Farm visitor attractions facing ‘unfair’ business rates
© Tim Scrivener Farm attractions should consider challenging their assessments for business rates, say advisers, as they are being overcharged by up to £3m a year.
This is as a result of the way the government’s Valuation Office Agency (VOA) calculates valuations.
A 2019 Lower Tribunal relating to Thurleigh Farm Centre in Bedfordshire found that the VOA’s approach was “not appropriate” and reduced its valuation by three-quarters.
See also: Businesses rate rises and how to challenge valuations
Last autumn saw the conclusion of a four-year business rates challenge by Apple Jacks Adventure Farm near Warrington in Cheshire.
This case was heard in an Upper Tribunal hearing at the Royal Courts of Justice in London, which reduced the farm’s rateable value (RV) by two-thirds and declared the VOA’s approach “ill-advised”.
Apple Jacks’ RV was cut to £11,750 after challenging the Valuation Tribunal for England, which had previously ruled a rateable value of £35,000 was appropriate.
This took the valuation below the £12,000 small business threshold, which means that no rates are payable.
These cases hinged on the method used by the VOA to arrive at a rateable value.
The RV of a business is usually based on what the open market rent would be for a business.
However, where no direct rental evidence is available – which is the case with almost all farm attractions run by the farm owner – then other methods are used.
Shortened approach
In both these cases, the VOA used a percentage of the business’s gross turnover to arrive at the RV.
The VOA’s rating manual states that for the “vast majority” of farm parks, the percentage rate should be between 6% and 9%.
However, the court found that little weight should be attached to the shortened approach in this instance.
Overvalutions
History of farm park rate valuation rises |
||
|
Effective date of rates bill rise |
Farm parks increase |
Average increase across all business types |
|
2023 |
29% |
7% |
|
2017 |
51% |
2.5% |
Mark Wasilewski, a former city financial analyst, had worked with the National Farm Attractions Network (NFAN) to help challenge exponential rises in business rates.
He says there is strong evidence that other farm attractions have suffered from similar overvaluations.
Business rates are meant to be a property tax, but using this approach to come up with a rateable value for farm attractions effectively turns it into a sales tax, he says.
Mark acted for Apple Jacks in its challenge to the VOA and had previously won a large reduction in his own farm park business rates case. He is currently helping seven other businesses with challenges.
“Excessive rates are a big issue – I believe the [farm parks] sector is paying around £3m/year too much,” he says.
The top 100 farm parks saw average RVs rise 51% between the 2010 and 2017 revaluations.
The problem is not just for farm parks but extends to other farm diversifications, from caravan parks to holiday lets, says Mark.
He puts the average increase in the RV of agriculture-related properties in England and Wales between 2005 and 2020 at 38%, compared to an average rise for all properties of 20%.
For the 2023 revaluation, farm parks have seen another 29% increase in valuations, compared with just 7% for all other businesses, he says.
Mark also acted for York Maze, which had a hearing earlier this year. “Technically, this case was ‘won’, but the 8% reduction was disappointing,” he says.
Excessive rates are a big issue – I believe the [farm parks] sector is paying around £3m/year too much
“However, the cost of going to the next stage, which is the Upper Tribunal, is too risky for many to consider.”
Three Lower Tribunal hearings are scheduled in the coming months, with more in the pipeline.
“The Apple Jacks result means the VOA must undertake proper valuations, which are far more time-consuming. It’s this resource issue that has prompted its resistance,” he suggests.
“There is no evidence to support the VOA’s [turnover] approach.
“The Upper Tribunal comprehensively dismissed the current VOA approach, which has been effectively a percentage of turnover.”
While not endorsing the turnover approach, Mr Wasilewski points out that the tribunal set an equivalent of 1.6% in the case of Apple Jacks and 2.4% in his own case.
The recent York Maze outcome was equivalent to 5.75% of turnover.
“My work with the NFAN established that correct valuations would average the equivalent of 2.5% of sales and be in a 1.5% to 4% range.
“Two other business rate challenges in different sectors have also dismissed the VOA’s turnover approach.”
Check valuations
The National Farm Attractions Network is concerned that checks are not being made by business operators on how valuations have been calculated and that the Valuation Office Agency (VOA) is taking that as a sign of acquiescence.
Checking can be done on the VOA’s website.
Mark Wasilewski also fears some farm parks are relieved to negotiate any reduction, rather than pushing for what they might achieve.
“Agents can negotiate, say, a 10% reduction for a rateable value that has gone up fourfold. All that achieves is to cement a three-and-a-half-fold increase, which is used to justify increases for others.
“That is how rates for farm parks are up sixfold since 2000. Mine rose fourfold since 2000 and Apple Jacks tenfold since 2005, while average business rates valuations in England are up 20% since 2005.”
Advice for farm parks and attractions
- The latest valuations for individual businesses can be found on the VOA’s website
- Check how the calculation has been arrived at
- Consult the National Farm Attractions Network for advice on a possible challenge
Ratings appeal – prepare for a long, costly and stressful experience
Joe Fryer and his wife, Valerie, run Apple Jacks Adventure Farm alongside family members working on the farm and the attraction, as well as other staff.
His experience of a ratings appeal heard by the Upper Lands Tribunal in the Royal Courts of Justice in London has left strong feelings and made him keen to alert others to what is involved in challenging the Valuation Office Agency (VOA).
Ratings value
Initially, a rating value of £47,850 had been given. The appeal was made against a second figure of £35,000.
The final decision was a rating valuation of £11,750, which is below the £12,000 under which businesses are exempt from the payment of business rates.
The system is subject to complex rules, says Joe, whose challenge to the VOA took four years.
Experts have to be appointed and they must follow these rules, which to the ratepayer can seem arbitrary and exclusive.
“Anyone who appeals at a higher tribunal must also withstand aggressive cross-examination by a government barrister, where questions and comments are designed to undermine your position in the court,” says Joe.
The Fryers are still waiting for the repayment of £17,000 from HMRC.
See a summary and download the judgment.