Livestock markets
This publication is intended for Valuation Officers. It may contain links to internal resources that are not available through this version.
This instruction relates to the valuation for rating purposes of livestock markets and should be read in conjunction with the appropriate Practice Note.
Primary Description: CM
List Description: Livestock Market and Premises
Scat Code: 158
Scat Suffix: S
This is a specialist class of property, to be valued by Valuers in each Unit.
The Class Co-ordination Team has overall responsibility for the co-ordination of this class. The team is responsible for approach, accuracy and consistency of valuations. The team will deliver Practice Notes describing the valuation basis for revaluation and provide advice as necessary during the life of the rating lists. Caseworkers and referencers have a responsibility to:
- follow the advice given at all times
- not depart from the guidance given on appeals or maintenance work without approval from the co-ordination team
- seek advice from the co-ordination team before starting any new work
Livestock markets are a sui generis use under the Town and Country Planning Use Classes Order 1987 (as amended).
Livestock markets are highly regulated and the legislation designed to protect animal welfare and provide bio-security impose significant restrictions on the way they can operate. The key legislation covering these issues are the Welfare of Animals at Markets Order 1990, the Animal Gatherings Order 2010 and the Transport of Animals (Cleansing and Disinfection)(England)(No3) Order 2003.
5.1 Methods of Valuation
5.1.1 Profits basis
Markets are not necessarily public utility undertakings (see Hereford Corporation v Taylor (VO) 1960 (53 RIT 771) and the Court of Appeal did not dissent from the view that a market was not a public utility undertaking in its judgement in British Transport Commission v Hingley (VO) and Grimsby CBC (1961 RVR 150).
In Thrapston Market Co v Newton (VO) (LT 1968 RA 415) the Lands Tribunal held “….in the past the Tribunal has accepted valuations of markets by reference to their accounts. But there is no rule, statutory or otherwise, that they should be valued by that method and the Tribunal is free to accept any other method if it thinks fit”.
Prior to the Thrapston case, the Tribunal had determined the assessments of three livestock markets:
- Taunton Corporation v Sture (VO) (1958 LT 51 RIT 749)
- Hereford Corporation v Taylor (VO) (1960 LT 53 RIT 771)
- Oswestry Borough Council v Plumpton (VO) (1962 LT RVR 44)
A common factor in these decisions was that the adjusted accounts indicated a basic rental value but that, in each case, the local authority would make an “overbid” in order to gain possession. However, where a local authority wishes to run a market as a service it is likely to be primarily interested in keeping it solvent rather than in making a profit. Furthermore the authority could, as a matter of policy, depress the fees, tolls, or charges even to a point where the accounts showed a loss. In Bingley UDC v Melville (VO) (1969 RA 681) the Lands Tribunal came to the conclusion that a profits basis did not give the right answer when assessing a local authority cemetery running at a loss. This principle applies equally to markets, although, where it can be established without doubt that in running a particular market the genuine motive is to make a profit, accounts may be a factor to be taken into consideration.
5.1.2. Rental method
Where a rent is paid, that rent should be carefully investigated to see whether the negotiations leading to the terms of agreement were at arm’s length. In particular, a rent paid to a local authority as landlord should receive close scrutiny to see whether, for example, the authority has accepted a rent below market value in order to keep the market open as a service or to attract trade to the town.
Where direct rental evidence of an arm’s length nature is available, this evidence, in addition to giving an indication of the open-market value of the particular market, will assist in the determination of the assessments of comparable hereditaments when expressed as a percentage of the gross commissions earned by the auctioneers who operate the rented market. In the generality of cases no arm’s length rental information will be available and the practice of relating rental value to gross commissions, using the relationship obtained from analyses of rented markets, should be adopted.
This method of determining rental value was used by the High Court in Stride & Son v Chichester Corporation (1960 EG 315) in which the rent which Stride & Son were to pay from September 1959 for occupation of part only of Chichester market fell to be determined under Part II of the Landlord and Tenant Act 1954. In the knowledge that the occupiers’ commissions were nearly £15,000 in 1958 (a peak year) the Court decided that the rent payable over the next 7 years should be £1,500 per annum.
This practice of relating rental value to gross commissions earnable by the tenant was accepted by the Tribunal in the Thrapston case and has been followed by VOs. The details of this approach are as follows:
a. the market is to be considered vacant and to let and it should be assumed that the most likely hypothetical tenant would be either a single auctioneer or a consortium of auctioneers whose prime motive for trading would be to encourage the maximum possible trade and to extract the maximum possible profit
b. the actual average throughput (or, where these figures are impossible to obtain, the estimated annual throughput) should be distinguished as between cattle, sheep, pigs, poultry, deadstock, etc. and, for each group, the average amount of commission chargeable should be ascertained (or estimated)
c. a percentage should be applied to the total commissions calculated from the above information to obtain the sum which the auctioneer could reasonably be expected to pay as rent for the right to sell in the market. In the Thrapston decision, the Tribunal, in accepting the VO’s method, said, “…. the question he had to answer was how much rent such a firm, or consortium of firms, would bid at arm’s length for an exclusive use of the market accommodation subject to the common law rights of the public to enter the market and buy or sell anywhere save in the accommodation that had been let off. He submitted that the rent an auctioneer would pay for the whole of the market accommodation, subject to these considerations, would be linked with the commissions he might reasonably expect to make on the sales conducted”
d. to the rental value of the right to sell livestock should be added the value of any other items not directly concerned with the actual function of sales (e.g. refreshments rooms, vehicle washing facilities, produce markets, rateable tolls, etc.)
e. from the value determined under sub-paragraphs c. and d., any necessary deductions should be made to allow for the effect of any disabilities not already reflected in the number of livestock sold in the market (e.g. additional annual expenditure occasioned by age, obsolescence, bad planning, etc.)
