be deemed to be reflected in the valuation without any specific addition. Where a lorry wash is used on non-mart days the value of this facility should be added to the valuation by making a specific addition based on 10% of the gross receipts.

Lorry / car parking:

Where income is derived from lorry / car parking on non-market days then an addition should be made having regard to the local levels of value for such facilities; in making this addition adjustments should be made to reflect the number of days a week this facility cannot be used for this purpose. In the absence of a local comparator an addition should be made based on 25% of gross income.

Car boot sales and market stalls:

Adopt 30% of the payment received from a car boot / market operator or 50% of net income from direct sales where the market or car boot sale is run by the occupier of the livestock market.

Chattels / antiques auctions sales:

Adopt 15% to 20% of gross commission depending on how significant this source of income is in relation to the market as a whole. Where gross commissions from this source comprise less than 10% of the income generated from livestock sales then this income stream should not be valued separately; the income generated should be added to the gross commissions for the mart as a whole.

Vehicle and Plant and Machinery Sales:

Many livestock marts are diversifying to improve income levels and the sale of vehicles and agricultural plant and machinery are becoming increasingly common. If these sales are held in specialist premises, such as Ely in Cambridgeshire and the 4x4 vehicle Auction Centre in the former livestock mart at Leominster, the properties should be valued in accordance with the methodology used to value Car Auction sites. In marts where the this type of sale forms only a subsidiary part of the whole and they are carried out in non-specialised land and buildings, the commissions should, where they contribute less than 10% of total mart income, be valued at the same rate as that adopted for livestock sales. Where the income is more substantial and adaptations have been made to either land and buildings, a valuation basis more akin to that adopted for chattel sales should be utilised.

Non-livestock sales offices:

Offices which are not used by the mart operator exclusively for mart related administration (for example, offices used for the provision of professional / agency services or electronic auctions) and offices used as kiosks in the paramount occupation of the market operator should be added as a separate addition in the valuation. The accommodation should be valued at a level which, whilst consistent with the levels adopted for similar offices in the locality, also reflects the fact that it forms part of a larger mart hereditament.

Café / restaurant:

All markets generally have refreshment facilities on site, or very close by. The quality varies from a timber or portable structure to a large building of permanent construction, which offers a full meal service with restaurant drinks licence, and which may be open on non-market days to serve other commercial premises in the locality. For the majority of marts the facility should be reflected in the overall valuation with no separate addition being made; if the income generated from the café / restaurant is significant however and the facility is utilised on non-mart days an addition should be made using either a percentage of gross receipts or a price per square metre which reflects the levels of value that are applied to separately assessed cafés and restaurants in the locality. Cafés and restaurants which are not in the paramount occupation of the market operator should be separately assessed.

Horse sales:

It is recommended that the percentage of gross commissions for this source of income be increased by 2.5% when gross commissions from this source comprise more than 10% of the total livestock income. Small-scale sales below this level should be valued at the appropriate gross commission rate for the mart as a whole.

Advertising rights:

These will normally be separately assessed unless they are not let out and they comprise an advertising station.

4.3 Bloodstock Markets

The recommended valuation approach for Horse Bloodstock Markets is one based on a full analysis of receipts and expenditure. The marts, which are located at Newmarket and Doncaster, are quite different from the normal livestock market in terms of their physical facilities and the nature of the sales which take place and as a consequence they should not be valued in accordance with this Practice Note.

Practice note: Revaluation 2010

1. Co-ordination Arrangements

This is an SRU National Scheme Class. Responsibility for implementing the scheme as set out within this Practice Note lies with the SRU, as does responsibility for ensuring effective co-ordination.

For further information see Rating Manual: section 6 part 1.

The Special Category Code is 158 and should be used. As an SRU class the appropriate suffix letter is ‘S’. To facilitate co-ordination, all valuations must be prepared using the newly installed non-bulk server valuation application and a National Co-ordination Spreadsheet shall be maintained by caseworkers, until the data can be downloaded on to the co-ordination sheet which is proposed for the non-bulk server.

