Since 2013, retailers have had to pay non-domestic rates ('Business Rates') for automated teller machines (ATMs) built into the front of stores, rather than treating the ATMs as part of the store's overall rating for valuation purposes. The Business Rates bill for the ATM was backdated to 2010, hitting retailers with significant liabilities.

The Court of Appeal has now held that ATMs sited in retail spaces do not in fact give rise to a separate liability for Business Rates; this means that many retailers may now be due a refund.

The key issue was the status of floor space occupied by ATMs, and so liability for payment of Business Rates.

Cross-appeals were brought to the Court of Appeal by the Valuation Office against Cardtronics Europe, an independent ATM operator, and a group of retailers (Sainsbury's, Tesco and Co-op) who each had stores with onsite ATMs.

ATMs and Liability to Pay Rates

Rates are payable on individual units of self-contained property (hereditaments), by the party in rateable occupation.  This case turned on whether an ATM could form a separate hereditament from the store in which it was housed, and the identification of the party in rateable occupation.

An ATM has no effect on the rateable value of the hereditament where it is sited (reg. 2(b) of the Valuation for Rating (Plant and Machinery) (England) Regulations 2000). However, an ATM could be relevant for identifying the existence and extent of a hereditament. Once it was established that there is a separate hereditament, the next issue was to determine who was in rateable occupation of that hereditament.

The Upper Tribunal (Lands Chamber) had held in 2017 that ATMs sited in spaces designed or adapted to accommodate the ATM were separate hereditaments. Therefore a separate Rates liability arose for the ATM. Moreover, the party in rateable occupation was the bank operating the ATM, not the store in which the ATM was sited.

Court of Appeal Judgment

The Court of Appeal granted the retailer's appeals and dismissed the Valuation Office's appeal, in effect reversing the Upper Tribunal's judgment.

The Court held that externally located ATMs (e.g. on external walls of premises) were not separate hereditaments for rating purposes. Therefore they did not give rise to a separate Business Rates liability.

In its judgment, the Court of Appeal considered both the correct way to identify a hereditament for ratings purposes, and the meaning of rateable occupation of a hereditament as follows:

  • Whilst an ATM itself is non-rateable machinery, it could be taken into account when determining whether a separate hereditament exists. It was not necessary for the site to be specifically adapted for the ATM in order to create a separate hereditament;
  • Applying the principle of "general control" (Westminster Council v Southern Railway Company Ltd [1936] A.C. 511) where a retailer has retained sufficient control of the ATM site (in contractual, physical and function terms) it should be treated as being in rateable occupation as the paramount occupier, not the bank.

What's next for retailers?

This is a positive result for retailers, who should now be seeking rebates for Business Rates, possibly backdated to April 2010. However, given the sums involved, it would not be surprising if the Valuation Office appealed to the Supreme Court.

Whilst the Court of Appeal refused permission to appeal, the Valuation Office has 28 days from the date of judgment to petition the Supreme Court for permission.