Public houses, inns and bars
This publication is intended for Valuation Officers. It may contain links to internal resources that are not available through this version.
This section deals with the rateability and valuation of the various types of public house, inns and bars and licensed restaurants in the nature of a public house.
The descriptions to be adopted, as appropriate, are public house and premises, public house, lodge and premises, inn and premises and finally bar and premises.
The special category codes to be adopted are:
226 to be used in all cases where there is no letting accommodation, or if letting accommodation is available this comprises six or less bed spaces,
227 to be used where the hereditament includes purpose built lodge style letting accommodation, either attached or stand-alone,
062 (Inns) - to be used where letting accommodation, comprising more than six bed spaces, is available within the main building/complex of buildings
303 (Bars) - to be used where because of the physical nature of the premises and the immediate A3/A4 market a floor space based valuation is the adopted approach.
In all instances the suffix “G” for generalist should be used to denote responsibility.
It is the responsibility of the generalist teams within the business units (each unit will have a CCT member to undertake the valuations in accordance with the published practice note.
The public houses and Clubs Class Co-ordination team has overall responsibility for the co-ordination of this class. The team are responsible for the approach to and 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 have a responsibility to:
- follow the advice given at all times
- not depart from the guidance given without approval from the co-ordination team
- seek advice from the co-ordination team before starting any new work
- where a floor space valuation approach is to be adopted then co-ordination with the Restaurants CCT is required (VP and CCT Members).
- where a public house or Inn has significant income from letting rooms in a location with significant competition from Hotels and Guest Houses then co-ordination with the Hotel CCT is recommended (VP and CCT Members).
5.1 Public Houses and other licensed premises must comply with certain legislation in order to trade and full compliance is assumed.
5.2 Planning
5.2.1 In particular, with regard to permitted Use in the Town & Country Planning Use Classes Order 1987 (as amended). This Order was amended in England in 2005 dividing the A3 Class further into:
A3 - Restaurants and cafes for the sale of food and drink for consumption on the premises - restaurants, snack bars and cafés
A4 - Drinking establishments the primary purpose for the sale and consumption of alcohol on the premises - typically public houses, bars and wine bars (but not night clubs) and,
A5 - Hot food takeaways for the sale of hot food for consumption off the premises.
The amendments to the order only apply in England and do not apply in Wales which retained the original A3 use class under the 1987 order. A consultation on adopting a similar system to England took place in 2018.
5.2.2 Change of use from A3 is generally permitted to either A1 and A2 under the permitted development rights without the need for further planning permission.
5.2.4 Similarly it is generally permitted that A5 and A4 Users can change use to either A1, A2 or A3.
However, there is currently no permitted change of use from A3 to either A4 or A5 Use Classes.
5.2.4 A flexible change of use for A1 properties with accommodation under 150m² is allowed to A3 use.
5.3 The sale of alcohol on the premises
5.3.1 Premises serving alcohol are required to hold a premises licence issued by the Local Authority under the Licensing Act 2003. It is necessary for both the proprietor and the property to be licensed. The Licensing Act 2003 is the principal Act relating to Licensed Property in England and Wales. Thus,
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any business or other organisation that sells alcohol on a permanent basis needs to have obtained a premises licence.
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anyone who plans to sell or supply alcohol or authorise the sale or supply of alcohol must have obtained a personal licence.
5.3.2 The details of the licence held will be displayed at the property.
5.3.3 Hot food takeaways supplying hot food after 11pm are also required to hold a premises licence.
5.4 Regulated entertainment
Whether permission is needed in the premises licence for music entertainment will depend on the circumstances. A licence is not required to stage a performance of live music, or the playing of recorded music if:
a. it takes place between 8am and 11pm
b. it takes place at an alcohol on-licensed premises
the audience is no more than 500 people
A licence is also not required:
a. to put on unamplified live music at any place between the same hours
b. to put on amplified live music at a workplace between the same hours and provided the audience is no more than 500 people.
Regulated entertainment also includes films, plays and dances, and boxing and wrestling. It is also possible to apply for a Temporary Event Notice up to 15 times a year per premises, to allow for activities including regulated entertainment or later opening hours for a limited period.
6.1 Traditional purpose built Public Houses
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an inspection check list for use on all inspections should be placed in the Electronic Document Records Management (EDRM) system
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the basis of measurement for this class is Net Internal Area in accordance with the VO Code of Measuring Practice for Rating Purposes in England and Wales
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for new licensed premises or following alterations the occupier should be asked for a copy of the deposited plan which has to be produced to the licensing authority. The bars, servery, trade kitchens, toilets, cellars, eating areas, games areas (indoor or outdoor), off-sales counter and any other trading or trade related areas should be clearly annotated. Beer gardens, forecourt/pavement drinking areas and on site parking should also be identified
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for traditional public houses or public house restaurants a full survey of the non-domestic accommodation is not required. Where a deposited plan has been supplied the main dimensions should be checked against measurements scaled from the plan. In other cases a sketch plan recording the main dimensions of the public areas including serveries will suffice
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traditional Public Houses are normally valued by reference to their fair maintainable turnover (FMT) but for comparison purposes the plans provided or measurements taken should be sufficient to calculate a customer area (including servery)
6.2 Inns
In addition to those requirements outlined above for Public Houses, full details of the available letting accommodation should be obtained. This should include the total number of rooms available by floor and if benefitting from lifts, type of room (for example single, double, family etc. and whether en-suite) and quality/style of operation (for example basic bed and breakfast, lodge style, boutique etc.).
6.3 Public houses, public house restaurants, restaurants in the nature of public houses, bars, etc. in new developments or premises converted to such use.