2. The State of the Industry

The traditional older in town centre markets have continued to decline particularly since the trend was accelerated by the outbreak of Foot and Mouth disease in February 2001. Due to the severity of this Foot and Mouth outbreak all markets in England and Wales closed from the end of February 2001 until February/March 2002. The marts had only recovered from the outbreak of BSE in 1996 when the 2001 epidemic struck. Prior to the 2001 FMD outbreak there were approximately 181 markets in England and Wales and only approximately 140 were left trading by 1 April 2003. The figure at 1.4.08 is closer to 124 livestock markets throughout England and Wales.

Following the 2001 FMD epidemic stringent bio security measures were demanded of mart operators and this meant that virtually all of the marts with rough surface penage disappeared. Also a number of smaller marts ceased trading. Prior to the 2001 FMD outbreak livestock marts could generally be categorised as super marts, regional marts and the smaller older marts. What has occurred since the resumption of trading is that livestock marts have become more polarised. For an initial period of trading many marts struggled and just when stock numbers, trade and prices were showing improvement the industry was then hit, in 2007/08 by a new FMD outbreak and subsequent Blue Tongue Surveillance and Protection Zones.

Whilst, outbreaks of Foot and Mouth disease in August 2007 meant that marts were forced to close for a short period, the imposition of restrictions for Blue Tongue, which is a midge carried viral disease which had slowly moved up through Europe into the UK, meant that the marts could remain open but their trade was severely hampered by restrictions as cattle and sheep could not be moved in or out of the respective zones or even into the clear area until the protection zones were expanded to cover the whole of England, Wales and Scotland on 3 November 2008.

The best trading marts now tend to be those with good road connections, modern buildings and facilities located on the outskirts of a town with an extensive agricultural hinterland often with diversification into agricultural machinery and other associated sales.

It is reported that livestock auctioneers and marts have been going through some particularly hard times since 2001 with increased bio security costs and diminishing numbers of stock being sold through the marts due to both the decline in the national herd and also farmers choosing to disposing of their stock direct to abattoirs. Direct sales to abattoirs of pigs since the early 1990’s has virtually decimated the pig trade in the livestock marts.

Despite the decline in some throughputs, higher prices combined with higher commissions and minimum commissions have meant that in general the turnover per market in England and Wales is now higher than in the past. Trade in the remaining marts has been considerably polarised, with the highest density of marts being congregated in the southwest, Wales and the north of England. In the south east there are virtually no marts apart from Ashford and Thame, with correspondingly low numbers of livestock in these areas.

The support of the local farming community is of paramount importance to the survival of markets. Farmers prefer the convenience of markets where they consider that they are likely to get a fair price for their stock and also where they can meet other farmers and discuss farming problems and associated matters. Moreover, in the past direct dead weight selling has caused problems especially where abattoirs have gone into liquidation with outstanding debts. Since 2005 there have been efforts to revive electronic selling but like the direct selling of sheep to abattoirs, it has so far has not proved particularly successful. Marts have also not been helped by supermarket operators encouraging farmers to enter into direct selling agreements with the abattoirs. Livestock mart operators rely heavily on farmer loyalty, as apart from the mart auctioning, the operator uses it as a contact point for selling other profitable agricultural services as some pure mart operations are only trading at break even or worse. Further, rationalisation can be expected.

There is no doubt that the very successful livestock marts are doing particularly well but there are others that are finding the trading climate particularly challenging. Initially marts tried to overcome the difficult trading conditions by diversifying into other types of sale, machinery, cars, 4 x 4’s, furniture, horticultural products and in this respect some have succeeded in developing diversification. However, the increased bio security measures forced upon the marts following the 2007 FMD outbreak has meant that these additional avenues have had to be curtailed to some extent.

3. Distortion in Trading Patterns

Gross turnover and commissions in respect of livestock marts around the antecedent valuation date will be severely distorted due to the on set of the outbreak of Foot and Mouth disease on 3 August 2007 in Surrey, closely followed on 28 September by DEFRA confirmed the first outbreak of Blue Tongue in the United Kingdom in East Anglia. The first surveillance zones being set up around Suffolk, part of Norfolk, Essex and Cambridgeshire with a 150 kilometre protection zone covering Lincolnshire and parts of Sussex. Subsequent, surveillance and protection zones encompassed large parts of England and a small part of Wales close to the English Border. Livestock movements between surveillance zones, protection zones and outside the protection zones were restricted. Even during the Vector Free period, which commenced on 20 December 2007, movements out of the zones could only be undertaken with a general licence. These zones severely affected the trade of all marts and not just those close to the boundaries. On 3 November 2008 the whole of England, Wales and Scotland became one protection zone and therefore restrictions on movements between these areas were removed.

