Charles Waters v Wayne Cox (Valuation Officer)

There is no dispute between the parties that the receipts and expenditure method of valuation is the appropriate means by which to arrive at the rateable value of the hereditament. Mr Barry Davies BSc DipLE MRICS FAAV IRRV(Hons) gave expert valuation evidence for the appellant. He is principal of Davies and Co, a practice based in Kettering which specialises in the valuation of rural land and properties. Mr Wayne Cox BSc(Hons) FRICS Dip Rating gave expert valuation evidence for the Valuation Office. Mr Cox is Head of Leisure and Licensed Property, within the National Valuation Unit (NVU).

Both experts referred to the Joint Professional Institutions’ Rating Valuation Forum (“the Rating Forum”) guidance published in 1997 titled “The Receipts and Expenditure Method of Valuation for Non-Domestic Rating: A Guidance Note”. Notwithstanding the age of this document, it is still the only guidance endorsed by, amongst others, the Royal Institution of Chartered Surveyors (RICS), the Institute of Rating, Revenues and Valuation (IRRV) and the Rating Surveyors’ Association (RSA).

In Hughes (VO) v York Museums and Gallery Trust [2017] UKUT 20 (LC) the Tribunal summarised the methodology as follows:

Until 2013 the farm was structured as a partnership. In August 2013 the partnership’s business, assets, and liabilities were transferred to Finkley Down Farm Limited. At that point the previous financial year end of 31 August was moved to 31 March. The following table, containing data produced by the farm’s accountants shows the turnover, cost of sales and gross profit for each year from 2011 to 2014 adjusted to a 31 March year end. The 2015 financial year (ending 31 March 2015) was the first year when the accounts were actually based on an April to March cycle.

Commendably, the experts have agreed a significant number of the components of the valuation, and I set these out in the table below together with the three items where small differences remain.

Mr Davies based his valuation on a fair maintainable trade (FMT) of £1,192,345, 10% less than the 2015 gross receipts. He similarly adjusted the cost of sales by deducting 10% from the 2015 total resulting in a figure of £244,326. His working expenses were aligned with the actual working expenses for 2015 but with the addition of £50,000 for a manager’s salary and £15,806 for equipment hire. This brought his total working expenses to £660,781. His net profit was therefore £1,192,345 – (£244,326 + £660,781) = £287,238. From this figure he deducted depreciation (£50,000), other income (£423) and bank charges (£20,000) resulting in a divisible balance of £217,661. He adopted a tenant’s share of 75% equating to £163,246 which leaves the hypothetical landlord with a rent, or in other words the rateable value, of £54,415. Mr Davies rounded this figure up to £54,500.

It is worth noting at this stage that Mr Cox’s valuation was rateable value £134,250, notwithstanding that the rating list entry was rateable value £100,000. He adopted a FMT of £1,325,000 based directly on the twelve months of trading leading up to the AVD. He also utilised the actual cost of sales for the same period, namely £271,475. Mr Cox added bank and financial charges of £15,800 to his working expenses resulting in a total of £619,425. His net profit was therefore £1,325,000 – (£271,475 + £619,425) = £434,100. He made provision for a renewal fund of £50,000 culminating in a divisible balance of £384,100. He adopted a tenant’s share of 65% equating to £249,668 which leaves a rent (rateable value) of £134,432. Mr Cox rounded this figure down to £134,250. The list assessment had been arrived at by taking 8% of a FMT of £1,300,000. Arithmetically this resulted in a figure of rateable value £104,000 which Mr Cox had rounded down to rateable value £100,000.

There are six outstanding issues.

Mr Davies’s approach to FMT questioned whether the hypothetical tenant would base his bid on the actual gross receipts or whether he would adopt a more cautious approach to ameliorate risk? He contemplated a scenario where the hypothetical tenant would present a business plan to their bank and considered that they would be prudent in their forecasting especially if overdraft funding was required. He thought that the increase in receipts from 2013 to 2014 of 66% was high and a further increase of 15.76% in the following year was unlikely to be sustained. He noted that risk could also be accounted for in the tenant’s share but ultimately decided to adopt a figure of 90% of the 2014/15 financial year receipts. He did not provide a rationale for his adjustment other than saying it was a matter of judgement. He was equally opaque about his decision to use the working expenses from 2015, notwithstanding that they related to a level of gross receipts which he had discounted.

