January 22, 2019

Business rates and ATMs

In Cardtronics Europe Ltd and others v Syke and others (Valuation Officers) [2018] EWCA Civ 2472, the Court of Appeal was asked to decide the correct legal approach to the rating of ATMs in retail premises.

Background and facts

Business rates are a tax on individual “hereditaments”, meaning units of property. They are charged on most non-domestic premises including shops, offices and warehouses, by valuation officers assigning a rateable value to these premises.

Where a hereditament is wholly or partly occupied, rates are payable by the party who is in rateable occupation. However, the concept of rateable occupation is not straightforward where there are two or more parties exercising control over the premises in question.

In this case, the Court of Appeal was ruling on an appeal brought by ATM operator Cardtronics and retailers Tesco, Sainsbury’s and the Co-op (the Retailers) against a finding of the Upper Tribunal Lands Chamber. The ATMs in the retail premises were both internal and external, and were operated by banks in the same corporate group as the operators of the stores. The other ATMs were operated by Cardtronics in shops and other premises.

The Tribunal held that the sites of the ATMs should be treated as separate hereditaments in rateable occupation by the bank or other ATM provider, not the owner of the host premises. This meant that the ATM site would be charged separate business rates, however, the Retailers found that in most cases, there was no corresponding reduction in the rateable value of the premises in which the ATMs were located, resulting in an increase in the tax burden of the Retailers.

The Court of Appeal’s decision

Giving judgment, Lord Justice Lindblom allowed the appeal that the ATM sites did not constitute a separate hereditament, and therefore the Retailers were still in rateable occupation of it.

LJ Lindblom noted that the “landlord-control principle”, as described in Westminster City Council v Southern Railway Co Ltd [1936] A.C. 511, should be used to determine who was in paramount occupation for the purpose of rateable occupation. This principle was that an owner of premises who retains sufficient control of the part of the premises owned by another party (as well as by himself) should be treated as being in rateable occupation of that part.

In applying this principle, the Retailers were held to have retained sufficient control of the site of the ATMs to be regarded as being in rateable occupation of it and to prevent a separate hereditament being formed. The court relied on several findings of fact which indicated that the Retailers retained sufficient control over the ATMs:

  • Access to the ATMs for regular servicing, maintenance and loading could only be achieved from within the store, and with the retailer’s co-operation or consent;
  • The ATMs enhanced the store’s “retail offer” by adding to the range of services available at the store;
  • The retailer’s employees were often involved in servicing and maintaining the ATMs; and
  • Some of the stores had been designed or adapted to accommodate an ATM.

Comment

This landmark ruling means that the UK government and local authorities will have to refund retailers hundreds of millions of pounds charged in England and Wales since the government decided it would treat ATMs as separate premises.

It is a helpful and common sense decision which will be welcomed by the thousands of retail businesses which currently have ATMs on their premises.

The decision is also good news for ATM users, as there was a fear that ATMs would be removed if the Retailers lost their appeal.

The article first appeared in our Real Estate Bulletin - January 2019.