Legal ruling raises prospect of huge savings for museums

A group of museums and galleries has won a legal case against the government agency that sets business rates, in a ruling that could have implications for institutions across England and Wales.

A case heard at the Lands Chamber of the Upper Tribunal dismissed a bid by the Valuation Office Agency (VOA) to use the social value provided to the local area Tyne & Wear Archives & Museums (Twam) as a basis for calculating their rateable value.

The VOA had assessed the rateable value of Shipley Art Gallery in Gateshead as £94,500, Laing Art Gallery in Newcastle as £193,000, and South Shields Museum as £62,500.

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As a result of the judgment this has been reduced to £10 for each museum, with the group set to benefit from substantial backdated and future savings.

Twam was established by four local authorities in Tyneside – Newcastle City Council, Gateshead Council, South Tyneside District Council and North Tyneside District Council – with the individual councils owning the respective freeholds of the buildings and employing staff on Twam's behalf.

None of the three museums charges for admission and they all operate at a deficit.

Socio-economic value

The VOA had argued that the museums had “socio-economic value” to the local authorities through a combination of benefits such as cultural education, community, mental health and well-being which do have a broad economic effect.

But in her ruling, Upper Tribunal Judge Elizabeth Cooke said that it is not possible to quantify the social value of that public benefit to the local authority and the three venues should not be penalised with large rates bills for providing benefits to the local community.

"Of course, the local authority funds its museum in order to generate socio-economic value, but there is no methodology available to translate that social value to the public into value to the local authority itself," Judge Cooke said in the judgment.

Jackie Reynolds, Twam’s Head of Finance, Governance and Resources, said: “We are delighted to see the original decision in our case being upheld. We fundamentally believe that museums should not be penalised with large rates bills for simply delivering the benefits that we clearly do for our local communities.”

Lambert, Smith, Hampton, a legal firm that advised Twam on the case, said the ruling should have far-reaching implications for the way museums in England and Wales are valued for business rates purposes and could result in significant savings for most museums but especially for loss-making institutions.

However, it added that it is likely that to obtain the benefit of reduced Rateable Values museums will need to engage in the appeals process because their rateable values will not be reduced automatically.

Colin Hunter, a Director at Lambert Smith Hampton, who acted as the expert witness for Tyne & Wear Archives and Museums, said: “This is a victory for common sense and drives a coach and horses through the VOA’s assertions of implied value attached to museums.

"It will come as welcome news to occupiers across the cultural and heritage sectors and offers much-needed clarity.”

Previous cases

The ruling follows previous business rate victories by York Museums Trust, and the Royal Albert Memorial Museum & Art Gallery in Exeter.

In 2017 the Upper Tribunal ruled that the business rates paid by the trust should be based on net income and expenditure, and not the so-called "contractor’s method" which reflects the cost of building a modern equivalent museum, and typically results in higher rateable values.

The ruling resulted in total annual savings of around £10,000, which were backdated for 10 years, which means the trust received a rebate of £100,000.

Exeter’s Royal Albert Memorial Museum & Art Gallery won a case on a similar basis in 2019, resulting in its rateable value dropping from £445,000 to just £1.

Alistair Brown, Policy Manager at The Museums Association, has called on the VOA to change its methodology in response to the latest ruling.

“This is a really positive outcome for Twam after a lengthy legal case. Many other museums can and should benefit from this landmark ruling – but it would be a waste of the sector’s resources for hundreds of individual appeals to now be launched," he said.

“Instead, we want to see a new VOA methodology for setting rates which reflects the tribunal’s decision, and we will be pursuing discussions with the VOA jointly with the Association of Independent Museums and the National Museum Directors’ Council to make this a reality.”