Iceland Foods Ltd v Berry

Plant providing services to a hereditament is excluded from rating where its services are used mainly or exclusively as part of manufacturing operations or trade processes. This exclusion is not confined to industrial or productive activities. A retail activity may constitute a trade process.

“Process” does not require a transition from one state or condition to another. It bears the wider meaning of anything done to goods or materials for the purposes of a trade. The key distinction is between services used mainly for the hereditament and services used mainly for the trader’s processes within it. Plant in the latter category is treated as a tool of the trade and disregarded when calculating rateable value.

The appellant operated a retail store specialising in chilled and frozen food. Its numerous integral refrigerated cabinets expelled heat into the store. A heavy-duty air-handling system maintained an environment in which the cabinets could operate while also providing acceptable conditions for staff and customers.

The Valuation Tribunal held that the system should be disregarded when calculating rateable value. The Upper Tribunal reversed that decision in [2015] UKUT 0014 (LC). The Court of Appeal upheld the Upper Tribunal in [2016] EWCA Civ 1150; [2017] Bus LR 766.

The central issue was whether the system supplied services mainly or exclusively as part of “manufacturing operations or trade processes” within Class 2 of the Schedule to the Valuation for Rating (Plant and Machinery) (England) Regulations 2000.

1. Appeal allowed unanimously. Lord Carnwath delivered the judgment, with which Lord Kerr, Lord Reed, Lord Hughes and Lady Black agreed. The decision of the Valuation Tribunal was restored on the issue before the court.

2. The Class 2 exclusion was not confined to productive or industrial activities. “Trade” naturally extended to retail activities. The alternative wording “manufacturing operations or trade processes” widened the provision beyond manufacturing. Neither the text nor the Wood Report supported an industrial limitation.

3. The exclusion was an exception to an exception. Under paragraph 2 of the Valuation for Rating (Plant and Machinery) (England) Regulations 2000, plant generally has no effect on rateable value. The scheduled classes identify plant brought into account. The Class 2 exclusion returns plant used mainly or exclusively for trade processes to the general rule of non-rateability.

4. The exclusion reflects the distinction between plant servicing the hereditament and plant serving the trader’s activities within it. The decisive inquiry concerns the main use of the services supplied. Plant mainly serving the trader’s processes is more fairly regarded as a tool of the trade, even if it also supplies heating, cooling or ventilation to the building.

5. “Process” did not imply a transition or change of state. It was capable of the wider meaning of anything done to goods or materials. Authorities concerning goods “subjected” to a process under industrial-building legislation arose in a narrower statutory context and did not govern the present provision. A trade process was simply a process in that wider sense carried on for the purposes of a trade.

6. The continuous refrigeration of goods to preserve them in an artificial condition was a trade process. The unchallenged finding below was that the air-handling services were used mainly or exclusively as part of that process. The system therefore had to be left out of account for rating purposes.

1. United Kingdom Supreme Court: Allowed the appeal unanimously and restored the Valuation Tribunal’s decision on the issue before the court: [2018] UKSC 15 .
2. Court of Appeal: Upheld the Upper Tribunal’s decision: [2016] EWCA Civ 1150 ; [2017] Bus LR 766.
3. Upper Tribunal (Lands Chamber): Reversed the Valuation Tribunal’s determination: [2015] UKUT 0014 (LC).
4. Valuation Tribunal: Held that the air-handling system fell to be ignored when calculating rateable value.