Business Rates and Advertisement Rights
Court of Appeal confirms advertisement rights will attract separate business rates liability.
In the recent case of Network Rail Infrastructure Ltd v List (Valuation Officer) [2026] EWCA Civ 7, the Court of Appeal affirmed that advertisement rights constitute separate ratable hereditaments (i.e. a unit capable of separate assessment for business rates), with liability falling on the person or company entitled to exercise those rights.
The Background
The case concerned a dispute between Network Rail Infrastructure Limited (“Network Rail”), and HMRC / the Valuation Office Agency (“VOA”), who are responsible for determining the ratable value of non-domestic properties.
Network Rail had granted exclusive rights to an advertisement company, J.C. Decaux Limited (“Decaux”), to operate advertising displays at two major London stations. During an inspection of these sites by a valuation officer, the advertisement rights were listed as separate hereditaments for which Decaux were listed as the rate payer.
Network Rail appealed the decision to the Valuation Tribunal for England, arguing that, amongst other things, the rights formed part of its centrally assessed railway undertaking and should not be separately rated. The argument was initially successful, however on a further appeal by HMRC was rejected by the Upper Tribunal who decided that:
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Under sections 64(2) and 65(8) of The Local Government Finance Act 1988 (“TLGFA 1988”), a qualifying right to use land for advertisement is in fact a separate hereditament;
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The phrase “let out” contained in section 64(2) of TLGFA 1988 (being the section which defines when an advertisement right will constitute a hereditament), simply means the right was created, with no further tests being applicable;
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The person or company entitled to exercise those advertising rights is deemed to be in occupation for rating purposes; and
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The usual case law tests regarding “ratable occupation” do not apply, and the statutory regime for advertising rights is self-contained.
Network Rail appealed the decision to the Court of Appeal, who have rejected it and instead affirmed the decision of the Upper Tribunal. Whilst Network Rail could appeal the decision again to the Supreme Court, whether they will choose to do so remains to be seen.
Potential Implications
The decision is not limited to railway stations and will affect all rights granted for advertisement purposes, whether in the transport sector or beyond.
If exclusive advertisement rights are granted, the advertisement company is likely to now be treated as a separate ratable occupier even if the advertisement space remains embedded in the rest of the site.
Whilst this case concerned a more traditional billboard arrangement, the decision will likely extend to any structured advertisement rights.
The VOA also has powers to backdate liability of rates to the date on which the relevant rights were granted. This could mean significant backdated liabilities for advertisement companies, though it is uncertain whether VOA will elect to do this on a broad scale, and if so whether rates would be backdated beyond the current rating list (i.e. 1 April 2023).
Next Steps and Risk Management
As all existing advertisement rights will be covered by this decision, a stock take of current advertisement arrangements by landowners would be prudent, to check how rates liability is currently treated and who may be contractually liable to pay for any new rates payable as a result of this decision.
For new arrangements, it is important that liability for business rates is clearly allocated in contractual documents. The potential costs should also be considered when agreeing rents and other commercial terms with advertisers, as well as any internal commercial modelling of income from advertisement ventures given that many advertisers will likely seek to offset the potential liability by way of rent concessions.
Given the potential for backdated rates liability and, as a result, the increased risk of advertisement companies becoming insolvent, landowners should undertake careful financial due diligence for new advertising arrangements and consider whether further security by way of a parent company guarantee, bond or rent deposit is appropriate to mitigate any identified financial risks.
The advertisement industry will no doubt be watching the VOA closely, to see how this decision is ultimately applied in practice.
If you would like to discuss any aspect of this article further, please contact the Property team on 0113 244 6100.
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The information in this article is necessarily of a general nature. The law stated is correct at the date (stated above) this article was first posted to our website.
Specific advice should be sought for specific situations. If you have any queries or need any legal advice, please feel free to contact Wrigleys Solicitors.
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