Such caution was notably absent from Mr Cox’s approach to FMT. In his view the arrival of the play barn in 2013 was transformational. He had no regard to the trading prior to 2013 and placed most weight on the 2014/15 financial year receipts. He noted a pattern of rising turnover since 2013 (including 2015/16) and although the 2013/14 year might be regarded as a ‘honeymoon’ period following the opening of the play barn, there was no reason to envisage that the hypothetical tenant would not base his bid on the trading in the year preceding the AVD.

The accounting information supplied in evidence demonstrates a rising pattern of gross receipts and, for that matter, a stable level of gross profit. Aside from a dip in 2012/2013 when the previous play barn was destroyed by a conflagration, the trend is relentlessly upwards. At the hearing Mr Cox said that he had allowed himself a ‘cheeky look at the 2016 figures’ which showed a further increase in gross receipts. That is a luxury unavailable to the hypothetical tenant and I disregard it. Mr Cox is right to place most weight on the later years as the hereditament was materially different from 2013 onwards. The play barn had perhaps lost some of its novelty factor by the 2014/15 year but the year-on-year trading was still showing an increase and at 15.76%, a sizeable one at that. A bid at the AVD necessarily means looking into the future, predicting income and costs.  The prudent hypothetical tenant would gather as much data together as possible, but I agree with Mr Cox that in this particular case, the last two years’ performance would be the most informative.  Mr Davies speculated about the hypothetical tenant presenting a case to the bank but that took him in to a realm of unreality not envisaged by statute.  The hypothetical tenant is assumed to be in a position to make the rental bid, there is simply no need to give any thought to a hypothetical bank manager.

Mr Davies had sought to reflect the risk associated with the Taylor Wimpey rights in both the FMT and the tenant’s share. Conflating the two increases the prospect of double counting and whilst I understand the logic of his stance, I think that the risk of the rights being exercised is better accounted for in the tenant’s share, if at all.

Neither expert valuer adduced any evidence about the economic reality of trading in Andover in 2015.  It would have assisted me to have had information about trends in spending patterns, employment and disposable income but none was available. It seems to me that Mr Davies is being unduly pessimistic in predicting that that the hypothetical tenant would base his bid on a figure 10% less than the actual turnover in the year ending in March 2015.  In a sense Mr Cox’s approach was also conservative, he envisaged a repeat of the previous year and of the two, I prefer Mr Cox’s approach as it is closer, in my judgement, to what would happen in reality. Neither party pursued an argument that the actual receipts were in any way exceptional or that Mr Waters was either of outstanding ability or conspicuously incompetent.

Similarly, there was no evidence from either the experts or Mr Waters regarding the effect on the overall level of receipts of relinquishing land to Taylor Wimpey in 2016. Mr Waters said at the hearing that visitor numbers had not dropped. In the circumstances I adopt a FMT of £1,325,000.

The question of whether it was appropriate to take account of a manager’s salary when in fact none is employed arose in Apple Jacks. However, in that case the circumstances were different; the owner was also running a 300 acre farming business and the Tribunal took the following view at paragraph 66:

“We remind ourselves that in this case the hereditament is partially exempt and that the hypothetical tenant would be primarily running a farm, with the attraction as a diversification activity. It seems to us more likely than not that the hypothetical tenant would need to employ a manager to cover the kind of day-to-day work ‘in’ the business that Mr and Mrs Fryer carry out. We also note that in cross-examination Mr Cox did not dispute the figure of £35,400 as an appropriate amount to reflect that cost. We therefore adopt Mr Hunter’s approach and deduct that amount as an expense in order to reach a divisible balance.”

The approaches of the respective experts to this item are subtly different. Mr Davies said that the hypothetical tenant would employ a manager and that the actual circumstances in which Mr Waters adopts a ’hands on’ approach to running the farm without paying himself a salary should be disregarded. Mr Cox disputed that conclusion but also dealt with the question of a director’s salary. He considered that a venture of this size and type would be run by an individual or family who themselves would not be providing the advice usually provided by in-house professional directors. In his view, the costs associated with the appointment of directors providing services in relation to matters such as human resources should only be included in connection with valuations of sizeable leisure properties such as the London Eye. Allowing for either a manager’s or director’s salary results in the same effect; it reduces the net profit and consequently the divisible balance. In the present case the inclusion of a director’s salary because Mr Waters is a director would effectively be a prior call on profits and as Mr Cox rightly states, care should be taken in arriving at the tenant’s share to avoid double counting.

