Apple Jacks Adventure Park, Stretton WA4 4NW (Apple Jacks), near Warrington, was a leisure attraction located within a much larger entity, being Mr and Mrs Fryer’s farm. Closed during winter months and subject to planning restrictions concerning the erection of permanent structures and various site constraints, it provided activities such as a soft play area, zip rides, mazes, trailer rides and, in October, Spooky World.
It was created to provide an additional income stream for the farm and was run in a hands-on fashion by the Fryers, whose farm staff worked on both the farm and the seasonal attraction according to need. Despite significant obstacles, the Fryers had managed to generate significant business.
In the 2017 list the rateable value for Apple Jacks was entered as £35,000. The Fryers appealed unsuccessfully to the Valuation Tribunal, but in Fryer v Cox (VO) [2022] UKUT 229 (LC) the Upper Tribunal (UT) reduced the figure significantly. In so doing it provided a useful overview of how the correct rateable value for an unusual property should be ascertained.
“Rateable value” is defined in the Local Government Finance Act 1988 (as amended) and is (with assumptions) the rent it is estimated the hereditament might reasonably be expected to be let at from year to year. The parties agreed that the correct basis of ascertaining rateable value was the amount that a hypothetical tenant (who in this case would be an agricultural tenant) would be prepared to pay at the relevant date to have the benefit of running Apple Jacks as a diversification activity on the farm.
There was insufficient rental evidence from which a likely market rent for Apple Jacks could be extrapolated. Although the VOA’s Rating Manual instructions had a shortened method to ascertain likely rental for farm diversification (based on percentage of gross receipts), in the absence of rental comparables or full retail and expenditure figures the use of this method would be ill-advised.
The primary method of valuation was the receipts and expenditure method summarised in Hughes (VO) v York Museums and Gallery Trust [2017] UKUT 20 (LC), whereby the net profit (or divisible balance) should be ascertained and from that the sum required by a tenant for capital and profit (“the tenant’s share”) should be apportioned, with the remainder being the sum available for rent (“the landlord’s share”).
The experts had revenue and expenditure accounts for four years (2011-14) and much of the valuation was agreed between them. In order to calculate the divisible balance, the Upper Tribunal considered the areas on which there had not been agreement. In relation to likely turnover, it accepted that the hypothetical tenant would exercise caution in his budget for receipts and sales. 2012 was an especially wet summer, and in 2014 there had been a special marketing arrangement with an online discount provider which had not been continued. Those anomalous years would be disregarded.
A hypothetical tenant would find the cost of repairs difficult to establish, but the UT determined that the 2013 figure with a greater than inflationary increase would be reasonable. Likely spend on marketing would be no more than 10% of receipts. The risk of business rates being adjusted would be something that would be included within the tenant’s share. However, the hypothetical tenant would require recompense for his or his manager’s day-to-day running of Apple Jacks, and this should be deducted as an expense to reach the divisible balance.
The UT calculated the divisible balance to be £47,138. The tenant’s share of this sum must cover profit, together with an allowance for the various risks and a return on capital, and the UT concluded that 75% of the divisible balance was the appropriate portion. This left 25% to be the rent, equating to £11,874, which was rounded up to £11,875 rateable value – higher than the nominal rateable value of £1 for which the Fryers contended but significantly less than had been previously determined.
Elizabeth Haggerty is a barrister
