The appeal of Lucy Formela-Osbourne

Is Severn Trent’s training academy (‘the Academy’) at Stoneleigh in Warwickshire, at which its apprentices are trained to deal with all manner of water issues, an ‘educational hereditament’ for the purpose of the Non-Domestic Rating (Miscellaneous Provisions) (No. 2) Regulations 1989, as amended, and thus subject to a lower decapitalisation rate when valuing the property using the contractor’s basis of valuation?

That is the single issue in this unopposed appeal by the Valuation Officer (‘VO’), Lucy Formela Osbourne, against a decision of Valuation Tribunal for England (‘the VTE’) dated 28 October 2025, in which the VTE allowed the ratepayer’s appeal against the VO’s Decision Notice, reducing the rateable value of the Academy from £205,000 to £113,000 and changing the description in the rating list from ‘offices and premises’ to ‘educational establishment and premises’ with effect from 11 May 2021.

The appeal is unopposed and has been determined under the Tribunal’s Written Representations procedure. I received helpful submissions from Jonathan Welch of counsel on behalf of the VO, and written evidence from Mr Philip Grundy MRICS, a lead valuer at the VOA.

I find the following facts from the evidence of Mr Grundy. Whilst the appeal is unopposed, Mr Mark Clapham MRICS IRRV of Lambert Smith Hampton, who represented Severn Trent at the VTE, helpfully reviewed Mr Grundy’s proposed ‘statement of agreed facts’ and made one observation on it.

The Academy was built by Severn Trent Water following a 2019 planning permission to demolish existing buildings and construct a new training facility. Construction took place during 2020, and the Academy opened in February 2021. It is used as a central in-house facility for Severn Trent’s employees (Mr Clapham said that it is also used by non-employees) and comprises a mix of classrooms, lecture and conference space, offices, breakout areas, specialist training areas and dedicated external practical training areas. The total gross internal area, in terms of main space, is 2,073.87 sqm. It falls within the auspices of Ofsted, the education regulator, which carried out a monitoring visit in May 2022.

The Academy was entered into the 2017 rating list with effect from 11 May 2021 at a rateable value of £205,000, with a description of ‘offices and premises’. That valuation was based on a rental approach, applying an office rate of £105 per sqm.

It is now common ground that the Academy should be valued for rating by using the ‘contractor’s basis’, which is generally appropriate for hereditaments for which there is no obvious market. While sometimes criticised as the method of last resort, the contractor’s basis has stood the test of time, providing a useful method to arrive at a notional rental value.

The contractor’s basis of valuation involves six stages; it is not necessary for me to outline them here, but enthusiasts can instead refer to, among many others, the Tribunal’s decision in Hughes (VO) v York Museums and Gallery Trust [2017] UKUT 0200 (LC) at [129-140]. The only issue in this appeal concerns stage 4 – the application of a statutory decapitalisation rate to convert an effective capital value of the hereditament to produce an annual equivalent. The applicable rate depends upon the nature of the hereditament – at the material day of 11 May 2021, the standard rate was 4.4%, but defence, educational or healthcare hereditaments attracted a lower rate of 2.6%.

The VTE (in an amended version of the decision) applied the lower rate of 2.6% to an adjusted capital value of £4,351,635 to arrive at a rateable value of £113,143, say £113,000 RV. In this appeal, the VO argues that the higher rate of 4.4% is applicable.

The decapitalisation rates are to be found in the amended Non-Domestic Rating (Miscellaneous Provisions) (No. 2) Regulations 1989 as amended (‘the Regulations’), which insofar as this appeal is concerned provide:

“2.

— Valuation on the contractor's basis

…

(1F)

Paragraph (2F) of this regulation applies in relation to a hereditament shown in a non-domestic rating list compiled for a billing authority in England on or after 1st April 2017 the rateable value of which is being ascertained using the contractor's basis of valuation.

…

(2F)

In applying paragraph 2(1) to (7) of Schedule 6 to the [Local Government Finance Act 1988, which provided the familiar valuation definitions] in circumstances where paragraph (1F) of this regulation applies, the appropriate rate is assumed to be—

(a)

in the case of a defence hereditament, an educational hereditament or a healthcare hereditament, 2.6%; and

(b)

in any other case, 4.4%.”