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inspections should be carried out in accordance with the Valuation Office Agency Code of Practice
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pub restaurants/restaurants should be measured to Net Internal Area (NIA) for rating purposes in accordance with the RICS Code of Measuring Practice 6th edition or its replacement
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NIA is taken as the usable area within a building measured to the face of the internal finish of perimeter or party walls ignoring skirting boards and taking each floor into account
- NIA will normally exclude toilets and associated lobbies used solely for staff purposes. However toilets primarily available to customers will need to be measured and included in the valuation
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separate areas should be provided for the respective uses on each floor level, and in particular for the following uses within the hereditament: restaurant, servery, bar, kitchen, stores, offices, cold stores and upper level stores
- all features likely to have a bearing on value should be recorded in sufficient detail. Their importance will vary, dependent upon the nature of the custom being sought, and the trade potential for the particular style of catering operation. The suitability of the surrounding areas, the presence of parking (or other transport) facilities and the style of a building may have a greater influence for the more exclusive restaurant offers
Note - For more detailed information on survey and inspection requirements of restaurants see Rating Manual: section 6 part 3 - section 875. If you have any doubts as to the survey requirements, speak to your Unit CCT member in the first instance.
All inspection notes, checklists, plans and other relevant material should be captured in EDRM.
Relevant survey details and remarks should be entered against the case in the Licensed Property Application (LPA) on RSA and photographs, which are invaluable, should be placed in RSA.
Public houses, bars and inns are valued on a rentals basis.
Traditional public houses use the “fair maintainable turnover” as the comparator to assist in the analysis of rental evidence and therefore as a valuation basis. Percentage rental bids are applied to the various income streams which make up the FMT depending on location, age, modernity, style of operation etc. as set out in the Valuation of public houses approved guide, contained in the practice note.
Public Houses and Bars in converted premises or new developments where a distinct licensed/A3 restaurant market exists may, where the rental evidence is supportive, use floor space as the comparator and therefore as a valuation basis. The floor measurement practice applied should accord with that adopted for A3 restaurant use. For detailed information on the valuation requirements of restaurants in such circumstances refer to Rating Manual: section 6 part 3 - section 875.
The interface between public house or restaurant styles of occupation and the application of either a trade based or floor space valuation approach is not always clear or straightforward. If any uncertainty exists seek advice, in the first instance, from your Unit CCT member.
8.1 Disclosure of trading information
Brewers and licensed retailers jealously guard their trading information due to what they regard as its sensitivity and confidential nature. They are particularly anxious to avoid their trade being disclosed to any predator considering a take over bid.
Likewise, free traders and tied tenants also, quite rightly, expect any information they supply to Valuation Officers (VOs) not to be divulged to third parties without good reason. Tenants are particularly keen that their landlord does not obtain details of any ‘wet trade’ outside tie or ‘dry trade’ which could be used against them in future rent review negotiations.
All brewers, licensed retailers, free traders and tied tenants obviously do not wish their trading position to be disclosed to competitors or potential competitors in the vicinity.
The Valuation Office Agency recognises these legitimate concerns and it is important for all staff to be fully aware that such information should not be disclosed to anyone other than in accordance with the agreed Code of Practice. (See Appendix 1).
During the course of negotiations VOs should not disclose to an owner trade information given by the occupier. Such information may only be disclosed to the owner’s agent if the agent is also representing the occupier in an appeal.
There is however no restriction on the VO disclosing, during the course of negotiation as may be considered appropriate, trade information supplied by a former owner or tenant (or on their behalf) to the present owner or tenant (or an agent acting on their behalf) who has acquired a similar or greater interest in the property following a freehold sale or assignment of lease.
VOs should be on their guard against any maker of a proposal who appears to be embarking on a fishing expedition in an attempt to ascertain the trade information of other properties especially where any pattern of enquiry is discernible e.g. the same company owns each property cited or properties are not comparable in type or location. If improper enquiries are made negotiations should be suspended until the appeal is listed for VT, at which time extreme caution should be exercised before divulging any information.
The procedure of serving notice in accordance with Regulation 41(3) of The Non-Domestic Rating (Alteration of Lists and Appeals) Regulations 1993 (S1 1993/291), (or Regulation 39(3) S1 1990/582), should be used sparingly and only as a last resort in those cases where the basis of valuation of an assessment is seriously under attack and the VO considers rental evidence/trade details of comparables are imperative to support the assessment. In such cases the number of comparables cited should be kept to the minimum necessary to support the appeal assessment.
8.2 Material change of circumstances (MCC)
The trade figures adopted for the compiled list should represent the annual trade considered to be maintainable at the antecedent valuation date (AVD), having regard to the physical nature of the property and its location as at the compilation day, when the new rating lists come into force.
However, there may have been a change in either the physical state of the hereditament, or its locality, either between the AVD and compilation date or post compilation, which might have influenced the FMT at the AVD had such changes existed at that time. These changes are usually referred to as a material change of circumstances (MCC), Schedule 6 para 2(7) of the Local Government Finance Act 1988 refers.
When considering the potential impact of an MCC in the FMT the following guidance should be followed:
a. confirm the identity and relevance of the quoted MCC
b. consider the trade actually achieved for the 12 months either side of the MCC - this enables trade to settle back down from any initial impact (actual receipts may need to be broken down month by month to ensure it is the MCC influencing the trade)
c. identify the change to the actual trade (increase or decrease) - any mitigating action likely to be carried out by the reasonably competent publican should be taken into consideration
d. can this be linked to the MCC in question?
e. are there any other factors which may have influenced the change but which have to be excluded for rating purpose such as economic factors or changes to spending preferences?
f. identify the change in trade, expressed as a percentage, due solely to the quoted MCC. Changes in trade identified at other public houses in the locality due to the same MCC, or which have not been affected by the MCC, may assist in making this judgement
g. apply the percentage change due solely to the MCC to the adopted FMT at the AVD and revalue
h. stand back and consider the revised RV which will represent the hypothetical rental value of the premises at the AVD but reflect the physical circumstances at the material day
As RPI/CPI measure price changes not volumes and as both are a national measures they are considered too crude to be relevant indicators for MCCs and therefore have no place in MCC deliberations
Valuations should be undertaken in the Licensed Property Application within RSA. Other support available:
- Survaid
- Unit CCT member
- Class Co-ordination team
1. Market appraisal
Leading benchmarking surveys and reports on licensed hospitality show that the industry has seen a continued response to shifting consumer demand, as alternative streams of revenue such as food and accommodation continue to grow. They also report continuing pressure on costs, with overheads reaching a ten-year high. Payroll is still the single largest cost, driven by pressure from increases in the minimum wage and living wage and the higher staffing costs of food-led operations.