As a consequence of the outbreaks, it is considered that the period for which trade should be considered relevant for the 2010 Revaluation is that between 1 August 2006 to 31 July 2007.

As for previous Revaluations quoted commissions may comprise “off farm” sales, including electronic auction sales of farm stock and equipment and stock valuations, all of which may be generated from business in the mart. As a broad rule any income not generated directly by the hereditament must be disregarded for the purposes of valuation of the livestock mart. Where there are offices occupied by the market company within the curtilage of the mart but occupation is not exclusively for mart related administration work, an appropriate value should be included as a separate item in the mart valuation.

4. Basis of Valuation

As stated the industry appears to have become much more polarised. A crucial element to the success of any livestock mart will be achieved by economies of scale and in order to achieve this the operation needs to be of sufficient size with good well laid out buildings, situated on an out of town site but with good access to the road network. This is demonstrated by the recently opened marts, such as Sedgemoor (Somerset), Junction 24 of the M5 Motorway, and Shrewsbury.

Older marts often suffer from the disadvantage of high running costs including effluent disposal, maintenance and greater bio security measures. This all contributes to potentially higher overheads that can erode profit margins. Where such marts are in areas of low stock numbers the problem is compounded.

The general trend that emerges from the limited rental evidence available suggests a continuing rental growth in respect of the most successful marts with increasing turnovers, whereas more limited changes in respect of the older marts, particularly those smaller marts which face heavy competition.

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

4.1 2010 Basis to be adopted.

Each market is essentially unique. Where rent closely conforms to or is readily adjusted to the basis of rateable value, the starting point of that rent paid would normally be considered the best evidence of that market’s rental and rateable value within the context of this Practice Note. A check valuation should be made using the valuation scheme set out below and it is then for the valuer to weigh up all the circumstances and decide which more correctly represents the rateable value under the terms of the rating hypothesis.

4.2 Other Markets Basis of Valuation

The basis for Revaluation 2010 will remain related to income in terms of gross commission but this will vary according to the type of market. Factors such as the degree of local competition and the extent and nature of the catchment area will have a bearing on the valuation.

The proposed scheme is based on relevant fair maintainable gross commissions capable of being earned through the mart:

TOTAL GROSS COMMISSIONS PERCENTAGE APPLIED TO WHOLE
Below £250,000 7.5%
£250,000 - £350,000 10%
£350,000 - £500,000 12.5%
£500,000 - £800,000 15%
£800,000 - £1,000,000 17.5%
Above £1,000,000 19%

These percentages would be adjusted upwards or downwards by a maximum of 2.5% where buildings or layout of the mart is not commensurate with the typical quality expected of a mart achieving the scale levels of trade. Downwards up to the maximum of 2.5% for poor and inferior buildings and upward to the maximum of 2.5% for modern or superior buildings or facilities.

Note: In relation to marts with gross commissions in excess of £500,000, it would be expected that the norm would be for a mart with good facilities, communications and hinterland. An example where an upward adjustment would be relevant is a very old mart but partially improved with say a 2000 state of the art sheep building. Similarly a more modern mart with buildings and facilities below expectation would require a downward adjustment.

The above percentages should be interpolated at the close margins between points.

Typical definitions:

4.3 Standard Older Mart

Usually in its historic location, buildings fit for purpose, adapted to a reasonable basic standard for compliance with regulations for health, safety and disease prevention. Some covered pens and often a variety of open span sheds but not necessarily with a covered sales ring, adequate access and vehicle parking and washstand.

4.4 Improved Older Mart

Possibly an historic location but investment has been made to some buildings which are improved to modern equivalent/state of the art with associated ancillary offices; evidence of considerable investment to improve standard facilities.

A valuation uplift over the standard basis would be expected.