Both Mr Waters and Mr Davies appended a series of job descriptions and terms of employment for various posts in the leisure sector to their evidence, and Mr Davies concluded that the cost of employing a manager would be £50,000 per annum. However, it was not clear whether these businesses were comparable in size and profitability to the farm and the figures related to posts offered in 2022 and 2023, not 2015. Mr Davies had advised many other farm attraction businesses and had included details of them in his evidence. However, he supplied no evidence about the way in which each was run, whether they relied solely on the owner or operator for management functions and whether they drew a salary. Financial details of three of his comparables were appended to his report but the wages and salary bills were not broken down between staff and managers. Mr Ormondroyd submitted that Mr Waters worked in the business free of charge but that ignored the profits shared between himself and his brother. No evidence was offered about how those profits were paid out, whether Mr Waters took monthly drawings or payment after year end, or a combination of the two.

Mr Cox’s approach was that favoured by the guidance; that in a small to medium sized business the hypothetical tenant would often run the business him or herself. He took support for his view from the Guidance Note which says at paragraph 5.29:

“Where the expenditure takes the form of directors’ remuneration by way
of salary, contributions to pension schemes or other reward, it is necessary to
consider the nature of that remuneration to ensure that it properly forms an
expense and is not an item which should be considered under the tenant’s share.
Where the occupier is an individual, or where the hypothetical tenant might be
expected to carry on the undertaking without advice from directors, it is normal
to allow for remuneration solely in the tenant’s share.”

The Tribunal has adopted this approach in cases involving small bed and breakfast or holiday letting businesses. Examples can be found in Wishart v Hulse (VO) [2018] UKUT 224 (LC) and Facciolo v Constantin (VO) [2020] UKUT 0123 (LC).

The question to be resolved is whether the hypothetical tenant would act any differently to Mr Waters. I have no evidence on which to base my decision other than the reality of Mr Waters’ situation. I accept Mr Cox’s approach that a small to medium sized operation would simply outsource the advice that an in-house director would provide. In this particular case there does not appear to have been any expenditure on this type of service and I do not therefore include it as a working expense. Taking all of this into account together with the practice extolled by the Guidance Note, I conclude that in this particular case it is inappropriate to allow for either a manager’s or director’s salary in the working expenses.

During the course of running his business Mr Waters had cause to hire or lease Sage financial and management software, catering equipment and a generator. In the year ending 31 March 2015 these items amounted to expenditure of £15,806. Mr Davies treated this expenditure as a working expense as this approach accorded with reality and any incoming tenant would expect to continue the arrangement. Mr Cox on the other hand preferred to reflect equipment hire in his tenant’s capital, reflecting the equipment in the £500,000 that he had allowed for the AVD market value of non-rateable equipment that an incoming tenant would need to provide to achieve the FMT. Mr Davies criticised this approach as it caused what he considered to be a legitimate business expense to disappear from the valuation.

It seems to me that businesses routinely hire equipment. This might relate to something that is required from time to time such as a portable generator or an item where a subscription model is appropriate such as accounting software. The sums involved at the farm are relatively modest and Mr Cox acknowledged that were he to adopt Mr Davies’s Valuation Tribunal approach to non-rateable assets and depreciation it would reduce the assessment by rateable value £1,050. In relation to the generator Mr Cox said that it should properly form part of the landlord’s chattels and was therefore part of the hereditament on offer to the hypothetical tenant. I do not have enough information about the generator to judge whether he is correct but the sums expended appear to be in the range £1,000 to £2,000 per annum which if excluded will not make a material difference to the valuation. I prefer Mr Davies’s point of view, there is no reason to conclude that the hypothetical tenant would behave in a different way to the actual tenant, and I therefore include the expenditure in the working expenses.

A corollary of including these items in the working expenses is that it is necessary to consider whether the depreciation figure should change. Both experts adopted £50,000, but it is unclear how Mr Davies arrived at this amount. Mr Cox took the value of the non-rateable assets required to achieve the FMT to be £500,000 and adopted a 10 year, straight line write down. He contended that with the hired items included in the working expenses the depreciation would be less and the figure in the actual accounts should be used instead. I agree with this approach.