Just as local authorities may be prepared to run markets at a loss in order to maintain a service to the community, auctioneers may, in certain circumstances, be found to be running small markets at an apparent loss for the purposes of maintaining contact with agricultural clients from whom their professional practices stem. Such circumstances will require special consideration and VOs should deal with each case on its individual merits.
5.1.3 Contractor’s basis
The contractor’s basis of valuation is not considered to be a suitable approach and should not normally be used. It may, however, be necessary to have recourse to this method in bringing into assessment, for the first time, a new market the potential of which cannot be gauged until it has been in operation for some time. The decision of the Lands Tribunal in the case of Melville and Rees (VO’s) and Airedale and Wharfedale Joint Crematorium Committee (1963 3 RVR 201) would appear to lend support to the use of the contractor’s basis under these circumstances.
5.2 Tolls
The rateability of tolls is dealt with in RM Section 6 part 3 : Section 1100.
Tolls can only be rateable in the hands of the occupier of the land and cannot be the subject of a separate assessment. See Faversham Navigation Commissioners v Faversham Union (1867).
It was held in The Mayor, Aldermen and Burgesses of the Borough of Oswestry v Hudd (VO) (CA 1966 RA 5) that a distinction can be drawn between the “market” in the sense of the right to hold a concourse of buyers and sellers, and the place where the concourse is held - i.e. the “market place”. The “market” in the former sense is a local monopoly right commonly originating in a grant from the Crown; such grant often confers a right to levy tolls on merchandise at the market and where this right is separately held as an incorporeal right, it is not rateable.
If exclusive possession of a stall or standing is required by a trader, this can be obtained only by the permission of the owner of the soil of the “market place” (not necessarily the owner of the market); any payment for such privilege is known as stallage or piccage. Stallage or piccage is a profit of the soil and is rateable. The owner of the market place need show no grant, prescription nor statutory authority for taking stallage or piccage. The criterion would seem to rest on whether payment of the toll confers on the payer a right to occupy part of the soil of the market. If so, the tolls should be included as a constituent of the assessment of the market.
In cases of doubt or difficulty or where the VO has included tolls in valuation and their inclusion is disputed, a full report, together with a copy of the statute relative to the market in question, should be submitted to CEO (Rating) through the Technical Advisor.
Stalls or standings separately occupied on a permanent basis should be separately assessed - Brooks (VO) v Greggs and Others LT 1991 RA 61 - see also RM 5 : 630
The size, type, age and geographical location of a livestock market will influence the range and quality of the facilities encountered.
When carrying out an inspection care should be taken to identify any separate hereditaments and where they are found to exist, sufficient measurements should be recorded to enable that accommodation to be valued in accordance with the appropriate valuation scheme.
A comprehensive measured survey of all the accommodation found within the mart will not be required to enable a valuation to be carried out. A detailed record should however be taken of any office accommodation that is not used exclusively by the mart operator for mart related administration (e.g. offices used for the provision of professional and / or agency services) and of any cafe / restaurant accommodation that is not in the paramount occupation of a third party; this accommodation, if present, should be measured to Gross Internal Area (GIA) in accordance with the VOA Code of Measuring Practice for Rating Purposes.
A description of the agricultural hinterland and the nature, location and accessibility of the mart should be prepared.
A site layout plan which records the use made of all the land and buildings found within the site boundaries should be produced.
A full description of all land and buildings should be recorded; this description should include details of the age, condition, method of construction and the quality / type of finish involved.
A detailed photographic record should be taken in all cases providing permission is first obtained from the mart operator.
The number, frequency and type of sale days should be established and details of the commission rates charged for each type of sale activity should be obtained. The Livestock Market Form of Return (VO6043) should be issued so that the total income received from all the activities carried out within the mart can be determined.
The number of sale rings, the adequacy of the penning areas (covered /open) and the ease of circulation and access for unloading / loading should be recorded.
The method used for effluent disposal should be established and details of the bio-security measures in place should be noted.
Finally, any factor which the mart operator identifies as an issue which restricts or significantly increases the cost of operation should be noted.
Surveys, plans, Forms of Return (VO6043) and any lease documentation should be stored in the property folder of the Electronic Document Records Management (EDRM) system.
Photographs should be uploaded onto the Rating Support Application (RSA).
The approach to be followed is set out in the relevant rating list Practice Note.
All valuations for the 2017 Rating List should be entered onto the Non-Bulk Server (NBS) (Class - Livestock Markets (Scat Code 158)).
Other support available:
- Survaid
- Class Co-ordination Team
1. Market appraisal
1.1 Livestock markets operate in a difficult business environment, their performance and viability are affected by a variety of factors which are inextricably linked to the challenges faced by the wider agricultural industry.
1.2 As at 1 April 2021 there were about 118 operational marts in England and Wales under the control of about 80 companies. Most still host one or two sales per week with additional sales in the peak period of September to December, some smaller or remote markets are used just for autumn sales.