4.5 Modern Mart

Generally (but not exclusively) built from the 1970’s onwards and probably close to good road network. Modern standard buildings fit for purpose and designed to accommodate easy throughput for large-scale animal sales. All necessary facilities with improvements where necessary to allow buildings meet the regulations to a good standard. Mainly under cover the site will often be large and flexible enough to accommodate other retail uses.

4.6 Fair Maintainable Trade

The gross turnover figures should be estimated relating to the year ending 31 July 2007, as later figures would be affected by Foot and Mouth and Blue Tongue diseases.

Where the mart operator has failed to supply details of trade for the period 1 August 2006 to 31 July 2007 the valuer should make a robust judgement of fair maintainable trade based on his knowledge of the mart, information gathered from the press and other sources. The valuation will be based on the level of gross commission, which the hypothetical tenant can achieve from the hereditament at the AVD, and in cases where information has been provided the valuer may have regard to actual commissions achieved in order to decide the fair maintainable trade at 1 April 2008. By having regard to the trend pre FMD/Bluetongue it should be possible to eliminate any fluctuations in trade, which may be due to the abnormal trading factors.

Turnover/gross commission should not be adjusted to reflect bad debts unless there is clear evidence the non-payment is significantly in excess of the norm for that type of market and is not due to poor financial management by the operator.

Income will exclude:

  1. VAT

  2. tolls

  3. income from non livestock sales sources, which will be separately valued

  4. income from buildings or land, which are separately assessed

  5. income derived from activities outside the hereditament e.g. farm sales, estates agency or electronic auction sales.

The gross commission percentages of the above scheme refer to livestock sales only. Commissions derived from other sources should be considered as set out below.

a. Lorry washes: Only where there is significant income on non market days then an addition should be made either as a lump sum related to the value adopted for separately assessed lorry washes, or by reference to 10% of gross receipts. Access to lorry washes is a statutory requirement for livestock markets, and if this facility is non profit making it can be reflected in the valuation without a specific addition.

b.** Lorry/car parking:** It is assumed that all livestock marts will have adequate parking facilities in relation to their age and the type of market which is to be valued, but where income is derived from parking on non market days then an addition should be made by reference to local levels of value for such facilities, but making adjustment for the number of days a week it is in market use. Where there is no local comparator take 25% of gross income.

c. Car boot sales and market stalls: Adopt 50% of payment from a market operator or 50% of net income from direct sales where the market or car boot sale is run by the occupier of the livestock market.

d. Chattels/antiques auctions sales: Adopt 15% to 20% of gross commission depending on how significant this source of income is in relation to the market as a whole. Where gross commissions from this source comprise less than 10% of total income then do not value separately, but include in gross commissions for the mart as a whole.

e. Vehicle and Plant and Machinery Sales: Many livestock marts are diversifying to improve income and the selling of vehicles may be seen as a possible new sources. Agricultural plant and machinery sales are increasingly common. If these are held in specialist premises, such as Ely in Cambridgeshire, and a 4x4 vehicle Auction Centre in a former livestock mart at Leominster the properties should be valued on a derived industrial basis having regard to the established modus operandi for Car Auctions. In marts where the sales are only part of the whole and occupy non-specialised land and buildings, contributing less than 10% of total income of the mart, the commissions should be valued at the same rate as for livestock sales. Where income is more substantial and perhaps a major building in the mart is dedicated to such sales, a valuation basis more akin to chattel sales should be employed.

f. Non-livestock sales offices: Examples will include estate agency or electronic auctions and kiosks in paramount occupation of the market operator. The buildings should be valued having regard to the local level of rental for similar offices, making allowance for being part of a larger hereditament.

g. Cafeteria and restaurant: All markets generally have refreshment facilities on site, or very close by. The quality varies from a timber building or Portakabin to a large building of permanent construction, which offers a full meal service with restaurant drinks licence, and may be open on non-market days to serve other commercial premises in the locality. A lease may specify that an additional sum of rent shall be payable for the restaurant, usually in relation to gross income, and in such cases the lease terms should be followed in the rating valuation of the mart. For most markets the facility should be reflected in the overall valuation with no separate addition made unless it generates a good income from meals and licensed sales, including non-market days. In this case a separate addition should be made on the basis of a percentage of gross receipts but having regard also to the rental basis for separately assessed cafes and restaurants in the locality. In cases where the restaurant/café is not in the paramount occupation of the market operator because for example it is let on lease to a caterer, then it should be separately assessed in accordance with the normal rating principles.

