Tesco, Sainsbury’s and the Co-operative Group have won a £500m battle over whether ATMs at supermarket sites should be separately assessed for business rates. The Supreme Court ruled they should not, which should trigger hundreds of millions of pounds of refunds.
Announcing the decision, Lord Carnwath said that “substantial sums” were at stake, with appeals relating to some 10,000 other appeal sites (amounting to 34,000 appeals in all) depending on the outcome of this case.
He said the Supreme Court unanimously agreed with the Court of Appeal, which found in 2018 that ATMs should not be separately rated. Previously, the Upper Tribunal (Lands Chamber) had made a distinction between ATMs accessible inside a building and outside, finding that while internal ATMs should not be assessed for business rates, external ones should.
The Valuation Office Agency (VOA) took the matter to the highest court, where convenience store ATM operator Cardtronics UK joined the supermarket chains in fighting to uphold the Court of Appeal decision. The crucial question before the court was: who is the rateable occupier of the site of a cash machine whose operator is a different company from the occupier of the premises in which it is located?
Giving the court’s judgment, Lord Carnwath said that retailers retained occupation of the ATM sites, even though they had conferred on the banks’ rights which substantially restricted their use of those sites. He said that both parties “share the economic fruits” of the specific activity for which the space is used, as the presence of the ATMs furthers the retailers’ general business purposes and provides them with an income.
While external ATMs are available to a wider market at all times, and are “physically separated” from the other facilities in the store, he found that the retailers remain in occupation of those ATM sites as well, as they are not any less part of the retailers’ overall business.
Colliers International had estimated that, if the Court of Appeal decision was ultimately upheld by the Supreme Court, the retailers would be due refunds in the region of £500m.
John Webber, head of business rates at Colliers International, said: “This is a massive relief, not only for the supermarkets involved, but also for the consumers who need access to these machines. Many would have suffered if the judgment went the other way and retailers ripped the ATMs out of their stores to save extra rates bills, denying many in the local community free access to cash.”
“There was a real fear that if the VOA had been successful, not only would it have led to the ripping out of ATM machines, but it would also have opened up the floodgates to assess up to 400,000 vending operations which would have been calamitous for both retailers and those operators.”
“Of course, the tragedy over all of this is the total waste of taxpayers’ money in pursuing this unnecessary and unfair claim. The local authorities are unlikely to have accrued for this cost and at the end of the day it is Joe Public who will suffer.”
Bryan Johnston, UK head of real estate litigation at Dentons, which acted for Sainsbury’s, Sainsbury’s Bank and The Co-operative Group, said: “This is not just a great victory for retailers who faced a substantial rates burden, but it is also a significant victory for the public and their ability to access their own money through the ATM network.
“If the court had allowed the appeal, many retailers would have had little choice but to reconsider the viability of offering free ATM services for the benefit of their customers. This could have had a negative impact on communities where an ATM in a shop is the primary method of accessing funds.”
But he warned that, with around 34,000 appeals likely to be determined by this decision, many of which have been in a “state of paralysis for years”, there will be a “significant logistical exercise” involved in undoing the consequences of the VOA’s decision to separately rate ATM machines.
“Retailers will be due rebates in the multi-millions,” he added.
Jerry Schurder, head of business rates at Gerald Eve, who represented Cardtronics – the world’s largest ATM operator – in the matter, said: “ATMs are part of the retail offer of the stores they are situated in and the VOA should never have treated them as separate businesses.
“We especially welcome the Court’s rejection of the VOA’s attempt to separately rate internal machines, the consequences of which would have been dire.
“The VOA freely admitted during the Supreme Court hearing that, if successful, its approach would have led to the likes of kiddie rides, coffee and soft drink machines each receiving their own rates bills. The VOA must now drop its crusade to find more things to assess for business rates.”
Emily Wood, partner and group head of real estate dispute resolution at DMH Stallard, who represented Cardtronics throughout the litigation, said: “ATMs provide much-needed accessibility to cash on high streets and in rural communities. These, in turn, support those businesses and communities. Retaining the imposition of business rates on ATMs would have had huge ramifications for the continued provision of this much-needed service.
“This litigation has seen the passage of high streets across the country begin to struggle to survive, right through to now where the current pandemic has closed whole towns. As we move out of lockdown, it’s essential that all that can be done is done to open them up again. More so than ever, in the current climate, the right decision has been upheld by the court.”
Josh Myerson, incoming president of the Rating Surveyors’ Association and head of rating at Montagu Evans, added that the decision is likely to be an “administrative nightmare” for the VOA, which might face further challenges to its rating decisions in analogous circumstances.
He warned: “The decision will be looked at very closely in terms of many separately rated units where there is no absolute division in control and responsibility between the user and their host. It is possible that the decision could lead to a series of challenges seeking to remove other assessments from the rating list.”
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