1.3 Stock prices increased steadily during 2020 and in early 2021 prices for cattle and sheep were 10-20% higher than in 2020. The concerns over economic uncertainty within the sector which had resulted in some reductions in the price of breeding stock in autumn 2018 and across the industry in 2019 appear to have lifted. On-going issues relating to the export of live sheep and cattle remain largely unresolved. Other long-standing issues further impacting the industry include, increased competition from direct purchasing by abattoirs, increasing overheads following recent changes to the way in which drainage costs are calculated (now on a total site area basis), higher costs as imposed by electricity suppliers, and the national minimum wage have all impacted on the profitability of livestock markets. The public’s attitude to meat consumption and environmental sustainability also continue to be of concern to the industry.
1.4 The COVID pandemic has impacted on the operation of marts since the outbreak in March 2020. The marts were allowed to continue operating as they are an essential part of the national food chain and to prevent animal welfare issues, but restrictions including the imposition of ‘drop and go’ with the farmers unable to remain on site to sell their stock, with this handled by mart staff, reportedly led to increased operating costs. Sales of some classes of livestock, such as dairy cows were not permitted for part of the year though marts were able to facilitate private farm to farm sales. Restrictions have impacted on other income streams such as cafes and other outlets operated by third parties.
1.5 Mart operators rely heavily on the support of the local farming community for their success. Any loss of market share to deadweight sales, direct selling and /or other operators is detrimental. The increased use of cattle collection centres by abattoirs is perceived as the major threat to their businesses. The industry reports that only 50 to 60% of all fat stock sales are now routed through livestock marts. The requirement to remain competitive puts pressure on the level of commissions that can be charged which in turn can impact on overall profitability.
1.6 Bio-security, movement restrictions and strict regulatory controls to improve traceability and animal welfare continue to affect the way marts can operate and put pressure on margins. Whilst onerous, the success of these measures is evidenced by the fact that, with the exception of Bovine TB, the livestock industry was relatively disease free at the Antecedent Valuation date (AVD) .
1.7 Whilst the current geographical distribution of the marts across the country has not altered, since the last AVD a small number of marts have closed as a result of redevelopment, acquisitions and mergers.
2. Changes from the last practice note
2.1 There is only limited rental evidence available and no major change of approach is warranted. It is acknowledged however, the burden of overheads continues to increase, which particularly impacts smaller operators and this is reflected within the 2023 scheme.
3. Ratepayer discussions
3.1 Discussions have been held with industry representatives, with whom the VOA has proposed the revised scheme as shown within section 4 below.
4. Valuation scheme
4.1 In the absence of reliable direct rental evidence to the contrary, it is recommended that all Livestock Markets should be valued by applying a percentage to the fair maintainable gross commissions that are capable of being generated from on-site sales, in accordance with the following guidelines.
4.2 Income from livestock sales
A percentage taken from the table below should be applied to the total gross livestock commissions, exclusive of VAT.
Unlike previous revaluations there have been no countrywide disease outbreaks in the years immediately preceding the AVD that will have resulted in a distortion in trading patterns. In determining what level of fair maintainable gross commissions to adopt as at 1 April 2021, careful consideration will need to be given as to whether, given the nature and location of the mart concerned, the trends and figures suggested by the year end 2019 and 2020 returns will be sustainable. Valuer judgement will be required to ensure that the figures adopted accord with the requirements of the rating hypothesis.
The level of gross commission should not be adjusted to reflect bad debts unless there is clear evidence that the level of non-payment is significantly in excess of the norm for the particular type of market and that it is not due to poor financial management by the operator.
Total gross commissions (livestock element only)
Percentage is derived from the gross commission from livestock sales and should be interpolated between bands.
Below £250,000 5%
£250,000 - £750,000 5-7.5%
£750,000 - £1,500,000 7.5-14%
£1,500,000 - £2,500,000 14-15%
£2,500,000 - £5,000,000 15-16%
Care should be exercised when comparing older marts to more modern equivalents, achieving similar levels of turnover. However, such issues as poor access to town centre markets will largely be reflected within commission income.
4.3 Income from other sources
The terms of occupation of any ancillary activity need to be ascertained in order to decide whether a separate unit of assessment is appropriate. Where the mart operator is in paramount control of the facility, the income/gross commissions received from non-livestock sales should be treated as follows:
4.4 Lorry washes
Access to lorry washes is a statutory requirement for livestock markets; if this facility is used solely in connection with mart business it should be deemed to be reflected in the valuation without any specific addition. Where a lorry wash is used by the general public and other businesses on non-mart days the value of this facility should be added to the valuation by making a specific addition based on 10% of the gross receipts from this source.
4.5 Lorry/car parking
Where income is derived from lorry/car parking on non-market days then an addition should be made having regard to the local levels of value for such facilities, in making this addition adjustments should be made to reflect the number of days a week this facility cannot be used for this purpose. In the absence of a local comparator an addition should be made based on 25% of gross income from this source.
4.6 Car boot sales and market stalls
Adopt 30% of the payment received from a car boot/market operator or 50% of net income from direct sales where the market or car boot sale is run by the occupier of the livestock market.
4.7 Chattels/antiques auctions sales
Adopt 10% to15% of gross commission depending on how significant this source of income is in relation to the market as a whole. Where gross commissions from this source comprise less than 10% of the income generated from livestock sales then this income stream should not be valued separately; the income generated should be added to the gross commissions for the mart as a whole.
4.8 Vehicle and plant and machinery sales
Many livestock marts are diversifying to improve income levels and the sale of vehicles and agricultural plant and machinery are becoming increasingly common. In marts where this type of sale forms only a subsidiary part of the whole and they are carried out in non-specialised land and buildings, the commissions should, where they contribute less than 10% of total mart income, be valued at the same rate as that adopted for livestock sales. Where the income is more substantial and adaptations have been made to either land and buildings, a valuation basis more akin to that adopted for chattel sales should be utilised.