The challenging market conditions that the leisure and hospitality industry has faced are well documented and publicised. The industry’s approach has been to experiment and adapt. The majority of major operators have largely completed their disposal programs, which were a major driver of the reduction in pub numbers. At the same time, operators have opened new larger premises better suited to the new market conditions, for example providing improved food offers, and accommodation offers are increasingly common. Other segments of the industry are experimenting with new formats to follow the changing market. Drinks offers are evolving, with a move towards a greater range of no- and low-alcohol drinks to attract customers from this growing market segment.
While overall numbers of pubs have continued to fall, the decline has slowed significantly since the recessionary period, as turnover levels stabilise and the number of employees has risen again over recent years. These changes are not uniform across the market though, as in many instances, larger pubs have performed better than smaller ones.
2019 saw moderate growth for the industry however market sentiment is better in the drink-led than the food-led segments of the industry.
This is in contrast with the restaurant sector which continues to struggle due to a combination of customer tastes and over-supply.
While rent levels appear to have risen slightly from 2015, there will be significant regional and market variations. The implementation of the Pubs Code in July 2016 has yet to result in significant numbers of premises moving to
Market Rent Only terms, and its impact may be seen more in the negotiating position of tenants who ultimately remain tied.
1A. Impact of the COVID19 pandemic
The COVID19 pandemic had a major impact on the leisure industry in the period leading up to AVD (1 April 2021). Details of the various restrictions implemented by statute in response to the pandemic, and of the vaccination rollout, can be found online. In February 2021 the UK Government published its Roadmap out of lockdown for England which set out four steps to relax restrictions. Step 1 had already taken place by the AVD, although pubs were still restrictions on pubs at this time.
The later three stages of the Roadmap for England included
- the opening of outdoor hospitality and outdoor dining (Step 2, no earlier than 12 April);
- the opening of indoor and outdoor eating and drinking subject to social distancing measures (Step 3, no earlier than 17 May); and
- the removal of remaining restrictions on openings/events (Step 4, no earlier than 21 June).
Subsequent to 1 April 2021 Steps 2 and 3 took place as planned, but Step 4 was delayed four weeks to 19 July.
The situation in Wales, both leading up to and after the AVD, was similar although not identical.
2. Changes from the last practice note
There have been changes to the categories and all percentage ranges within the approved guide to the valuation of public houses have been revised. There have been a number of further amendments. Any queries should be referred to the pubs and clubs CCT via your unit CCT member/RLPV in the first instance.
Further guidance on floor area approaches and micropubs has been given.
3. Ratepayer discussions
The Pubs Rating Forum was established in the autumn of 2014 in order to provide a vehicle through which the pub industry and the Valuation Office Agency can maintain an on-going dialogue and exchange of information in respect of matters relevant to the valuation for rating of public houses.
The member organisations of the Forum are as follows:
- British Beer and Pub Association
- UK hospitality
- British Institute of Innkeeping
- Federation of Licensed Victuallers Associations
- Guild of Master Victuallers
In collaboration with the Forum the available rental evidence has been analysed and considered in detail, along with other market performance indicators. The approved guide has been agreed with the forum.
4. Valuation scheme
The approved guide at Appendix 1 should be referred to in conjunction with this practice note.
5. Floor area approaches
There are circumstances in which a floor area approach can be considered. Section 7.1 of the approved guide covers one set of circumstances and should be considered carefully before adopting any floor area approach. Licenced properties valued on a floor area approach may remain on the Licenced Property Application, which has facilities to support floor area calculations, and be classified under Scat code 303. Floor areas should be calculated to NIA on an overall approach, zoning is not an appropriate method.
5.1 Micropubs
An emerging market sector, these are generally small single room premises concentrating on a drink offer, primarily in adapted retail premises. Their operating model may differ from the traditional public houses and larger high street pubs and bars that provide the majority of rental evidence for the Approved Guide. When valuing this style of operation in small former retail units or similar where only minor alterations have taken place, a trade-based approach under the Approved Guide may not produce a realistic figure, and a floor area approach may be considered.
Mode or category should be considered carefully after inspection to ascertain the level of adaption present and extent of fit out. Along with any relevant rent on the subject property, evidence from other A3/A4 units should be considered, rather than A1 shops in the vicinity. Levels of fit out should be considered when analysing rental evidence.
Note that under NIA a small WC provision shared between customers and staff would be excluded from the customer area.
Advice on this category can be sought from the pubs and clubs CCT.
This is the approved guide to valuation.
1. Market Appraisal
The Association of Licensed Multiple Retailers undertakes an annual survey which is recognised across the industry as a significant reference point for benchmarking the key performance indicators in licensed hospitality.
The headline results of the survey conducted in February 2015 showed the following:
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“A consolidated recovery: last year’s report showed a more confident and robust sector with costs under control and capex, employment back on track. That trend continues this year and like for likes continue to improve as operators trade their way out of recession.
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A more robust sector: as the recovery continues, we are seeing evidence of less variation across the outlet universe and within market segments. There is evidence of a levelling up.
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Which may be jeopardised by unsustainable costs: after last year’s tightening, margins have improved, but the volatility in this area and that of employment highlights ongoing fragility. Operating costs directly linked to legislation, particularly those in the late night sector such as levies and licensing fees, have risen. It is clear that, whilst the sector is well placed for growth, continued economic challenges and lack of consumer confidence mean there is little headroom for operators to absorb any additional cost burdens.”