In paragraphs 11, 12 and 13 I set out the detail of the Taylor Wimpey rights. Mr Ormondroyd said that surprisingly there appeared to be no decision of the Tribunal or Courts that directly considered whether such a right was relevant to the valuation exercise. He referred to the well known passage in Robinson Bros (Brewers) Ltd v Houghton and Chester-le-Street AC [1937] 2 KB 445, where Scott LJ said:

“it is the duty of the valuer to take into consideration every intrinsic quality and every intrinsic circumstance which tends to push the rental value either up or down, just because it is relevant to the valuation and ought therefore to be cast into the scales of the balance”

Mr Ormondroyd acknowledged that matters that are personal to the actual occupier fall to be excluded from the valuation exercise as they are not a characteristic of the hereditament. The leading authority on this point is the House of Lords decision in Dawkins v Ash Brothers [1969] 2 AC 382. At p382 Lord Pearce said the following:

“So one must assume a hypothetical letting (which in many cases would never in fact occur) in order to do the best one can to form some estimate of what value should be attributed to a hereditament on the universal standard, namely a letting "from year to year." But one only excludes the human realities to a limited and necessary extent, since it is only the human realities that give any value at all to hereditaments. They are excluded in so far as they are accidental to the letting of a hereditament. They are acknowledged in so far as they are essential to the hereditament itself. It is, for instance, essential to the hereditament itself that it is close to the sea and that humans will pay more highly for a house close to the sea. One can therefore take that into account in the hypothetical letting. It is, however, accidental to the house that its owner was shrewd or that the rich man happened to want it and that therefore the rent being paid is extremely high. In the same way I think it would be accidental to the hereditament that its owner intended to pull it down in the near future. For the hereditament might have had a different owner who would not pull it down. So the actual owner's intentions are thus immaterial since it is the hypothetical owner who is being considered. But when a demolition order is made by a superior power on a hereditament within its jurisdiction different considerations apply. The order becomes an essential characteristic of the hereditament, regardless of who may be its owner or what its owner might intend. That particular hereditament has had branded on its walls the words "doomed to demolition whatever hypothetical landlord may own it." Thus the demolition order, by being a fact which is essential to and not accidental to the hereditament itself, prima facie cannot be excluded as irrelevant or shrouded by any necessary cloud of fiction.”

Mr Ormondroyd concluded that the same decision establishes that the “present probability of a future happening” (per Lord Pearson at p393F) is something to which the valuation exercise can have regard. He also had regard to the decision of the High Court in Coll (LO) v Waters [2016] EWHC 831 (Admin) where it was held that a restrictive covenant preventing occupation otherwise than as a single dwelling is a relevant factor in a valuation for council tax. The decision acknowledges that a restrictive covenant is not a matter to be taken into account in a non-domestic rating context. The court considered a submission based on part of the judgment in Dawkins v Ash Brothers that I set out above, that a restrictive covenant could not be taken into account because it was a result of a private agreement and not imposed by a “superior power”. Mitting J said:

“What Lord Pearce was referring to was the exercise of a superior power, by whomsoever that power may have been exercised. What he had in mind, I think, was that it was the exercise of a power which the person subject to it could do nothing unilaterally to remove. Thus the removal of a planning obligation would require the consent of the local planning authority, or perhaps on appeal, the Secretary of State; in my judgment, so too in the case of a covenant of this nature imposed by an adjoining landowner. It would require that landowner to be persuaded by the owner of the hereditament for the restriction which must in practice affect the value of the hereditament to be removed.”

Mitting J concluded that there was nothing specific to the council tax legislation which required the restrictive covenant, by nature ‘essential’ to the dwelling being valued, to be disregarded. Mr Ormondroyd, who incidentally represented the Listing Officer in Coll (LO) v Waters, submitted that in the present case that the same logic applied; the Taylor Wimpey right could not be removed unilaterally by the owner/occupier of Finkley Down Farm and it was therefore essential to the hereditament. Furthermore, there is no specific provision in non-domestic rating legislation which requires that it be disregarded in the valuation exercise. He concluded that the possibility of the future exercise of the Taylor Wimpey right would then be a matter to which regard should be had in the valuation.

Mr Ormondroyd acknowledged that the decision had no consequences for non-domestic rating. Specifically, Mitting J said that:

“The statutory context in Williams¹ (Footnote: ¹) was paragraph 2(7) of schedule 6 to the 1988 Act. It is not necessary for me to set out a detailed explanation as to why the context is different. I am simply satisfied that the two statutory schemes are distinct and that the council tax valuation exercise is not identical to that required in the non-domestic rating scheme, not merely because it deals with the capital value of freehold land or a long lease rather than the annual letting value, but also because the statutory approach to valuation is not identical.