4.9 Non-livestock sales offices
Offices which are not used by the mart operator exclusively for mart related administration (for example, offices used for the provision of professional / agency services or electronic auctions) and offices used as kiosks in the paramount occupation of the market operator should be added as a separate addition in the valuation. The accommodation should be valued at a level which, whilst consistent with the levels adopted for similar offices in the locality, also reflects the fact that it forms part of a larger mart hereditament.
4.10 Café/restaurant
All markets generally have refreshment facilities on site. The quality varies from a timber or portable structure to a large building of permanent construction, which offers a full meal service, and which may be open on non-market days to serve other commercial premises in the locality. Where the catering facility is only open on market days, it should be reflected in the overall valuation with no separate addition being made, if the income generated from the café/restaurant is significant and the facility is utilised on non-mart days an addition should be made using either a percentage of gross receipts or a price per square metre which reflects the levels of value that are applied to separately assessed cafés and restaurants in the locality. In some cases the catering facility is operated by a 3rd party on a licence arrangement, in such cases 30% of the licence fee should be adopted. Cafés and restaurants which are not in the paramount occupation of the market operator should be separately assessed.
4.11 Horse sales
Within livestock markets income from this source will be minimal and is not comparable with horse bloodstock markets as described within para 4.13. It is therefore recommended commissions are included within livestock turnover figures.
4.12 Advertising rights
These will normally be separately assessed unless they are not let out and they comprise an advertising station. Where the Mart does advertise feed, machinery, agrochemical suppliers on the walls around the ring and other prominent locations around the site and receives payment, this should be added at 50% of income.
4.13 Bloodstock markets
The recommended valuation approach for horse bloodstock markets is one based on a full analysis of receipts and expenditure. The dedicated equine bloodstock marts, are quite different from the normal livestock market in terms of their physical facilities and the nature of the sales which take place and as a consequence they should not be valued in accordance with this practice note.
4.14 Co-ordination
Due to the complexities involved in valuing livestock markets, Class Coordination team members should be approached when dealing with both Check, Challenge and Appeal and maintenance work on this class.
1. Market Appraisal
Livestock Markets operate in a difficult business environment; their performance and viability are affected by a variety of factors which are inextricably linked to the challenges faced by the wider agricultural industry.
As at 1 April 2015 there were 124 operational marts in England and Wales under the control of 84 companies.
The movement in stock prices and changes to the level of commission charges that have occurred since 1 April 2008 has seen turnover levels, for the majority of marts, rise significantly. As at 1 April 2015, however there was growing concern within the industry that these turnover levels may not be sustainable in the future given direct purchasing by Abattoirs which was squeezing operators, changes in eating trends – vegetarianism, increased chicken consumption, fluctuating stock prices, increasing overheads, movement restrictions and other uncertainties including future trends in stock numbers and the size of the national herds particularly pedigree and high quality breeding stock. It is alleged that large numbers of this stock has been lost and cannot be replaced. The effect of these matters demonstrated in the lower level of rental bids for new leases.
Many of the challenges facing the industry were perceived to be greater than experienced at the last AVD although in many respects they were similar difficulties to those which existed at the last revaluation.
Mart operators rely heavily on the support of the local farming community for their success. Any shift in loyalty can have a dramatic impact on the viability of the business. Operators, as a consequence, need to remain competitive at all times and deliver the level and quality of service necessary to ensure that they do not lose market share to deadweight sales, direct selling and /or other operators. For example, the organisation of Cattle Collection Centres by abattoir operators is perceived as a major threat to their businesses. The requirement to remain competitive puts pressure on the level of commissions that can be charged which in turn can impact on overall profitability.
Bio-security, movement restrictions and strict regulatory controls to improve traceability and animal welfare continue to affect the way marts can operate and put pressure on margins. Whilst onerous the success of these measures is evidenced, by the fact that, with the exception of Bovine TB, the livestock industry was relatively disease free at the AVD.
Operating costs, particularly water and effluent charges are continuing to increase and have to be largely absorbed by the operator.
Changing attitudes and trends and the impact of government / EU policies (e.g. the removal of subsidies) are also areas of concern as these can affect the level of sheep and beef production which in turn can then have a knock-on effect on turnover /profitability.
Despite these challenges and concerns, marts continue to operate.
The current geographical distribution of the marts across the country is not expected to alter but it is likely that a small number of marts will close in the future as a result of acquisitions and mergers.
A number of marts have relocated to purpose built out-of-town developments funded to a large extent by the re-development value of their previous sites. There are some marts that could potentially do likewise but in the immediate short term such a move would appear unlikely as they depend on the marts securing firm funding and complying with / satisfying strict planning requirements. Funding a new mart from private funds is extremely difficult in the present climate.
Re-location, whilst an attractive option and one which potentially offers the opportunity to grow the business is not a quick fix nor a viable option for the majority of marts. Diversification and /or further rationalisation are the two main ways that existing marts can look to increase turnover.
Some marts have been successful in securing and protecting turnover by diversification but the location and physical characteristics / layout of a significant number of marts, particularly the more traditional / older ones, prevent this happening. Most marts have now adapted into the modern format
The outlook for the future of the livestock market industry remains challenging but its survival should be secured providing:
- it receives the continued support of the farming community
- there are no major disease outbreaks and
- the marts are proactively managed to develop opportunities for growth and control outgoings / minimise risk and exposure to debt.