In terms of the rental market the whole country is now experiencing an improvement in economic conditions, fuelled particularly by the strong market evidenced in London. Once people start to have more disposable income, trading performances should start to improve. With improved market confidence and trading performance, rental values will improve, but that is undoubtedly from a lower base in 2015 when compared to that seen in 2008.
2. Changes from the Last Practice Note
All valuation scales within the Approved Guide to the Valuation of Public Houses have been revised. The categorisation of property types and locations within the various percentage to RV ranges have been changed to better match the evolution of the market over the past 7 years. Unit lead LP Specialists will have had these changes explained to them in advance of commencing revaluation. Any queries should be referred to them in the first instance.
3. Ratepayer Discussions
The Pubs Rating Forum was established in the autumn of 2014 in order to provide a vehicle through which the pub industry and the Valuation Office Agency can maintain an on-going dialogue and exchange of information in respect of matters relevant to the valuation for Rating of public houses.
The member organisations of the Forum are as follows:
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British Beer & Pub Association
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Association of Licensed Multiple Retailers
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British Institute of Innkeeping
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Federation of Licensed Victuallers Associations
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Guild of Master Victuallers
In collaboration with the Forum and its appointed rating advisers (Gerald Eve, Lawrence Tattersall, BNP Paribas and Davis Coffer Lyons) the available rental evidence has been analysed and considered in detail, along with other market performance indicators. The Approved Guide has been agreed with the Forum, following a period of 4 months intensive discussions covering all relevant factors.
4. Valuation Scheme
Reference should be made to the Approved Guide at Appendix 1 to this Practice Note.
The Revaluation 2017 Approved Guide for the Valuation of Public Houses is only available as a PDF File.
The documents below are in Adobe PDF format. To view these documents you will need the Adobe Acrobat PDF viewer. If you do not have this you can download the Acrobat Reader free of charge.
This Code of Practice, which is being issued as an indication of the general policy of the Valuation Office, supersedes any earlier Code of Practice and relates to specified information supplied to the Valuation Officer following a notice served under either Section 82 of the General Rate Act 1967 or paragraph 5 of Schedule 9 to the Local Government Finance Act 1988, as amended by paragraph 46 of Schedule 5 to the Local Government and Housing Act 1989. Such information will have been requested by the Valuation Officer in the belief that it will assist him/her in carrying out functions conferred or imposed by or under Part III of the 1988 Act (concerning non-domestic rating), including the compilation of a new rating list, or the maintenance of the rating list now in force.
The Valuation Office acknowledges the wish of the members of the Brewers’ Society to preserve what they consider to be the confidential nature of trade information supplied to Valuation Officers in compliance with notices served upon them in accordance with the foregoing paragraph.
The Brewers’ Society, together with its agents, acknowledges that this Code of Practice is being issued entirely without prejudice to any requirement to disclose the trade information referred to above by law, and to each Valuation Officer’s statutory duty. The Valuation Officer reserves the right to examine each case on its individual merits.
The information supplied in compliance with such notices will not be disclosed to other Government Departments, without prejudice to any statutory or other legal requirements to the contrary. Whilst any information supplied to the Valuation Office will not as a matter of general practice be supplied to other branches of the Inland Revenue no formal restriction can be placed on the use within the Inland Revenue of the returns or the information contained in them.
The following will be the general practice adopted by Valuation Officers and their staff in dealing with rating cases concerning Brewers’ public houses:
- Trade information supplied in respect of a hereditament will not be disclosed to any person without the written consent of the person supplying the information, or the person/body on whose behalf the information was supplied, except in the following circumstances:
a. Where a proposal has been made the Valuation Officer may, in the course of negotiation, disclose trade information to the parties to an appeal in respect of that hereditament, except that where the owner, or the owner’s agent, is acting independently of the occupier, information supplied by the occupier shall not be divulged other than in accordance with 1(c) - 1(e) below.
b. In order to deal with the assertions made by any party in negotiations or prior to the hearing of an appeal in relation to the rating assessment of any similar hereditament, the Valuation Officer shall, wherever possible, endeavour to give details of analyses etc which have regard to trade information in such a manner that the trade of a specific hereditament or of any individual cannot be identified.
If it becomes essential for the Valuation Officer to refer to the actual trade of a hereditament, that information (or any other information supplied) will be disclosed in confidence only to the parties to an appeal or their professional advisers.
a. If an appeal cannot be settled by agreement, and it is listed for hearing by the Valuation and Community Charge Tribunal, where the Valuation Officer considers it necessary to refer to trade information of comparable hereditaments in support of the assessment under appeal he will serve notice in accordance with Regulation 39(3) of The Non-domestic Rating (Alteration of Lists and Appeals) Regulation 1990 (Statutory Instrument 1990 No 582).
Valuation Officers undertake to use this procedure judiciously and to limit the number of hereditaments to which the notice relates to those reasonably required to support the level of assessment of the appeal hereditament.
a. When any person to whom notice has been given in accordance with 1(c) above serves notice on the Valuation Officer in accordance with Regulation 39(4), the Valuation Officer will generally comply provided that he/she intends to support the valuation of the appeal hereditament by reference to trade information and further that he/she is satisfied that the hereditament specified in such notice is comparable in character or otherwise relevant to the appeal hereditament or that the trade information of the hereditament specified in the notice is directly related to the rating assessment of the appeal hereditament.
The Valuation Officer may refuse to comply with such notice if he/she is not satisfied that the hereditament is comparable in character or otherwise relevant to the case of the person who served such notice, or to the appeal hereditament, and the Valuation Officer will not divulge trade information where the assessment of the appeal property falls to be determined solely by reference to rents or costs.
a. If the person who serves notice under paragraph 1(d) above applies to the Valuation and Community Charge Tribunal or arbitrator under Regulation 39(6) where the Valuation Officer has refused or failed to comply with the notice or part of it, he/she may defend his/her decision. If the Tribunal or arbitrator is satisfied that it is reasonable to do so, it or he/she may direct the Valuation Officer to comply with the notice in all or part and in such circumstances the Valuation Officer will, of course, comply subject to any possible appeal.
