Commercial and industrial premises are often mothballed to await improvements in the market – but what effect does that have on business rates liabilities? The issue was addressed by the Upper Tribunal (UT) in a guideline case concerning a gas-fired power station.
The facility, which had a rateable value of £5,340,000, was mothballed for more than two years. Its owner contended that, during that period, its rateable value should be reduced by 90 per cent. Its plea that the relevant rating list should be amended accordingly did not, however, find favour with either a local authority valuation officer or the Valuation Tribunal for England.
Challenging that outcome, the owner contended that the facility’s mode or category of occupation (MCO) had, during the relevant period, changed from that of a power station to that of a power station subject to long-term preservation. It further argued that the facility should be valued on the basis that, whilst mothballed, it was incapable of beneficial occupation as a power station.
In rejecting the appeal, the UT acknowledged that the power station was mothballed for a considerable period and that it required 14 months of re-commissioning work – at a cost of £9 million – before it could be reopened. However, there was never any intention to permanently close the facility with a view to its demolition or conversion to another use. The mothballing works were entirely reversible and arose from an economic decision to shut down the facility until the market improved.
Pithily observing that a power station is a power station, the UT found that there was no difference of kind between the use of a power station and that of a power station under long-term preservation. The period of mothballing did not establish a distinct or separate MCO. A staffing presence was maintained throughout and the power station was at all times capable of being beneficially occupied as such.