2. Changes from the 2010 practice note
Initially, there was very little new rental evidence at AVD, although it was known that there were deals in confidential negotiations. Once this evidence close to the AVD emerged it demonstrated that across the sector rental bids had fallen. This has resulted in a re-appraisal of the AVD evidence and a slightly amended basis
Apart from the above, an adjustment to the percentage which should be applied to the income received from car boot / market stall operators has occurred.
3. Ratepayer Discussions
The Livestock Auctioneers Association and a representatives for the Scottish Marts have been in active discussions and provided information. The Valuation Scheme set out below is based upon these discussions, and whilst, the LAA cannot bind its members, both sides acknowledge the approach and the active and extensive discussions which have taken place to arrive at these figures.
4. Valuation Scheme
The limited rental evidence that is available suggests that the rateable value of a Livestock Market should still be determined by applying a percentage to the fair maintainable gross commissions that are capable of being generated from on-site sales.
In the absence of reliable direct rental evidence to the contrary, it is recommended that all Livestock Markets should be valued in accordance with the following guidance.
4.1. Income from Livestock Sales.
A percentage taken from the table below should be applied to the total gross commissions, exclusive of VAT.
Unlike the previous two revaluations there have been no countrywide disease outbreaks in the years immediately preceding theAVD that will have resulted in a distortion in trading patterns. In determining what level of fair maintainable gross commissions to adopt as at 1 April 2015, careful consideration will need to be given as to whether, given the nature and location of the mart concerned, the trends and figures suggested by the year end 2014 and 2015 returns will be sustainable. Valuer judgement will be required to ensure that the figures adopted accord with the requirements of the rating hypothesis.
The level of gross commission should not be adjusted to reflect bad debts unless there is clear evidence that the level of non-payment is significantly in excess of the norm for the particular type of market and that it is not due to poor financial management by the operator.
|
Total gross commissions (Livestock Element only) |
Percentage applied to whole (The percentages should be interpolated at the close margins between the bands). |
|
Below £400,000 |
7.5% |
|
£400,001 - £1,000,000 |
7.5% to 14.5% Extrapolated |
|
£1,000,000,- £1,500,000 |
14.5% |
|
£1,500,001 - £2,500,000 |
14.5% to 16% Extrapolated |
|
Above £2,500,000 |
16% |
The percentage adopted should reflect the physical and locational characteristics of the property.
The percentage will normally reflect that the buildings or the layout of the mart is commensurate with a mart achieving the scale levels of trade.
For marts with gross commissions in excess of £750,000 it would be expected that the norm would be a mart with reasonably good facilities, communications and hinterland. It has been suggested that valuer judgement should be applied for old-style marts with inferior buildings but care should be exercised that the marts level of trade already reflects its physical characteristics and that it’s outgoings are equally favorable to more modern equivalents.
4.2. Income from other sources
The terms of occupation of any ancillary activity need to be ascertained in order to decide whether a separate unit of assessment is appropriate. Where the mart operator is in paramount control of the facility, the income / gross commissions received from non-livestock sales should be treated as follows:
Lorry washes
Access to lorry washes is a statutory requirement for livestock markets; if this facility is used solely in connection with mart business it should be deemed to be reflected in the valuation without any specific addition. Where a lorry wash is used on non-mart days the value of this facility should be added to the valuation by making a specific addition based on 10% of the gross receipts.
Lorry / car parking
Where income is derived from lorry / car parking on non-market days then an addition should be made having regard to the local levels of value for such facilities; in making this addition adjustments should be made to reflect the number of days a week this facility cannot be used for this purpose. In the absence of a local comparator an addition should be made based on 25% of gross income.
Car boot sales and market stalls
Adopt 30% of the payment received from a car boot / market operator or 50% of net income from direct sales where the market or car boot sale is run by the occupier of the livestock market.
Chattels / antiques auctions sales
Adopt 15% to 20% of gross commission depending on how significant this source of income is in relation to the market as a whole. Where gross commissions from this source comprise less than 10% of the income generated from livestock sales then this income stream should not be valued separately; the income generated should be added to the gross commissions for the mart as a whole.
Vehicle and Plant and Machinery Sales
Many livestock marts are diversifying to improve income levels and the sale of vehicles and agricultural plant and machinery are becoming increasingly common. If these sales are held in specialist premises, such as Ely in Cambridgeshire and the 4x4 vehicle Auction Centre in the former livestock mart at Leominster, the properties should be valued in accordance with the methodology used to value Car Auction sites. In marts where the this type of sale forms only a subsidiary part of the whole and they are carried out in non-specialised land and buildings, the commissions should, where they contribute less than 10% of total mart income, be valued at the same rate as that adopted for livestock sales. Where the income is more substantial and adaptations have been made to either land and buildings, a valuation basis more akin to that adopted for chattel sales should be utilised.
Non-livestock sales offices
Offices which are not used by the mart operator exclusively for mart related administration (for example, offices used for the provision of professional / agency services or electronic auctions) and offices used as kiosks in the paramount occupation of the market operator should be added as a separate addition in the valuation. The accommodation should be valued at a level which, whilst consistent with the levels adopted for similar offices in the locality, also reflects the fact that it forms part of a larger mart hereditament.
Café / Restaurant
All markets generally have refreshment facilities on site, or very close by. The quality varies from a timber or portable structure to a large building of permanent construction, which offers a full meal service with restaurant drinks licence, and which may be open on non-market days to serve other commercial premises in the locality. For the majority of marts the facility should be reflected in the overall valuation with no separate addition being made; if the income generated from the café / restaurant is significant however and the facility is utilised on non-mart days an addition should be made using either a percentage of gross receipts or a price per square metre which reflects the levels of value that are applied to separately assessed cafés and restaurants in the locality. Cafés and restaurants which are not in the paramount occupation of the market operator should be separately assessed.