h. Horse sales: Some marts such as Melton are now beginning to develop a good market in horse sales, and it is recommended that the %age of gross commissions for this source of income be increased by 2.5% when gross commissions from this source comprise more than 10% of total livestock income. Small-scale sales below this level should be valued at the appropriate gross commission rate for the mart as a whole.

i. Advertising rights: Normally separately assessed unless it is not let out, and comprises an advertising station (see Rating manual Section 6 part 3 section 20)

The above list is not exhaustive, and any other examples where guidance is needed should be referred to the specialist valuer in CEO Local Taxation (Rating).

5. Essential Information

If a consistent and correct basis is to be achieved, then it is essential to obtain actual turnover and/or gross commissions, or sufficient background information, eg average commission rates, in the year ending 31 July 2007 to enable accurate estimates of these figures where the appropriate information is not forthcoming. A breakdown between the various type of livestock and non livestock income should be requested as set out in the Form of Return number VO 6043.

It may not be sufficient to have regard to just the 2006/7 year trading figures. The VO must consider whether these can reasonably be expected to have been maintained.

Full information is always required in the case of markets let at current rents, and a copy of the lease is preferable to relying upon information contained in the Form of Return.

The terms of occupation of ancillary activities need to be ascertained in order to decide whether a separate unit of assessment is appropriate.

If it is claimed that operating expenses for the market are well above average, and therefore the valuation basis for the mart be reduced, or the market should valued on a full accounts basis, then full accounts information should be obtained and advice sought from CEO Local Taxation (Rating).

6. Bloodstock Markets

Included in this special category code are horse bloodstock markets at Newmarket and Doncaster. These markets are quite different from the normal livestock market in terms of their physical facilities and the nature of the sales, which take place, although some livestock marts may from time to time hold sales of horses, which are not bloodstock.

Horse bloodstock markets will be valued on a receipts method but should not be valued in accordance with this Practice Note.

Any departure from the above valuation scheme must be referred to CEO Local Taxation (Rating) for advice.

Practice note: 2005: Livestock markets

1. Co-ordination Arrangements

This is a SRU National Scheme Class. Responsibility for implementing the scheme as set out within this Practice Note lies with the SRU, as does responsibility for ensuring effective co-ordination.

For further information see Rating Manual : Section 6: Pt 1

The R2005 Special Category Code 158 should be used. As a SRU Class the appropriate suffix letter is S.

To facilitate coordination, all valuations must be prepared using a standard valuation sheet ( see appendix 1 ) and a National Coordination Spreadsheet shall be maintained by caseworkers. The spreadsheet will be installed on the R drive for Rating Specialists using the CEO Technical Folder. ###2. The State of the Industry

2.1 Changes since 1998

2.1.1 Traditional town centre markets have continued to close since 1998 and those that have relocated outside the town centres are increasingly drawing trade away from the remaining more congested town centre markets. Many smaller markets that rely heavily on a localised trade are becoming increasingly uneconomic to run, and are facing the prospect of closure as trade rationalises to the larger markets better able to cope with the rapidly changing patterns of farming.

2.1.2 This trend was accelerated by the outbreak of foot and mouth disease on 20 February 2001. By the end of February 2001 all markets in England and Wales had closed and although the last recorded outbreak was 30 September 2001, they did not begin to reopen until February/ March 2002. Marts had only just recovered from the outbreak of BSE in 1996, and although some continued to trade during the outbreak as livestock collection centres or rely on non livestock sales, the effect on profitability was dramatic. 41markets failed to reopen and by 1 April 2003 only 140 remained trading. At the beginning of December 2003 144 markets were trading. The prolonged period of closure of livestock marts both during and after the outbreak has caused difficulties for large and small marts alike as they try to recover lost trade. For the larger marts the burden of high fixed costs in relation to lower turnover has meant that trading conditions remained difficult at the antecedent valuation date .

2.1.3 Abattoirs and major food supermarket companies continue to buy livestock direct from farms which has further reduced volume of stock through the traditional market by auction. Compared to five years ago more producers are switching from auctions to selling their stock, particularly fatstock cattle, direct to the slaughterhouse on a deadweight basis, a trend that greatly increased during the 12 month period when marts were closed forcing sellers to find new outlets until draconian restrictions on stock movement were finally removed.