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The Brewers’ Society will recommend to members that, prior to any hearing by the Valuation and Community Charge Tribunal or Lands Tribunal, they, and their professional advisers, should co-operate with Valuation Officers in the agreement of facts relating to the appeal hereditament, and (so far as they are able) of facts relating to any comparable hereditament to which either side proposes to refer.
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The Valuation Officer will not object to a request from any other party under regulation 38(3) of the aforementioned regulations to the Valuation and Community Charge Tribunal for the case to be heard in camera where trade information is to be disclosed, (but such an arrangement cannot prevail in the event of an appeal to the Lands Tribunal and beyond).
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Notwithstanding the foregoing, if the Lands Tribunal or a superior Court make an order for discovery under Rule 40 of the Lands Tribunal Rules, the Valuation Officer will be bound to comply.
This Code of Practice, which is being issued as an indication of the general policy of the Valuation Office, supersedes any earlier Code of Practice and relates to specified information supplied to the Valuation Officer following a notice served under either Section 82 of the General Rate Act 1967 or paragraph 5 of Schedule 9 to the Local Government Finance Act 1988, as amended by paragraph 46 of Schedule 5 to the Local Government and Housing Act 1989. Such information will have been requested by the Valuation Officer in the belief that it will assist him/her in carrying out functions conferred or imposed by or under Part III of the 1988 Act (concerning non-domestic rating), including the compilation of a new rating list, or the maintenance of the rating list now in force.
The Valuation Office acknowledges the wish of the members of the National Licensed Victuallers Association (NLVA) to preserve what they consider to be the confidential nature of trade information supplied to Valuation Officers in compliance with notices served upon them in accordance with the foregoing paragraph.
The NLVA and its agents acknowledges that this Code of Practice is being issued entirely without prejudice to any requirement to disclose the trade information referred to above by law, and to each Valuation Officer’s statutory duty. The Valuation Officer reserves the right to examine each case on its individual merits.
The information supplied in compliance with such notices will not be disclosed to other Government Departments, without prejudice to any statutory or other legal requirements to the contrary. Whilst any information supplied to the Valuation Office will not as a matter of general practice be supplied to other branches of the Inland Revenue no formal restriction can be placed on the use within the Inland Revenue of the returns or the information contained in them.
The following will be the general practice adopted by Valuation Officers and their staff in dealing with rating cases concerning public houses owned and occupied by members of the NLVA:
- Trade information supplied in respect of a hereditament will not be disclosed to any person other than the parties to an appeal in respect of that hereditament without the written consent of the person supplying the information, or the person/body on whose behalf the information was supplied, except in the following circumstances:
a. In order to deal with the assertions made by any party in negotiations or prior to the hearing of an appeal in relation to the rating assessment of any similar hereditament, the Valuation Officer shall, wherever possible, endeavour to give details of analyses etc which have regard to trade information in such a manner that the trade of a specific hereditament or of any individual cannot be identified.
If it becomes essential for the Valuation Officer to refer to the actual trade of a hereditament, that information (or any other information supplied) will be disclosed in confidence only to the parties to an appeal or their professional advisers.
a. If an appeal cannot be settled by agreement, and it is listed for hearing by the Valuation and Community Charge Tribunal, where the Valuation Officer considers it necessary to refer to trade information of comparable hereditaments in support of the assessment under appeal he will serve notice in accordance with Regulation 39(3) of The Non-domestic Rating (Alteration of Lists and Appeals) Regulation 1990 (Statutory Instrument 1990 No 582).
Valuation Officers undertake to use this procedure judiciously and to limit the number of hereditaments to which the notice relates to those reasonably required to support the level of assessment of the appeal hereditament.
a. When any person to whom notice has been given in accordance with 1(b) above serves notice on the Valuation Officer in accordance with Regulation 39(4), the Valuation Officer will generally comply provided that he/she intends to support the valuation of the appeal hereditament by reference to trade information and further that he/she is satisfied that the hereditament specified in such notice is comparable in character or otherwise relevant to the appeal hereditament or that the trade information of the hereditament specified in the notice is directly related to the rating assessment of the appeal hereditament.
The Valuation Officer may refuse to comply with such notice if he/she is not satisfied that the hereditament is comparable in character or otherwise relevant to the case of the person who served such notice, or to the appeal hereditament, and the Valuation Officer will not divulge trade information where the assessment of the appeal property falls to be determined solely by reference to rents or costs.
a. If the person who serves notice under paragraph 1(c) above applies to the Valuation and Community Charge Tribunal or arbitrator under Regulation 39(6) where the Valuation Officer has refused or failed to comply with the notice or part of it, he/she may defend his/her decision. If the Tribunal or arbitrator is satisfied that it is reasonable to do so, it or he/she may direct the Valuation Officer to comply with the notice in all or part and in such circumstances the Valuation Officer will, of course, comply subject to any possible appeal.
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The NLVA will recommend to members that, prior to any hearing by the Valuation and Community Charge Tribunal or Lands Tribunal, they, and their professional advisers, should co-operate with Valuation Officers in the agreement of facts relating to the appeal hereditament, and (so far as they are able) of facts relating to any comparable hereditament to which either side proposes to refer.
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The Valuation Officer will not object to a request from any other party under regulation 38(3) of the aforementioned regulations to the Valuation and Community Charge Tribunal for the case to be heard in camera where trade information is to be disclosed, (but such an arrangement cannot prevail in the event of an appeal to the Lands Tribunal and beyond).
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Notwithstanding the foregoing, if the Lands Tribunal or a superior Court make an order for discovery under Rule 40 of the Lands Tribunal Rules, the Valuation Officer will be bound to comply.
1. Co-ordination
1.0 Public Houses (including inns, public house style restaurants, bars & café-bars)
Public houses are a Group class (outside London) subject to a national scheme. The Southern SRU is responsible for valuing public houses for the 3 London Group Offices.