Horse sales
It is recommended that the percentage of gross commissions for this source of income be increased by 2.5% when gross commissions from this source comprise more than 10% of the total livestock income. Small-scale sales below this level should be valued at the appropriate gross commission rate for the mart as a whole.
Advertising rights
These will normally be separately assessed unless they are not let out and they comprise an advertising station. Where the Mart does advertise feed, machinery, agrochemical suppliers on the walls around the ring and other prominent locations around the site and receives payment, this should be added at 50% of income.
Bloodstock Markets
The recommended valuation approach for Horse Bloodstock Markets is one based on a full analysis of receipts and expenditure. The marts, which are located at Newmarket and Doncaster, are quite different from the normal livestock market in terms of their physical facilities and the nature of the sales which take place and as a consequence they should not be valued in accordance with this Practice Note.
1. Co-ordination Arrangements
This is an SRU National Scheme Class. Responsibility for implementing the scheme as set out within this Practice Note lies with the SRU, as does responsibility for ensuring effective co-ordination.
For further information see Rating Manual: section 6 part 1.
The Special Category Code is 158 and should be used. As an SRU class the appropriate suffix letter is ‘S’. To facilitate co-ordination, all valuations must be prepared using the newly installed non-bulk server valuation application and a National Co-ordination Spreadsheet shall be maintained by caseworkers, until the data can be downloaded on to the co-ordination sheet which is proposed for the non-bulk server.
2. The State of the Industry
The traditional older in town centre markets have continued to decline particularly since the trend was accelerated by the outbreak of Foot and Mouth disease in February 2001. Due to the severity of this Foot and Mouth outbreak all markets in England and Wales closed from the end of February 2001 until February/March 2002. The marts had only recovered from the outbreak of BSE in 1996 when the 2001 epidemic struck. Prior to the 2001 FMD outbreak there were approximately 181 markets in England and Wales and only approximately 140 were left trading by 1 April 2003. The figure at 1.4.08 is closer to 124 livestock markets throughout England and Wales.
Following the 2001 FMD epidemic stringent bio security measures were demanded of mart operators and this meant that virtually all of the marts with rough surface penage disappeared. Also a number of smaller marts ceased trading. Prior to the 2001 FMD outbreak livestock marts could generally be categorised as super marts, regional marts and the smaller older marts. What has occurred since the resumption of trading is that livestock marts have become more polarised. For an initial period of trading many marts struggled and just when stock numbers, trade and prices were showing improvement the industry was then hit, in 2007/08 by a new FMD outbreak and subsequent Blue Tongue Surveillance and Protection Zones.
Whilst, outbreaks of Foot and Mouth disease in August 2007 meant that marts were forced to close for a short period, the imposition of restrictions for Blue Tongue, which is a midge carried viral disease which had slowly moved up through Europe into the UK, meant that the marts could remain open but their trade was severely hampered by restrictions as cattle and sheep could not be moved in or out of the respective zones or even into the clear area until the protection zones were expanded to cover the whole of England, Wales and Scotland on 3 November 2008.
The best trading marts now tend to be those with good road connections, modern buildings and facilities located on the outskirts of a town with an extensive agricultural hinterland often with diversification into agricultural machinery and other associated sales.
It is reported that livestock auctioneers and marts have been going through some particularly hard times since 2001 with increased bio security costs and diminishing numbers of stock being sold through the marts due to both the decline in the national herd and also farmers choosing to disposing of their stock direct to abattoirs. Direct sales to abattoirs of pigs since the early 1990’s has virtually decimated the pig trade in the livestock marts.
Despite the decline in some throughputs, higher prices combined with higher commissions and minimum commissions have meant that in general the turnover per market in England and Wales is now higher than in the past. Trade in the remaining marts has been considerably polarised, with the highest density of marts being congregated in the southwest, Wales and the north of England. In the south east there are virtually no marts apart from Ashford and Thame, with correspondingly low numbers of livestock in these areas.
The support of the local farming community is of paramount importance to the survival of markets. Farmers prefer the convenience of markets where they consider that they are likely to get a fair price for their stock and also where they can meet other farmers and discuss farming problems and associated matters. Moreover, in the past direct dead weight selling has caused problems especially where abattoirs have gone into liquidation with outstanding debts. Since 2005 there have been efforts to revive electronic selling but like the direct selling of sheep to abattoirs, it has so far has not proved particularly successful. Marts have also not been helped by supermarket operators encouraging farmers to enter into direct selling agreements with the abattoirs. Livestock mart operators rely heavily on farmer loyalty, as apart from the mart auctioning, the operator uses it as a contact point for selling other profitable agricultural services as some pure mart operations are only trading at break even or worse. Further, rationalisation can be expected.
There is no doubt that the very successful livestock marts are doing particularly well but there are others that are finding the trading climate particularly challenging. Initially marts tried to overcome the difficult trading conditions by diversifying into other types of sale, machinery, cars, 4 x 4’s, furniture, horticultural products and in this respect some have succeeded in developing diversification. However, the increased bio security measures forced upon the marts following the 2007 FMD outbreak has meant that these additional avenues have had to be curtailed to some extent.