The outcome of this case therefore has no consequence for the non-domestic rating scheme, and nothing that I have said should be taken as applicable to it.”

Mr Flanagan submitted that the Taylor Wimpey right should not be taken into account because it is simply a form of option derived from a private agreement and even if he was wrong on this point, it was not value significant.

He disagreed that there was no decision of the Tribunal or courts that directly considered the question; the principle was established, and all of the decisions countered the position of the appellant. In particular in Dawkins v Ash Brothers Lord Pearce’s reference to a ‘superior power’ could only mean a statutory body or similar. Taylor Wimpey are not a ‘superior power’ but a party to a private contract.

Mr Flanagan submitted that the decision of the Court of Appeal in Williams (VO) v Scottish and Newcastle [2001] EWCA Civ 185 was directly on point:

“23.

It is common ground between the parties that the statutory rating hypothesis, as explained in case law, takes account of statutory restrictions on the use of a hereditament but not of restrictions imposed by the covenants in a lease or by restrictive covenants affecting freehold property.”

Mr Flanagan noted that the parties in Williams had agreed the position but in his view an obligation affecting freehold property created by a private agreement should not be taken into account in the rating hypothesis. Mr Ormondroyd observed that the Court of Appeal had simply recorded the position between the parties, it was not obiter dictum.

Mr Flanagan referred to two VTE decisions CBRE Britannica St Helens v Grace (VO) and Pearl Group Service Ltd v Alexander (VO). In the first of these the VTE held that a freehold restrictive covenant prohibiting use as a nightclub was not a relevant matter under the rating hypothesis. The VTE concluded that an obligation of this sort deriving from a private

In Pearl it was held that a leasehold covenant restricting the use of a private sports ground was not to be taken into account under the rating hypothesis. The covenant was contained

Mr Ormondroyd said that the decisions were flawed in that the VTE had concluded that the covenants should not be taken into account because there was a statutory or non-statutory procedure to modify the restrictions. He submitted that until the procedures are completed the restrictions remain and are therefore no different to a planning permission. It follows that if there is evidence that a restriction could be easily removed or is unlikely to be enforced, less weight should be attached to it in the valuation exercise.

Mr Flanagan sought to return to first principles. He correctly pointed out that the rating hypothesis, by means of statutory assumptions and terms, imposes a common standard or yardstick of valuation.

The statutory hypothesis makes no assumptions about events in the future or the likelihood of them coming to pass. In Dawkins at pg382 Lord Pearce said:

“…it would be accidental to the hereditament that its owner intended to pull it down in the near future. For the hereditament might have had a different owner who would not pull it down. So the actual owner’s intentions are thus immaterial since it is the hypothetical owner who is being considered. But when a demolition order is made by a superior power on a hereditament within its jurisdiction different considerations apply. The order becomes an essential characteristic of the hereditament, regardless of who may be its owner or what its owner might intend. That particular hereditament has had branded on its walls the words “doomed to demolition” whatever hypothetical landlord may own it”

The rights reserved by Taylor Wimpey are, in my view, an essential characteristic of the hereditament. The power to exercise the option lies with Taylor Wimpey and is out of the control of the hypothetical tenant. They remain an essential characteristic of the hereditament regardless of the owner or the owner’s intentions and should therefore be taken into account when considering the assessment of the property. In terms of its effect on value I note that the rights were reserved in 2008 for a period of 20 years and are only likely to be activated if Taylor Wimpey obtain planning permission for the site to the east of the farm and take up their option to buy it. At the moment that land is not zoned for development. I also observe that two years prior to the AVD Mr Waters took out a substantial loan to build the new play barn. It seems that the actual occupier regarded the potential loss of the land as a matter that was a distant possibility or if it came to pass, something which the business would withstand. The assumed tenancy is from year to year with a reasonable prospect of continuance and I take the view that a remote contingency such as the exercise of the rights reserved is unlikely to feature in the hypothetical tenant’s thinking. It follows that there is no need to have regard to it in the valuation.

Both expert valuers referred to what the Guidance Note says (at paragraph 5.46) about the tenant’s share:

“the tenant’s share may be regarded as the first call upon the divisible balance. The share has to be sufficient to induce the tenant to take a tenancy of the property and to provide a proper reward to achieve profit, an allowance for risk and a return upon tenant’s capital.”