The Group Licensed Property Valuer (GLPS) is responsible for co-ordination within the group. Regional Licensed Property Valuers (RLPS) are responsible for a cluster of Groups, overseeing effective co-ordination, both in their Groups and cross border.
The Special Category Codes for public houses, inns, public house style restaurants, bars and café-bars are:
226 - to be used in all cases where there is no letting accommodation, or if letting accommodation is available this comprises six or less bed spaces,
227 - to be used where the hereditament includes purpose built lodge style letting accommodation, either attached or stand-alone,
062 (coaching and other inns) - to be used where letting accommodation, comprising more than six bed spaces, is available within the main building/complex of buildings
Outside London, as a Group class, the appropriate suffix letter is G. In London, where public houses are valued by the SRU, the appropriate suffix letter is S.
1.1 Wine bars
Wine bars are a Group Class and responsibility for ensuring that appropriate co-ordination takes place lies with the Groups. Co-ordination responsibilities are set out in Rating Manual Section 6 part 1.
Special Category Code 303 should be used. As a Group Class the appropriate suffix letter should be G. (In London, if the property is valued by the SRU, the appropriate suffix letter will be S.)
Historically wine bars had an “On-Licence” for the sale of wine only, but even before the Licensing Act 2003 which removed the different categories of licence, many operated with a full “On-Licence” permitting the sale of intoxicating liquor of all descriptions for consumption on or off the premises during permitted hours. Licensed restaurants would, in most cases, have only had a “Part IV” licence permitting the sale of intoxicating liquor only to diners taking table meals where consumption is ancillary to the meal - this distinction has also been removed by the 2003 Act.
1.2 Licensed Restaurants
Responsibility for the valuation of restaurants is divided between Groups and the SRU, depending on the type and characteristics of the restaurant.
Licensed restaurants that are physically similar or trade in the nature to a public house/public house restaurant, or where potential occupiers of the property are likely to be brewers, pubcos, their tenants or freetraders, should be given the same Special Category Codes as for public houses. (See paragraph 1.1 above.) As a group class, the appropriate suffix letter should be G. (In London, if valued by the SRU, the appropriate suffix letter will be S.)
Roadside restaurants (e.g. Little Chef or similar) have been classified as a Group class (national scheme) with a Special Category Code of 238. (See Rating Manual section 6 part 3 - section 880.) The appropriate suffix letter to be used is G.
Drive In (or freestanding) restaurants have been allocated Special Category Code 091, Drive Thru restaurants should be coded 092. (See Rating Manual Section 6 Part 3 - Section 365.) In all cases the special category code should be suffixed with the letter G or S, depending on whether dealt with by Groups or SRUs.
All other restaurants not falling into the above categories should have Special Category Code 234.
2. Central Discussions
Representations were invited from organisations representing occupiers of public houses. Various reports on the state of the industry have been provided to the Valuation Office, including those commissioned by the British Institute of Innkeeping, the Federation of Licensed Victuallers Associations and the Association of Licensed Multiple Retailers. The method of valuation and the levels of value have been discussed in detail with the British Beer & Pub Association (BBPA).
In the course of these discussions evidence of a considerable number of rents and turnover has been examined. Rents have been adjusted for domestic accommodation (if applicable) and then, in most cases, analysed in terms of receipts, excluding VAT.
Similar discussions took place for previous revaluations. These resulted in agreement, with the BBPA, of the valuation framework for the 2005, 2000 and 1995 rating lists. These are published as Approved Guides.
3. Method of Valuation
3.1 Public Houses
The method of valuation is set out in “Rating Lists 2010 Valuation of Public Houses Approved Guide.” (See Rating Manual section 6 part 3 - 5 Section 825 Practice Note 1: 2010 Appendix 1.) This has been agreed with the BBPA.
Broadly, in most cases, this involves determining the fair maintainable trade of the property, excluding VAT. This will be split between gross receipts for liquor, food, accommodation and other sales; and net receipts from gaming machines. Rental percentages are then to be determined and applied to these income streams. In most cases the rateable value will be the sum attributable to these, together with the value attributable to any other part of the property that is not reflected in the fair maintainable trade.
3.2 Bars
Where a licensed property forms part of a distinct market for a particular location, for which there is relevant market evidence, consideration needs to be given as to whether the property will be more correctly valued on a floor area comparative basis, rather than by reference to the fair maintainable receipts.
Such properties will usually be found together in major towns or cities, often occupying sites close to, or on the edge of, the prime retail location. They will often comprise refitted or prestigious premises converted in the 1990s or later, with large open plan areas (greater than 400 m2), although size is not necessarily definitive. Interchangeable use between bar and restaurant must be possible without offending the rating principle of “rebus sic stantibus”. Public houses retaining their traditional nature will not satisfy these criteria.
Following changes to planning use classes under the Town and Country Planning (Use Classes) (Amendment) (England) Order 2005, effective from 21 April 2005, public houses in England came under the new A4 use class which covers drinking establishments. A change of use from A4 to A3 is permitted development not requiring planning permission, whilst a change in the opposite direction is not.
Where a distinct licensed/A3 market can be identified, and the rents, when analysed, are consistent across that market (rather than specifically limited to that of public houses), enabling a tone of value to be established on a floor area comparative basis, then this rental evidence should be used to derive the RV.
3.3 Licensed Restaurants and Café Bars
Licensed restaurants, not in the nature of a public house, and café bars situated in shopping areas should be valued by reference to floor area, either ITZA or in accordance with the prevailing tone, having regard to rental evidence for A3 users. Those situated outside shopping areas should be valued by reference to floor area, having regard to the level of value for such A3 users, types of property and location.
3.4 Lodges
Lodges adjoining public houses should be valued on a percentage of receipts in accordance with Appendix 1.
3.5 Letting Bedrooms
Where a property has letting bedrooms, it may be that the distinction between a public house/inn and a hotel is unclear. Guidance on this is set out in Appendix 2.