2.1.4 In some cases Marts have attempted to mitigate the effect of lower auction prices by increasing commission rates, or introducing a minimum rate to cover expenses, but the practice has not been uniform. Prices at auction obtained for store and breeding stock in 2003 have been exceptional, and well above levels achieved pre FMD.

2.1.5 Although volume of stock has fallen since 2000 in most markets, not all markets have been affected by FMD to the same extent. This will depend on the location, degree of competition, type of stock traded, and the extent of non livestock sales. Some marts have substantially diversified into non stock sales such as antiques, car boot sales, chattels, motors cars and furniture, which may now form a substantial proportion of total income to the mart. In the areas of the country worst affected by FMD such as the southwest and the north west where large quantities of stock were destroyed, it will take a considerable period of time for farms to restock, and the throughput of stock passing through the local marts to recover. Marts that predominantly trade in fatstock cattle have found trading conditions more difficult than those that sell a much higher proportion of stores. Many mart operators are pessimistic that trading will ever return to its previous level, and although throughput had recovered to a level better than expected, the future remains uncertain for many marts. Uncertainty has also increased in relation to possible future changes in legislation , such as the possible introduction of a 150km restriction on stock transportation from farm to mart and onward destination, and a 48 hour lairage limitation at marts that will affect marts that trade 5 days a week or experience seasonal peaks ( introduced in August 2003).

2.1.6 At the same time as livestock sales are falling, additional burdens have been placed on marts by requirements of local authorities and Defra for disposal of sewage effluent, cleaning of vehicles, movement of vehicles and animal welfare. Traditionally many of these costs were borne by the landlord but increasingly landlords have sought to re negotiate leases in order for the burden to be placed on the tenant. This has had the effect of depressing levels of rent offered for such marts. Restrictions on animal movements have been progressively removed, but there is still a 6 day standstill restriction on movement of livestock after sale and this has placed additional costs on the industry already facing increased costs because of bio security measures.

2.1.7 Although a number of marts have closed since FMD, the economic position at the AVD is improving. Some marts have recovered trade and obtained new trade from other marts in the locality that have closed, and some are now trading at levels equal to or above pre FMD .Some new marts have opened, such as Stratford upon Avon in 2003 and Washingpool Farm outside Bristol in 2002.

2.2 Distortions in trading patterns

Turnover and commissions for a market may include “off farm” sales including electronic auctions, sales of farm stock and equipment, sales of milk quota, stock valuations etc all of which may be generated from business in the mart. This will vary from mart to mart, and the extent to which a hypothetical tenant will pay a rent for a mart that loses money or just breaks even in order to obtain other business is difficult to establish. As a general rule any income not generated directly by the hereditament must be disregarded for the purposes of valuation of the livestock mart. Where the administration work is carried out in offices within the curtilage of the mart and they are occupied by the mart operator, the value will be included as a separate item in the mart valuation ( see para 4.2.6 (g) ).

3. Basis of Valuation

Patterns are very difficult to discern because of the very wide variety of factors that affect rents for livestock markets and it is almost impossible to find any two rents that are wholly comparable. Compared to 1998 there appears to be less distinction between marts based on rents payable in relation to gross commissions or turnover.The age of buildings remains important in terms of the repair liability and flexibility to introduce new bio security measures. For example, mart operators have to spend greater sums on sealing of cracks in concrete yard areas because of the risk of spreading infection, and this will impact more on the older marts where concrete surfaces have not been renewed for many years, compared to newer marts or where substantial resurfacing has taken place

Throughput and hence rental value now appears to be heavily influenced by location, catchment area and competition, so that marts located in areas where the volume of stock is low have been the slowest to recover. Chelmsford is a new mart with modern buildings but has closed because of the lack of a viable stock catchment area. Marts in traditional stock areas such as the north west, that were badly affected by FMD culling, have failed to recover volume of stock traded as well as marts in less affected stock areas. Where local competition is less, because of closure of nearby marts or restrictions on the transport of livestock over long distances, marts have prospered and rents may be expected to be more buoyant.