An investigation as to whether the Academy is an educational hereditament requires a multi-layered journey through legislation. The starting point is regulation 3 of the Regulations, which for present purposes defines an “educational hereditament’ as one which-

“(b)

is constructed or adapted for the provision of further education within the meaning of section 2(3) of the Education Act 1996 … and is wholly or mainly used for the purposes of an institution which is–

(i)

maintained or assisted by a local education authority; or

(ii)

within the higher education sector within the meaning of section 91(5) of the [Further and Higher Education Act 1992] and which is not a university; or

(iii)

within the further education sector within the meaning of section 91(3) of the 1992 Act; or

(iv)

provided or maintained by a body not established for profit…”

The appellant asserts, and I accept, that the Academy was constructed for the provision of further education within the meaning of the 1996 Act. But is it wholly or mainly used for the purposes of an institution which satisfies one or more of the criteria (i) to (iv) of sub-paragraph 3(b)?

Criteria (i) and (iv) can be quickly dispensed with; there is no evidence that the Academy is maintained or assisted by the local education authority, and Severn Trent, as part of Severn Trent plc, is not a body established not for profit. That leaves criteria (ii) and (iii) – in terms, whether the Academy is within the higher or further education sector, for which we must look to section 91 of the Further and Higher Education Act 1992 for further illumination.

As regards criteria (ii), the Academy is not a university, so the question is whether it is within the higher education sector within the meaning of section 91(5) of the 1992 Act, which as far as relevant, provides:

“(5)

References to institutions within the higher education sector are to—

(za)

registered higher education providers of a description prescribed by regulations made for the purposes of section 39(1) of the Higher Education and Research Act 2017,

(a)

[and (aa) universities]

(b)

[institutions in Wales]

and

(c)

designated institutions for the purposes of Part II of this Act (defined in section 72(3) of this Act)”

Taking those in turn, as regards section 91(5)(za), section 39(1) of the 2017 Act deals with establishments to which the Office for Students makes grants or loans, and there is no evidence that it does so to the Academy. As regards s.91(5)(c), section 72(3) of the 1992 Act refers us to s.129 of the Education Reform Act 1988, but the Academy does not appear to meet those requirements, which now largely relate to Wales.

So, we have reached a dead end as regards criteria (ii) regarding higher education, and need to return to our starting point and consider criteria (iii), and the further education sector, which is defined by section 91(3) of the 1992 Act as:

“(a)

institutions conducted by further education corporations, and

(b)

designated institutions for the purposes of Part I of this Act (defined in section 28(4) of this Act), and

(c)

sixth form colleges”

There is no evidence that the Academy is a sixth form college, and Severn Trent Limited are not a further education corporation. The only other possibility is a designated institution under section 28(4). We have already discounted the school or grant-aided options, so the remaining question is whether the Secretary of State has designated the Academy as one which is principally concerned with the provision of “full-time education suitable to the requirements of persons over compulsory school age who have not attained the age of 19 years”. There is no evidence that she has, and it seems likely that at least some of Severn Trent’s employees at the Academy have seen at least nineteen summers.

Accordingly on the evidence it seems to me that the Academy does not meet the requirements to be classed as an educational hereditament for the purposes of the Regulations.

I should add that had the ratepayer responded to the appeal with any evidence to the contrary, my conclusions might have been different, so this decision may be of limited application to other cases. Mr Clapham’s brief comment that people other than Severn Trent employees are trained there was not enough to satisfy the criteria.

Mr Grundy’s revised valuation of £193,000 was based on an adjusted capital figure of £4,389,999, but the VTE’s (amended) £4,351,635 is not under appeal, and I have taken the VTE’s figure.

To be fair to the VTE, Mr Clapham’s valuation of £113,000, based on the lower decapitalisation rate of 2.6%, is recorded as being unchallenged by the VO’s representative, so it was understandable that the panel focused more on the physical characteristics, and mode and category of occupation, of the hereditament. Those elements are not under appeal nor, as I have said, is the VTE’s adjusted capital figure of £4,351,635. However, for the reasons above the hereditament must be assessed using the standard decapitalisation rate, which will result in a rateable value of:

The appeal therefore succeeds, and the rating list shall be amended to show the hereditament at a rateable value of £191,000 with effect from 11 May 2021.

I make no order for costs.