4. IT Application
The licensed property valuation application should be used to value all public houses, inns, public house style licensed restaurants and bars covered by this section, and wine bars valued on the receipts basis.
The Revaluation 2010 Approved Guide for the Valuation of Public Houses is now only available as a PDF File.
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1. Valuation
Public houses/Inns
These are to be valued in accordance with Rating Manual Section 6 part 3 - 5 Section 825 and the 2010 Practice Note. The scales agreed with the British Beer & Pub Association (BBPA) to determine the rental percentage for different income streams broadly increase as trade increases until the thresholds of £500,000 (liquor) and £400,000 (food) are reached. Accommodation receipts derived from letting six or less bedspaces will be added to the dry trade; for more than six bedspaces a separate percentage will be applied to accommodation receipts. Below the threshold, the resultant effect is the greater the liquor, food and accommodation receipts, the higher the overall rental percentage to rateable value becomes.
Four & five star and major chain operated hotels
These are to be valued in accordance with Rating Manual section 6 part 3 - 5 Section 510 and the 2010 Practice Note. The valuation scheme for each hotel type uses specific indicators as a guide to likely profitability. Thus, in very broad terms, the higher the accommodation receipts (the most profitable of the income streams), expressed both as a proportion of total receipts and per double bed unit, the higher the percentage to rateable value adopted. Conversely, the greater the proportion of liquor, food and other turnover, the lower the overall profitability of the business is likely to be and therefore a lower percentage will be applicable.
Independent three star hotels
These are to be valued having regard to local evidence, in accordance with Rating Manual section 6 part 3 - 5 Section 510 Practice Note 2010.
Purpose built lodges
Purpose built lodges adjoining or attached to public houses, should be valued using the scale for lodges and the liquor, food and other income streams for the public house valued in accordance with the Approved Guide. (Rating Manual section 6 part 3 - 5 Section 825 Practice Note 1 : 2010 Appendix 1.)
2. Effect of Valuation Bases
When applying the public house and hotel scales to the same level of fair maintainable trade, different values may arise, particularly for older properties, or those with a relatively low proportion of accommodation receipts.
Publicans/innkeepers and hoteliers however serve different markets, they have different expectations, incur different costs and achieve different levels of profitability. Thus any differences arising when applying the two valuation bases to fair maintainable trade are to be expected and reflect the nature of the business and the different rental markets. This should not cause problems provided the hereditament is correctly identified as either a public house or hotel and valued accordingly.
3. Distinction between Public Houses/Inns and Hotels
In most cases there will be no problem in identifying public houses/inns and hotels. Where, however, the distinction is blurred it is important to identify the exact nature and type of property that is being valued, and the likely occupier.
If the property provides public rooms, service and other facilities in addition to bedrooms, though it may have a significant licensed and restaurant trade (possibly at a relatively low profitability), it is likely to be an hotel. It is likely, on the other hand, to be a public house/inn if, whilst having letting rooms it does not have the usual facilities or provide the services normally associated with an hotel.
The physical characteristics of the property, the nature of business being carried on and the most likely occupiers of the property if vacant must be identified. The following factors, whilst not exhaustive, should be considered and may give some guidance:
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the Class of the Use Classes Order under which the property has planning permission,
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amount and relativity between the income streams for liquor trade, catering, accommodation and other,
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physical factors such as separate entrance, reception, sitting rooms, dining room etc. provided for residential guests and segregated from bar areas and licensee’s/proprietor’s or manager’s living accommodation,
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arrangement of letting bedrooms, type and standard of accommodation,
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whether bedrooms have en-suite facilities or bathrooms/WCs are shared, and if so with other guests or staff,
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level and type of services provided for residential guests,
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the type of staff employed, e.g. receptionist/telephonist, housekeeper, chambermaid, cook, waiters/waitresses, bar staff, night porter etc.,
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the history of occupation of the property and whether the occupier (or potential occupier) is likely to be a publican/innkeeper, who sees the opportunity to increase profit by utilising spare accommodation for letting purposes, or a hotelier who sees the opportunity to increase profit by attracting non-residential restaurant and bar trade,
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whether the property is run by a proprietor or managed on behalf of a company running a number of public houses/inns or hotels.
4. Valuation at the Interface
Very exceptionally where, following consideration of the essential nature of the hereditament, the current mode of operation and the likely operation of the hypothetical tenant, it is still not possible to determine whether the property should be regarded primarily as a public house/inn or an hotel, it may be necessary to adjust the percentage adopted to reflect the actual circumstances. In these circumstances, the following guidance may assist in the determination of the appropriate valuation method to be adopted:
a. where the percentage accommodation receipts are greater than 40% the hotel basis is most likely to be appropriate. The rental percentage adopted should generally be increased if a substantial part of the other income streams arises from a profitable bar. The resultant valuation should not exceed the valuation based on the public house scale,
b. where the accommodation receipts are below 30% the public house basis is most likely to be appropriate,
c. between 30% and 40% the property should be valued on both the public house basis and the hotel basis. If the hotel basis is increased (by say 1%) to reflect the profitability of the wet trade, or if a lower band/point within a band is adopted on the public house scale and the catering/accommodation are valued to reflect any extra services and lower profitability, any differences between the two bases should be minimised. This will also reflect the additional tenant’s capital required, and the increased complexity of the business, compared to a typical public house.
d. the above points must also be viewed in terms of the total receipts. For example, 40% of total FMT of £100,000 may still indicate that the property should be regarded as a public house/inn. On the other hand, 40% of total FMT of £1,000,000 is more likely to lead to the conclusion that the property is an hotel,
e. in cases where it is still not possible to determine the nature of the property, where the actual operator is an individual entrepreneur it is more likely that the property is being run primarily as a public house/inn. Where the property is being managed on behalf of a company running a number of public houses and hotels then, with the exception of the large, branded public house/restaurant chains, it is more likely that it will fall to be treated as a hotel.