The general trends that appear to emerge from the limited evidence available post FMD suggest that there continues to be a movement away from the all inclusive rent to the more commercial FRI basis and that minimum rents continue to be agreed albeit at lower levels than hitherto. A minimum rent should not necessarily be accepted as good evidence of the rent that could be reasonably expected in the rating hypothesis unless it can be shown that it represents more than the minimum trade that can be expected, ie the reasonable expected maintainable trade. Markets now tend to fall within three categories:

a) larger marts serving a wide catchment area with gross commissions from say £300,000 a year to £500,000 a year. b) small local marts with gross commissions of less than £100,000 a year c) marts which fall between a) and b) , probably trading around £200,000 gross commissions a year.

It is apparent from the limited evidence available from new lettings in 2002 and 2003 that rents are now agreed on the basis of gross commissions rather than turnover, although turnover rents do remain in some cases where lease terms have been renegotiated, such as at Hereford.

4. 2005 Basis to be adopted

4.1 Let markets at current rents

Each market is essentially unique and where a rent closely conforms to or is readily adjusted to the basis of rateable value, the basis of that rent paid should be considered the best evidence of that market’s rental and thus rateable value, within the context of guidance given in the Practice Note.

A check valuation should be made using valuation scheme set out in 4.2 below. It is then for the valuer to weigh up all the circumstances and decide which more correctly represents the rateable value under the terms of the rating hypothesis.

Rents under new leases agreed pre 2001, or reviews, which do not reflect the impact of FMD, are unlikely to be of any assistance in establishing the correct rental value of a mart as at 1 April 2003.

4.2 Other Markets- basis of valuation

4.2.1 The basis for Revaluation 2005 will remain related to income, in terms of gross commission but this will vary according to the type of market. Factors such as the degree of local competition and extent and nature of the catchment area will have a bearing on the valuation.

4.2.2 Larger and better performing markets should be valued on the basis of between 10% and 12.5% of gross commissions, and smaller local marts shall be valued on the basis of 6% to 7% of gross commissions. Markets that have either decent buildings, or where competition is limited and volume has recovered closer to its pre FMD level, will fall within the 9% to 10% range of value. However, none of the factors mentioned above is conclusive, and each mart must be valued on its own merits, based on the information available. Any departure from this valuation scheme, such as the exceptional case of a small old local mart where a basis of less than 6% is sought, must be referred to CEO Local Taxation ( Rating) for advice.

4.2.3 Where the mart operator has failed to supply details of trade since FMD the valuer should make a robust judgement of fair maintainable trade based on his knowledge of the mart, information gathered from the press and other sources. The valuation will be based on the level of gross commission which the hypothetical tenant can achieve from the hereditament at the AVD, and in cases where information has been provided the valuer may have regard to actual commissions achieved in order to decide the fair maintainable trade at 1 April 2003. By having regard to the trend post FMD it should be possible to eliminate any fluctuations in trade, which may be due to abnormal factors.

4.2.4 Turnover/gross commission should not be adjusted to reflect bad debts unless there is clear evidence the non payment is significantly in excess of the norm for that type of market and is not due to poor financial management by the operator.

4.2.5 Income will exclude:

1) VAT 2) tolls 3) income from non livestock sales sources, which will be separately valued 4) income from buildings or land, which are separately assessed 5) income derived from activities outside the hereditament eg farm sales, estates agency or electronic auction sales.

4.2.6 To the rental value of the right to sell livestock should be added to the value of other items not directly concerned with the function of livestock sales that will include:

(a) Lorry washes

Where there is significant income on non market days then an addition should be made either as a lump sum related to the value adopted for separately assessed lorry washes, or by reference to 10% of gross receipts.

Access to lorry washes is a statutory requirement for livestock markets, and if this facility is non profit making it can be reflected in the valuation without a specific addition.

(b) Lorry/car parking

It is assumed that all livestock marts will have adequate parking facilities in relation to their age and the type of market which is to be valued, but where income is derived from parking on non market days then an addition should be made by reference to local levels of value for such facilities, but making adjustment for the number of days a week it is in market use. Where there is no local comparitor take 25% of gross income. .

(c ) Car boot sales and market stalls

Adopt 50% of payment from a market operator or 50% of net income from direct sales where the market or car boot sales are run by the occupier of the livestock market.