3. Distortion in Trading Patterns
Gross turnover and commissions in respect of livestock marts around the antecedent valuation date will be severely distorted due to the on set of the outbreak of Foot and Mouth disease on 3 August 2007 in Surrey, closely followed on 28 September by DEFRA confirmed the first outbreak of Blue Tongue in the United Kingdom in East Anglia. The first surveillance zones being set up around Suffolk, part of Norfolk, Essex and Cambridgeshire with a 150 kilometre protection zone covering Lincolnshire and parts of Sussex. Subsequent, surveillance and protection zones encompassed large parts of England and a small part of Wales close to the English Border. Livestock movements between surveillance zones, protection zones and outside the protection zones were restricted. Even during the Vector Free period, which commenced on 20 December 2007, movements out of the zones could only be undertaken with a general licence. These zones severely affected the trade of all marts and not just those close to the boundaries. On 3 November 2008 the whole of England, Wales and Scotland became one protection zone and therefore restrictions on movements between these areas were removed.
As a consequence of the outbreaks, it is considered that the period for which trade should be considered relevant for the 2010 Revaluation is that between 1 August 2006 to 31 July 2007.
As for previous Revaluations quoted commissions may comprise “off farm” sales, including electronic auction sales of farm stock and equipment and stock valuations, all of which may be generated from business in the mart. As a broad rule any income not generated directly by the hereditament must be disregarded for the purposes of valuation of the livestock mart. Where there are offices occupied by the market company within the curtilage of the mart but occupation is not exclusively for mart related administration work, an appropriate value should be included as a separate item in the mart valuation.
4. Basis of Valuation
As stated the industry appears to have become much more polarised. A crucial element to the success of any livestock mart will be achieved by economies of scale and in order to achieve this the operation needs to be of sufficient size with good well laid out buildings, situated on an out of town site but with good access to the road network. This is demonstrated by the recently opened marts, such as Sedgemoor (Somerset), Junction 24 of the M5 Motorway, and Shrewsbury.
Older marts often suffer from the disadvantage of high running costs including effluent disposal, maintenance and greater bio security measures. This all contributes to potentially higher overheads that can erode profit margins. Where such marts are in areas of low stock numbers the problem is compounded.
The general trend that emerges from the limited rental evidence available suggests a continuing rental growth in respect of the most successful marts with increasing turnovers, whereas more limited changes in respect of the older marts, particularly those smaller marts which face heavy competition.
This property is valued using the non-bulk server. The manual can be accessed here.
4.1 2010 Basis to be adopted.
Each market is essentially unique. Where rent closely conforms to or is readily adjusted to the basis of rateable value, the starting point of that rent paid would normally be considered the best evidence of that market’s rental and rateable value within the context of this Practice Note. A check valuation should be made using the valuation scheme set out below and it is then for the valuer to weigh up all the circumstances and decide which more correctly represents the rateable value under the terms of the rating hypothesis.
4.2 Other Markets Basis of Valuation
The basis for Revaluation 2010 will remain related to income in terms of gross commission but this will vary according to the type of market. Factors such as the degree of local competition and the extent and nature of the catchment area will have a bearing on the valuation.
The proposed scheme is based on relevant fair maintainable gross commissions capable of being earned through the mart:
| TOTAL GROSS COMMISSIONS | PERCENTAGE APPLIED TO WHOLE |
| Below £250,000 | 7.5% |
| £250,000 - £350,000 | 10% |
| £350,000 - £500,000 | 12.5% |
| £500,000 - £800,000 | 15% |
| £800,000 - £1,000,000 | 17.5% |
| Above £1,000,000 | 19% |
These percentages would be adjusted upwards or downwards by a maximum of 2.5% where buildings or layout of the mart is not commensurate with the typical quality expected of a mart achieving the scale levels of trade. Downwards up to the maximum of 2.5% for poor and inferior buildings and upward to the maximum of 2.5% for modern or superior buildings or facilities.
Note: In relation to marts with gross commissions in excess of £500,000, it would be expected that the norm would be for a mart with good facilities, communications and hinterland. An example where an upward adjustment would be relevant is a very old mart but partially improved with say a 2000 state of the art sheep building. Similarly a more modern mart with buildings and facilities below expectation would require a downward adjustment.
The above percentages should be interpolated at the close margins between points.
Typical definitions:
4.3 Standard Older Mart
Usually in its historic location, buildings fit for purpose, adapted to a reasonable basic standard for compliance with regulations for health, safety and disease prevention. Some covered pens and often a variety of open span sheds but not necessarily with a covered sales ring, adequate access and vehicle parking and washstand.
4.4 Improved Older Mart
Possibly an historic location but investment has been made to some buildings which are improved to modern equivalent/state of the art with associated ancillary offices; evidence of considerable investment to improve standard facilities.
A valuation uplift over the standard basis would be expected.
4.5 Modern Mart
Generally (but not exclusively) built from the 1970’s onwards and probably close to good road network. Modern standard buildings fit for purpose and designed to accommodate easy throughput for large-scale animal sales. All necessary facilities with improvements where necessary to allow buildings meet the regulations to a good standard. Mainly under cover the site will often be large and flexible enough to accommodate other retail uses.
4.6 Fair Maintainable Trade
The gross turnover figures should be estimated relating to the year ending 31 July 2007, as later figures would be affected by Foot and Mouth and Blue Tongue diseases.
Where the mart operator has failed to supply details of trade for the period 1 August 2006 to 31 July 2007 the valuer should make a robust judgement of fair maintainable trade based on his knowledge of the mart, information gathered from the press and other sources. The valuation will be based on the level of gross commission, which the hypothetical tenant can achieve from the hereditament at the AVD, and in cases where information has been provided the valuer may have regard to actual commissions achieved in order to decide the fair maintainable trade at 1 April 2008. By having regard to the trend pre FMD/Bluetongue it should be possible to eliminate any fluctuations in trade, which may be due to the abnormal trading factors.