5. Overview
In the vast majority of cases consideration of the factors set out in paragraph 3 above should enable the valuer to determine whether the hereditament should be regarded primarily as a public house/inn or an hotel. In those exceptional cases where the valuer is still uncertain as to the primary use of the property regard to the further considerations at paragraph 4 above should provide assistance and enable a conclusion to be drawn.
As with all valuations it will be necessary to stand back and look at the resultant figure to ensure the assessment is reasonable compared to other public houses/inns and older hotels in the locality.
This Code of Practice, which is being issued as an indication of the general policy of the Valuation Office Agency, supersedes any earlier Code of Practice and relates to specified information supplied to a Valuation Officer following a notice served under paragraph 5 of Schedule 9 to the Local Government Finance Act 1988, as amended by paragraph 46 of Schedule 5 to the Local Government and Housing Act 1989. Such information will have been requested by a Valuation Officer in the belief that it will assist them in carrying out functions conferred or imposed by or under Part III of the 1988 Act (concerning non-domestic rating), including the compilation of a new rating list, or the maintenance of the rating list now in force.
The Valuation Office Agency acknowledges the wish of the members of the following bodies;
British Beer & Pub Association (BBPA)
Association of Licensed Multiple Retailers (ALMR)
British Institute of Innkeeping (BII)
Federation of Licensed Victuallers Associations (FLVA)
Guild of Master Victuallers (GOMV)
to preserve what they consider to be the confidential nature of trade information supplied to Valuation Officers in compliance with notices served upon them in accordance with the foregoing paragraph.
These bodies, together with their representatives, acknowledge that this Code of Practice is being issued entirely without prejudice to any requirement to disclose the trade information referred to above by law, and to each Valuation Officer’s statutory duty. A Valuation Officer reserves the right to examine each case on its individual merits.
The information supplied in compliance with such notices will not be disclosed to other Government Departments, without prejudice to any statutory or other legal requirements to the contrary. Whilst any information supplied to a Valuation Officer will not as a matter of general practice be supplied to other branches of HMRC no formal restriction can be placed on the use within HMRC of the returns or the information contained in them.
The following will be the general practice adopted by Valuation Officers and their staff in dealing with rating cases concerning public houses:
1. Trade information supplied in respect of a hereditament will not be disclosed to any person without the written consent of the person supplying the information, or the person/body on whose behalf the information was supplied, except in the following circumstances:
a. Where a proposal has been made, a Valuation Officer may, in the course of negotiation, disclose trade information to the parties to an appeal in respect of that hereditament, except that where the owner, or the owner’s agent, is acting independently of the occupier, information supplied by the occupier shall not be divulged other than in accordance with 1(c) - 1(e) below.
b. In order to deal with the assertions made by any party in negotiations or prior to the hearing of an appeal in relation to the rating assessment of any similar hereditament, a Valuation Officer shall, wherever possible, endeavour to give details of analyses etc. which have regard to trade information in such a manner that the trade of a specific hereditament or of any individual cannot be identified.
If it becomes essential for a Valuation Officer to refer to the actual trade of a hereditament, that information (or any other information supplied) will be disclosed in confidence only to the parties to an appeal or their professional advisers.
c. If an appeal cannot be settled by agreement, and it is listed for hearing by the Valuation Tribunal Service (VTS), where a Valuation Officer considers it necessary to refer to trade information of comparable hereditaments in support of the assessment under appeal they will serve notice in accordance with Regulation 17 in England and Regulation 31 in Wales.
Valuation Officers undertake to use this procedure judiciously and to limit the number of hereditaments to which the notice relates to those reasonably required to support the level of assessment of the appeal hereditament.
d. When any person to whom notice has been given in accordance with 1(c) above serves notice on a Valuation Officer in accordance with Regulation 17(6) in England) or Regulation 31(4) in Wales, a Valuation Officer will generally comply provided that they intend to support the valuation of the appeal hereditament by reference to trade information. Provided also that they are satisfied that the hereditament specified in such notice is comparable in character or otherwise relevant to the appeal hereditament or that the trade information of the hereditament specified in the notice is directly related to the rating assessment of the appeal hereditament.
A Valuation Officer may refuse to comply with such notice if they are not satisfied that the hereditament is comparable in character or otherwise relevant to the case of the person who served such notice, or to the appeal hereditament, and a Valuation Officer will not divulge trade information where the assessment of the appeal property falls to be determined solely by reference to rents or costs.
e. If the person who serves notice under paragraph 1(d) above applies to the Valuation Tribunal Service or arbitrator under Regulation 17(9) in England or Regulation 31(7)in Wales in circumstances where a Valuation Officer has refused or failed to comply with the notice or part of it, they may defend their decision. If the Tribunal or arbitrator is satisfied that it is reasonable to do so, it or they may direct the Valuation Officer to comply with the notice in all or part and in such circumstances a Valuation Officer will, of course, comply subject to any possible appeal.
2. Those bodies, referred to above, will recommend to members that, prior to any hearing by the Valuation Tribunal Service or Upper Tribunal (Lands Chamber), they, and their professional advisers, should co-operate with Valuation Officers in the agreement of facts relating to the appeal hereditament, and (so far as they are able) of facts relating to any comparable hereditament to which either side proposes to refer.
3. A Valuation Officer will not object to a request from any other party under Regulation 37 of The Valuation Tribunal for Wales 2010 (SI 2010/713) or Regulations 31 of The Valuation Tribunal for England (Council Tax & Rating Appeals) (Procedure) Regulations 2009 (SI 2009 NO 2269) to the Valuation Tribunal Service for the case to be heard “in camera” where trade information is to be disclosed, (but such an arrangement cannot prevail in the event of an appeal to the Lands Tribunal and beyond).
4. Notwithstanding the foregoing, if the Upper Tribunal (Lands Chamber) or a superior Court make an order for discovery under Rule 40 of the Lands Tribunal Rules, the Valuation Officer will be bound to comply.