(d) Chattels/antiques auctions sales

Adopt 15% to 20% of gross commission depending on how significant this source of income is in relation to the market as a whole. Where gross commissions from this source comprise less than 10% of total income then do not value separately, but include in gross commissions for the mart as a whole

Vehicle and Plant and Machinery Sales

Almost all livestock marts are looking to diversify to improve income and the selling of vehicles may be seen as a possible source of new income. Agricultural plant and machinery sales are increasingly common, often being held in specialist premises, such as Ely in Cambridgeshire, and a 4x4 vehicle Auction Centre in a former livestock mart at Leominster. These properties should be valued on a derived industrial basis having regard to the established modus operandi for Car auctions. In some marts the sales are profitable as part of the larger business, but use non specialised land and buildings and do not contribute a substantial proportion of total income to the mart. When this type of sale contributes say 10% or less to total commissions, then the commissions should be valued at the same rate as for livestock sales. Where income is more substantial and perhaps a major building in the mart is used for this purpose, dedicated to vehicle auction sales, a valuation basis more akin to chattel sales should be employed.

(f) Non livestock sales offices

Examples will include estate agency or electronic auctions, kiosks in paramount occupation of the market operator. Value by having regard to the local level of rental for similar offices, making allowance for being part of a larger hereditament.

(g) Cafeteria and restaurant

All markets must have refreshment facilities on site, or very close by, and these will vary depending on the size and type of market, from a timber building or portacabin to a large building of permanent construction which offers a full meal service with restaurant drinks licence, and may be open on non market days to serve other commercial premises in the locality.

A lease may specify that an additional sum of rent shall be payable for the restaurant, usually in relation to gross income, and in such cases the lease terms should be followed in the rating valuation of the mart. For most markets the facility should be reflected in the valuation with no separate addition unless it generates a good income from meals and licensed sales, including on non market days. In this case a separate addition should be made on the basis of a %age of gross receipts but having regard also to the rental basis for separately assessed cafes and restaurants in the locality.

In cases where the restaurant/café is not in the paramount occupation of the market operator because for example it is let on lease to a caterer, then it should be separately assessed in accordance with the normal rating principles.

(h ) Horse sales

Some marts such as Melton, are now beginning to develop a good market in horse sales, and it is recommended that the %age of gross commissions for this source of income be increased by 2.5% when gross commissions from this source comprise more than 10% of total livestock income. Small scale sales below this level should be valued at the appropriate gross commission rate for the mart as a whole.

(i) Advertising rights

Normally separately assessed unless it is not let out, and comprises an advertising station ( see Rating manual Section 6 part 3 section 20)

The above list is not exhaustive, and any other examples where guidance is needed should be referred to the specialist valuer in CEO Local Taxation ( Rating).

5. Essential Information

5.1 If a consistent and correct basis is to be achieved, then it is essential to obtain actual turnover and/or gross commissions, or sufficient background information, eg average commission rates, to enable accurate estimates of these figures where the appropriate information is not forthcoming. A breakdown between the various type of livestock and non livestock income should be requested as set out in the questionnaire attached as appendix 1. Information may be obtained informally or using 2003 FOR number VO 6043..

It may not be sufficient to have regard to just the 2002/3 year trading figures. The VO must consider whether these can reasonably be expected to be maintained.

5.2 Full information is always required in the case of markets let at current rents, and a copy of the lease is preferable to relying upon information contained in the Form of Return .

5.3 The terms of occupation of ancillary activities need to be ascertained in order to decide whether a separate unit of assessment is appropriate.

5.4 If it is claimed that operating expenses for the market are well above average, and therefore the valuation basis for the mart be reduced, or the market should valued on a full accounts basis, then full accounts information should be obtained and advice sought from CEO Local Taxation ( Rating)..

6. Bloodstock markets

Included in this special category code are horse bloodstock markets at Newmarket and Doncaster. These markets are quite different from the normal livestock market in terms of their physical facilities and the nature of the sales, which take place, although some livestock marts may from time to time hold sales of horses, which are not bloodstock.

Horse bloodstock markets will be valued on a receipts method but should not be valued in accordance with this Practice Note.