Following widespread condemnation over the potentially damaging effect of the business rates revaluation which took place in April 2017, museum owners have received some welcome news after the Upper Tribunal (Lands Chamber) ruled in their favour in a test case relating to how the properties are valued for rating purposes.

York Museum and Gallery Trust (YMT), which owns the Yorkshire Museum, York Art Gallery, St Mary’s Church (also known as the ‘Heritage Centre’) and Castle Museum, advised by national commercial property consultancy Lambert Smith Hampton (LSH) and Stuart Ward Solicitors, was successful in its long-running battle with the Valuation Office Agency (VOA) in which it claimed the properties should be valued on a net income basis for business rates purposes rather than rebuild costs.

Almost 50 per cent of all museums across England and Wales are valued by the VOA using what is commonly known as the ‘contractor’s method’, resulting in unashamedly high business rates liabilities for their charitable owners – many of whom are struggling just to keep up with the costs of maintaining what are typically listed buildings.

However, as a result of the court’s decision, the museums will now be valued based on net income achieved by the individual museums/galleries. This means that prominent attractions such as Castle Museum, which has high visitor numbers and is part of York’s tourist offer, will have a rateable value in keeping with this; now set at £183,000 per annum. Comparatively, the Yorkshire Museum, which includes the ruins of St Mary’s Abbey, has been reduced to a rateable value of £1, which reflects the higher costs to maintain such an important historic landmark.

The news will be particularly welcome for museum owners across Yorkshire, the East Midlands and London, whose rateable values have risen by upwards of 47% following the revaluation.

>> view our infographic to see the changes by region

The VOA brought the appeal forward to the Upper Tribunal in an attempt to separate out all shops and cafés, as well as a historic building that formed part of St Mary’s Abbey in the grounds of Yorkshire Museum. The VOA was unsuccessful in this request, with the Upper Tribunal agreeing that all but one of the shops should be valued as part of the museum. Had the VOA been successful, the rates liability for the museums would have increased by nearly £500,000. Instead, LSH and Stuart Ward successfully saved York Museum and Gallery Trust £100,000 in rates.

If the VOA had been successful, York Museum Enterprise Ltd, the trading company for the museums, which donates all its profits back into the properties, would have been liable to pay the rates bills. A bill of this magnitude would have left the museums without the much-needed source of income that helps maintain the buildings and their collections.

Colin Hunter, Divisional Director at Lambert Smith Hampton, said: “The outcome of the appeal reflects more than a decade of discussions with the VOA on behalf of York Museum Trust and the Association of Independent Museums. This decision will not only help museums in York, it could also help the 767 museums valued on this basis in England and Wales.

“The VOA’s attempt to separate out the values of shops and offices is the most financially damaging aspect of the case. Had their appeal succeeded, its implications would not only affect museums, it would have significant repercussions for any charity with a trading subsidiary.”

The VOA has already stripped out the shops and cafés at National Trust and English Heritage properties, and the British Museum, this ruling should help reverse this trend.

Should you have any queries regarding this ruling and what it means for you please do not hesitate to contact our Business Rates experts.