Introduction

Iceland Foods Ltd v Berry (Valuation Officer) (Rev 1) ([2018] UKSC 15) is a landmark judgment by the United Kingdom Supreme Court that addresses the classification of specialized air handling systems in retail premises for rating purposes under the Valuation for Rating (Plant and Machinery) (England) Regulations 2000 (SI 2000/540). The case revolves around whether the air handling system installed by Iceland Foods constitutes manufacturing operations or trade processes, thereby affecting the calculation of the rateable value of their retail store in Liverpool.

Summary of the Judgment

The Supreme Court was tasked with determining if the specialized air handling system at Iceland's store should be classified under manufacturing operations or trade processes for rating purposes. Initially, the Valuation Tribunal favored Iceland, but subsequent appeals reversed this decision. The Supreme Court ultimately upheld the Valuation Tribunal's original decision, ruling in favor of Iceland Foods. The Court concluded that the air handling system was integral to Iceland's trade process of storing and displaying refrigerated merchandise and should therefore be excluded from the rateable value calculation.

Analysis

Precedents Cited

The judgment references several key cases that influenced the Court’s decision:

• Union Cold Storage Co Ltd v Southwark Assessment Committee (1932) – Affirmed that refrigeration chambers used in trade processes are part of the hereditament.
• Union Cold Storage Co Ltd v Bancroft [1931] – Distinguished between storage purposes and processes that alter goods, supporting a broader interpretation of trade processes.
• Assessor for Lothian Region v BP Oil Grangemouth Refinery Ltd (1985) – Held that facilities used solely for processing within industrial premises are part of the hereditament.
• Leda Properties Ltd v Howells (Valuation Officer) [2009] – Recognized sophisticated air handling systems used for specific trade processes as non-rateable.

These precedents collectively supported a wider interpretation of what constitutes trade processes, emphasizing activities that fundamentally support the business operations.

Legal Reasoning

The Court examined the statutory framework provided by the Valuation for Rating (Plant and Machinery) Regulations 2000 and its Schedule, focusing on Class 2 provisions. The key issue was whether the air handling system was primarily used as a service to the hereditament or as part of a trade process.

The Supreme Court interpreted "trade processes" broadly, aligning with the dictionaries and previous case law, to include any process carried out for trade purposes, not strictly those involving a transition from one state to another. The Court rejected the narrower construal proposed by the Upper Tribunal and Court of Appeal, emphasizing that the air handling system was essential to Iceland's business operations, thus qualifying as a trade process.

Additionally, the Court referenced the Wood Report, which guided the drafting of the 2000 Regulations, supporting an inclusive interpretation to ensure fairness among ratepayers and consistency across regulations.

Impact

This judgment has significant implications for the valuation of commercial properties, particularly those using specialized equipment integral to their business operations. It clarifies that essential systems tied to trade processes can be excluded from rateable value, potentially reducing the financial burden on businesses with such infrastructure.

Future cases involving specialized plant and machinery will reference this decision to determine rateable values, promoting a more business-friendly environment by recognizing the operational necessities of modern commercial enterprises.

Complex Concepts Simplified

Rateable Value: The annual value of a property used to calculate local business rates.

Hereditament: Any property that can be owned by an individual or entity.

Plant and Machinery (for rating purposes): Equipment installed in a property that can be considered in determining its rateable value.

Trade Processes: Activities fundamental to the business operations, such as storing and displaying goods in a retail environment.

Class 2 Proviso: A specific clause in the rating regulations that determines whether certain plant and machinery should be excluded from the rateable value based on their use in trade processes.

Conclusion

The Supreme Court's decision in Iceland Foods Ltd v Berry establishes a clearer framework for assessing the rateable value of commercial properties featuring specialized equipment. By recognizing the integral role of such systems in trade processes, the judgment ensures that businesses are not unduly burdened by high rateable values derived from essential operational infrastructure. This enhances the fairness and accuracy of the rating system, aligning it more closely with the practical realities of modern commerce.

Overall, the case underscores the importance of interpreting legal provisions in a manner that supports business sustainability while maintaining equitable treatment of all ratepayers.