Both adopted a percentage of the divisible balance as the means of arriving at the tenant’s share.

In terms of comparators, they both referred to Apple Jacks where the tenant’s share was 75% of the divisible balance, BNPPDS Limited & BNPPDS Limited (Jersey) v Trustees for Blackrock UK Property Fund and Andrew Ricketts (VO) [2022] UKUT 129 LC in which the Tribunal determined that the tenant’s share was 50%, and two Valuation Tribunal decisions.

The first of these latter decisions related to York Maze (CHG100151577) with a tenant’s share 71.5% and the second to Farmer Ted’s (CHG100702281) where the tenant’s share was 64%. Farmer Ted’s has been appealed to this Tribunal and will be heard in April 2025.

In his supplemental report Mr Davies identified two additional comparables; The Big Sheep at Bideford in Devon, which had been agreed at 72% and Whitehouse Farm Centre at Morpeth agreed at 70.77%. Mr Cox described the former as having good facilities and seasonal opening. He also provided a map of the Whitehouse Farm Centre which showed some indoor facilities but not a play barn of the type at the farm.

Mr Davies adopted a 75% tenant’s share predicated on Mr Waters’ full-time, year-round work in the business and additional risk arising from the Taylor Wimpey reserved rights. In response to a question from the Tribunal he said that were he to ignore the rights his tenant’s share would be in the order of 71-72%. Mr Cox concluded that 65% was a ‘reasonable return’, a figure that included all director’s remuneration. Other than noting the percentage adopted neither expert placed any reliance on Blackrock, the circumstances of that case being far removed from the farm. Mr Davies relied on Apple Jacks as being a farm attraction with which a direct comparison could be drawn. Mr Cox emphasised the differences between Apple Jacks and Finkley Down Farm, including the seasonal opening of the former, its lack of utilities, a site prone to flooding and minimal indoor facilities.

York Maze is also a seasonal attraction without a play barn. Notwithstanding these two factors its AVD turnover of £1,601,581 was 21.3 % higher than Finkley Down Farm. Mr Cox said that the Tribunal’s decision had included £60,000 per annum in the working expenses for a manager but in reality, the hypothetical tenant would be the recipient of this sum. In his view, the tenant’s share taking account of this additional ‘income’ would equate to 75.90%. He added that the risk of precipitation in Andover was lower than in York.

Farmer Teds is in Ormskirk, Lancashire and has substantial undercover facilities. Its AVD turnover was £1,935,000.

Mr Cox’s approach to the tenant’s share was more forensic than Mr Davies’s. Mr Cox sought to identify a safe return on capital of 2% and to assure himself that the residue, once the return on capital was deducted, was adequate to cover reward to the hypothetical tenant and risk. He pointed out that while his valuation at 65% was rateable value £134,250 the Valuation Office were not seeking to alter the existing assessment of rateable value £100,000. The additional £34,250 would benefit the hypothetical tenant and equated to a tenant’s share of 73.97%.

Bearing in mind that the selection of the appropriate percentage for the tenant’s share is the element of the valuation that has the most far-reaching consequences it was surprising that the experts only referred to six comparables. Blackrock is of questionable relevance; Farmer Teds is under appeal and three others are seasonal. I have no doubt that Finkley Down Farm is superior to the attraction in Apple Jacks. No evidence about weather patterns was adduced but it is not unreasonable to assume that historically at least, the weather in Andover is drier than in the notoriously moist ‘Cheshire Gap’. The farm is on the periphery of a large town and has fewer disabilities. The quality of its buildings is superior, and it is open all year round. As Farmer Teds is the subject of an appeal to this Tribunal, I am inclined not to attach any weight to it as a comparable. I note the decision that the Valuation Tribunal made relative to two of the other farm attractions. The York Maze lacks the disabilities present at Apple Jacks and the percentage is appropriately less. It lacks a play barn and is therefore more susceptible to poor weather, a factor that undoubtedly explains its seasonal opening.

In my judgement the tenant’s share should be assessed at 68% of the divisible balance. In coming to this figure I have had regard to the constraints of the site in terms of its size and split nature, and the possibility of year round opening. I have already found that it is not appropriate to adjust for the risk that Taylor Wimpey will take up its option on the land to the east of the farm and require part of the farm for an access road.

