Huge savings for museums as Valuation Office changes how business rates are calculated

Museums and galleries in England and Wales are in line to save hundreds of thousands of pounds following changes to how the Valuation Office Agency (VOA) calculates business rates for the sector.

After a series of landmark legal cases, the VOA has confirmed that, for its 2023 revaluation, it has changed the methodology it uses to calculate business rates for the majority of museums.

The rateable value will now be calculated by receipts and expenditure, which considers whether the property makes a net surplus, rather than the contractor’s method, which assesses the cost of rebuilding the existing museum.

The updated rateable values will take effect from 1 April 2023.

Sector bodies have long argued that the contractor’s method unfairly penalises museums for occupying historic properties or large spaces required to house and display collections, calculating much higher levels of value than most museums could ever afford to pay in rent.

The change in methodology is likely to result in significant savings for many institutions, particularly loss-making organisations and those in listed buildings with high operating costs.

A legal victory in 2020 saw the rateable value of the Royal Albert Memorial Museum in Exeter reduced from £445,000 to a nominal £1, resulting in backdated savings of more than £1.5m. In 2022, Tyne & Wear Archives & Museums (Twam) won a further victory that saw the rateable value of three of its sites reduced to £10.

In 2017, York Museums Trust became one of the first museum trusts to successfully appeal its rateable value, receiving a rebate of £100,000 in backdated bills.

The VOA had announced in 2021 that it would no longer use contractor’s method to calculate business rates for some museum types, but was proposing to continue using it for museums set up by statute – including most national museums – and those in modern buildings constructed post-2001.

However, in its latest guidance for valuation officers, the VOA states that "following recent litigation [the receipts and expenditure method] is likely to apply to the majority of museums".

The change comes after years of collective lobbying by museum bodies, including the Museums Association, the National Museum Directors’ Council and the Association of Independent Museums, among others.

The change in methodology will not apply retrospectively to organisations assessed by the contractor's method under the last revaluation in 2017, and museums wishing to challenge that valuation must lodge an appeal.

There is a deadline of 31 March for appeals to be registered. Museums can begin the process by completing the VOA’s Museums Information Request Form. Appeals are made via the UK Government’s Check and Challenge process.

Museums Association director Sharon Heal said: "We very much welcome this news, which is as a result of joined-up advocacy across the sector. We are urging the museums concerned to lodge any appeals by the deadline of 31 March so that they don’t lose the opportunity to make considerable savings."

Update
02.03.2023

The following quote taken from the VOA guidance has been removed: "The contractor's method 'will apply to a minority of properties within this class […] mainly museums which occupy modern buildings'". Museums Journal understands that modern buildings will also be valued using the receipts and expenditure method, but the guidance has not yet been updated to reflect this.