Turnover/gross commission should not be adjusted to reflect bad debts unless there is clear evidence the non-payment is significantly in excess of the norm for that type of market and is not due to poor financial management by the operator.
Income will exclude:
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VAT
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tolls
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income from non livestock sales sources, which will be separately valued
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income from buildings or land, which are separately assessed
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income derived from activities outside the hereditament e.g. farm sales, estates agency or electronic auction sales.
The gross commission percentages of the above scheme refer to livestock sales only. Commissions derived from other sources should be considered as set out below.
a. Lorry washes: Only where there is significant income on non market days then an addition should be made either as a lump sum related to the value adopted for separately assessed lorry washes, or by reference to 10% of gross receipts. Access to lorry washes is a statutory requirement for livestock markets, and if this facility is non profit making it can be reflected in the valuation without a specific addition.
b.** Lorry/car parking:** It is assumed that all livestock marts will have adequate parking facilities in relation to their age and the type of market which is to be valued, but where income is derived from parking on non market days then an addition should be made by reference to local levels of value for such facilities, but making adjustment for the number of days a week it is in market use. Where there is no local comparator take 25% of gross income.
c. Car boot sales and market stalls: Adopt 50% of payment from a market operator or 50% of net income from direct sales where the market or car boot sale is run by the occupier of the livestock market.
d. Chattels/antiques auctions sales: Adopt 15% to 20% of gross commission depending on how significant this source of income is in relation to the market as a whole. Where gross commissions from this source comprise less than 10% of total income then do not value separately, but include in gross commissions for the mart as a whole.
e. Vehicle and Plant and Machinery Sales: Many livestock marts are diversifying to improve income and the selling of vehicles may be seen as a possible new sources. Agricultural plant and machinery sales are increasingly common. If these are held in specialist premises, such as Ely in Cambridgeshire, and a 4x4 vehicle Auction Centre in a former livestock mart at Leominster the properties should be valued on a derived industrial basis having regard to the established modus operandi for Car Auctions. In marts where the sales are only part of the whole and occupy non-specialised land and buildings, contributing less than 10% of total income of the mart, the commissions should be valued at the same rate as for livestock sales. Where income is more substantial and perhaps a major building in the mart is dedicated to such sales, a valuation basis more akin to chattel sales should be employed.
f. Non-livestock sales offices: Examples will include estate agency or electronic auctions and kiosks in paramount occupation of the market operator. The buildings should be valued having regard to the local level of rental for similar offices, making allowance for being part of a larger hereditament.
g. Cafeteria and restaurant: All markets generally have refreshment facilities on site, or very close by. The quality varies from a timber building or Portakabin to a large building of permanent construction, which offers a full meal service with restaurant drinks licence, and may be open on non-market days to serve other commercial premises in the locality. A lease may specify that an additional sum of rent shall be payable for the restaurant, usually in relation to gross income, and in such cases the lease terms should be followed in the rating valuation of the mart. For most markets the facility should be reflected in the overall valuation with no separate addition made unless it generates a good income from meals and licensed sales, including non-market days. In this case a separate addition should be made on the basis of a percentage of gross receipts but having regard also to the rental basis for separately assessed cafes and restaurants in the locality. In cases where the restaurant/café is not in the paramount occupation of the market operator because for example it is let on lease to a caterer, then it should be separately assessed in accordance with the normal rating principles.
h. Horse sales: Some marts such as Melton are now beginning to develop a good market in horse sales, and it is recommended that the %age of gross commissions for this source of income be increased by 2.5% when gross commissions from this source comprise more than 10% of total livestock income. Small-scale sales below this level should be valued at the appropriate gross commission rate for the mart as a whole.
i. Advertising rights: Normally separately assessed unless it is not let out, and comprises an advertising station (see Rating manual Section 6 part 3 section 20)
The above list is not exhaustive, and any other examples where guidance is needed should be referred to the specialist valuer in CEO Local Taxation (Rating).
5. Essential Information
If a consistent and correct basis is to be achieved, then it is essential to obtain actual turnover and/or gross commissions, or sufficient background information, eg average commission rates, in the year ending 31 July 2007 to enable accurate estimates of these figures where the appropriate information is not forthcoming. A breakdown between the various type of livestock and non livestock income should be requested as set out in the Form of Return number VO 6043.
It may not be sufficient to have regard to just the 2006/7 year trading figures. The VO must consider whether these can reasonably be expected to have been maintained.
Full information is always required in the case of markets let at current rents, and a copy of the lease is preferable to relying upon information contained in the Form of Return.
The terms of occupation of ancillary activities need to be ascertained in order to decide whether a separate unit of assessment is appropriate.
If it is claimed that operating expenses for the market are well above average, and therefore the valuation basis for the mart be reduced, or the market should valued on a full accounts basis, then full accounts information should be obtained and advice sought from CEO Local Taxation (Rating).
6. Bloodstock Markets
Included in this special category code are horse bloodstock markets at Newmarket and Doncaster. These markets are quite different from the normal livestock market in terms of their physical facilities and the nature of the sales, which take place, although some livestock marts may from time to time hold sales of horses, which are not bloodstock.
Horse bloodstock markets will be valued on a receipts method but should not be valued in accordance with this Practice Note.
Any departure from the above valuation scheme must be referred to CEO Local Taxation (Rating) for advice.