Taxation on the rateable value of some plant and machinery
Despite the rates overhaul that came in to effect on 1 April 2017, and pleas from business groups such as the Engineering Employers Federation (“EEF”) for an end to plant & machinery rateable value assessments, certain plant and machinery remains rateable.
There are therefore two issues to worry about. Firstly, are we being taxed on plant and machinery that is not rateable? Secondly, are we paying the correct level of tax in accordance with the rateable value of the plant and machinery concerned?
With regard to the first issue, plant and machinery that is assumed to be part of a building (and therefore rateable) is clearly set out in the Valuation for Rating (Plant and Machinery) (England) Regulations 2000 (as amended). Process plant and machinery mainly used as part of the process, on the other hand, should be exempt. But what if it performs both functions? Although the recent air conditioning case of Berry (Valuation Office)-v-Iceland Foods (2015) found in favour of the Valuation Office, the Tribunal did say that ‘had we been satisfied that the preservation of the environment within the store …… could properly be described as a trade process, we would have found in Iceland’s favour ……’.
So far as the second issue is concerned, the above Berry case confirmed that the value of the air conditioning systems should be determined using the Contractor’s Basis – adopting the statutory decapitalisation rate to visualise the rent that would emerge.
Certainly if business groups succeed in having plant and machinery removed from rateable value assessments, Marriott & Co. will be well placed to review such assessments.
By Gavin Marriott