Iceland Foods Ltd v Berry (Valuation Officer)

Plant and machinery providing services to a hereditament is generally rateable under Class 2 of the Valuation for Rating (Plant and Machinery) (England) Regulations 2000. The exclusion for plant used mainly or exclusively as part of manufacturing operations or trade processes is a narrow exception. The question is whether the plant is used as part of a trade process, not whether it serves the hereditament or the occupier. Retail storage and display of goods do not ordinarily constitute a trade process. Maintaining a suitable environment for goods, even with substantial or complex equipment, does not bring service plant within the exception.

Iceland operated a retail food store containing numerous integral refrigerated cabinets. It installed an air handling system to control temperature and ventilation, principally to ensure the cabinets operated correctly and to maintain acceptable conditions for staff and customers.

The Valuation Tribunal for England held that the system was used as part of trade processes and ordered a reduced rateable value. The Upper Tribunal (Lands Chamber) reversed that conclusion and determined that the premises should have a rateable value of £104,000. Iceland appealed to the Court of Appeal. The central issue was whether the air handling system fell within the Class 2 exception for services used mainly or exclusively as part of manufacturing operations or trade processes.

The appeal was dismissed unanimously. Sir Geoffrey Vos, Chancellor of the High Court, gave the judgment, with Gloster and Sharp LJJ agreeing.

1. Statutory scheme. The Local Government Finance Act 1988 and the Valuation for Rating (Plant and Machinery) (England) Regulations 2000 establish a general rule that the listed classes of plant and machinery are treated as part of the hereditament. Class 2 covers plant used in connection with services such as heating, cooling and ventilation. Its manufacturing-operation and trade-process wording is a narrow carve-out, not a broad exception for all plant that facilitates the occupier’s business.
2. Meaning of trade processes. The expression should be construed as a coherent concept alongside manufacturing operations. Such activities will normally bring about a transition from one state or condition to another, including through creation, completion, repair or improvement, although the statutory language must be applied to different situations as they arise. The historical provisions in the Rating and Valuation Act 1925 and the authorities on motive and process plant did not displace that construction.
3. Retail premises. The display and storage of goods for retail sale is ordinarily the antithesis of a trade process. Creating an environment suitable for displaying or storing goods does not become a trade process merely because the retailer’s equipment is unusually substantial or because the goods might deteriorate without suitable temperature control. The system’s principal relationship with the freezer cabinets did not alter that conclusion.
4. Remoteness. The court accepted that it was irrelevant whether the system cooled air expelled from the cabinets or cooled the stock itself. The decisive question remained whether the services formed part of a trade process.

The air handling system therefore remained rateable. The Upper Tribunal’s decision was upheld and the appeal dismissed.

1. Court of Appeal (Civil Division): Dismissed Iceland’s appeal and upheld the Upper Tribunal’s conclusion. [2016] EWCA Civ 1150.
2. Upper Tribunal (Lands Chamber): On 14 January 2015 reversed the Valuation Tribunal for England’s decision, allowed the appeal in part, and determined a rateable value of £104,000 with effect from 1 April 2010.
3. Valuation Tribunal for England: On 18 October 2012 held that the air handling system was used as part of trade processes and ordered a reduction of the rateable value from £108,000 to £98,000.