The Rating Forum Guidance provides at paragraph 5.59:

“when the valuer has completed a valuation on the R&E method…, it is essential to review each of the elements to ascertain whether they have been correctly applied and produce a credible result”

And at paragraph 5.60

“although it is likely that comparables will not be available in sufficient numbers to enable a valuation to be prepared on the rental/comparative basis… the valuer should consider the valuation produced against the background of valuations relating to similar properties and/or businesses. If the valuation does not appear to ‘fit the pattern’ so far as one is discernible, the valuer should again carry out a thorough review of the valuation adopted.”

Both experts sought to ‘sense check’ their valuations against agreed assessments from other farm attractions. Mr Davies provided five examples of attractions which he described as ‘truly comparable’ to the farm under consideration. These were are as follows:

Mr Davies considered that each of these properties to have a comparable location to Finkley Down Farm. He commented that the areas of land available for public access are very similar, particularly Longdown Activity Farm and Rare Breeds Church Farm. The farm buildings are all of a similar design, age, size, construction and area. He pointed out that a number of his comparable properties, namely Longdown, Church Farm, Marsh Farm, Whitehouse Farm Centre and Old MacDonalds Farm had all been the subject of appeals and had received a significant reduction in assessment.

In making these comparisons Mr Davies sought to make the point that all of the sites were assessed at figures that were substantially less than the current assessment on the farm. However, when properties are valued by means of the receipts and expenditure method there is rarely anything to be gained from such a simplistic comparison. It is their individuality and the nuances of their trading performance that makes these properties suitable candidates for this particular valuation methodology. Two of the properties were leasehold but Mr Davies did not adduce anything in evidence that would enable me to discern whether the rents could be relied upon, much less anything that explained how the assessments had been informed by the rents.

Mr Cox referred to rental evidence as well, but only to note that the Tribunal had, in Apple Jacks, placed no reliance on it. He was correct to do so, the rental evidence available in this appeal adds nothing to that considered in the earlier appeal.

He was also cognisant of the Tribunal’s comments in Apple Jacks and Blackrock about reliance on ‘the shortened method’ or in other words, valuation by means of taking a percentage of receipts. In this case he sought to use this method as means of comparison, but the Tribunal’s previous criticisms still apply. It appears to me that the expression, as a single numerical value, of all the characteristics, financial performance and valuer judgement that went into agreeing an assessment, is an exercise that will produce an answer of minimal utility.

Nevertheless, for completeness, I record below the details of Mr Cox’s comparisons.

The ‘stand back and look’ approach evinced by the guidance essentially asks ‘does the answer you have arrived at fit with the pattern established by other sites?’ recognising that when the receipts and expenditure method is used, all of the attributes and disadvantages are baked into the components of the valuation. The FMTs above are disparate, but without the costs of sales and working expenses the comparisons simply tell me that for some sites the notional rent as a percentage of receipts is higher or lower than at others. It enables the valuer to see whether the end figure fits within a range but that is where the benefit stops.

Mr Davies attached as an appendix to his supplemental report, a report by Briggs and Stone, a firm of land and property consultants based in Buckinghamshire. The report, which was produced for negotiation purposes, was commissioned by Mr Davies rather than Mr Waters and was based on a valuation date of 1 April 2017 rather than the AVD. It was intended to support the valuation sought by Mr Davies. The report concluded that the market rent of the property in its current condition and assuming that the property was held on a ten year FRI lease was £50,000 per annum. The author of the report, Mr Will Taylor MRICS FAAV, adopted the comparative method of valuation but did not provide any details of comparable transactions. He reported that owing to a lack of rental evidence he had regard to a ‘layered’ approach in which he had assessed the likely achievable combined rent of the property if the buildings were to be let for commercial (non-leisure) purposes. I find this valuation of no use at all as it is not on the same basis as the statutory definition of rateable value and purports to relate to the market two years after the AVD.

Having reached a conclusion on the various items where the parties were unable to come to a consensus and splitting the minor differences on the items of working expenses where the parties were in dispute, the resultant valuation is as follows:

The outcome is higher than the list assessment of rateable value £100,000 and that would continue to be the case if I were to adopt Mr Davies’s approach of allowing for a manager at £50,000 per annum. A comparison of the current assessment and the adopted FMT produces a figure of 7.54% which is higher than all the comparables although not by a sizable margin. I do not draw any conclusions from that figure. However, I do note that for the four properties where I have details of the net profit, a comparison of the net profit (in my calculation) to FMT, the farm is significantly higher: