Commentary on Sections Example 3 £150(Pe) – £50(E) = £100 Section 207: Meaning of “annual rental value”
819.This section defines “annual rental value” for the purposes of this Chapter. It does not replace the use of gross rateable value, which will continue. It derives from section 156(6) and section 837 of ICTA which in turn draws on section 23 of the General Rate Act 1967 (although that Act was repealed in 1988).
820.This section does not affect the Inland Revenue practice of using the gross rateable value as a proxy for “annual value”. That practice will continue. The main use of this section is to provide guidance on how to arrive at the annual value of properties for which rent is not paid and in practice is only needed in cases where no gross rateable value can be found. It provides the definition of annual rental value for land. Schedule 1 to the Interpretation Act 1978 defines “land” as including “buildings and other structures”. Chapter 5 of Part 3 of this Act applies to living accommodation, so this Chapter applies only to accommodation which is not living accommodation.
821.Subsection (1) defines “annual rental value”. Section 837(1) refers to “rates and taxes” on the premises. This section includes a fuller and more updated description of domestic property charges: “taxes, rates or charges”. See Change 24 in Annex 1.
822.The following subsections set out the adjustments to make in order to arrive at the rent to be used for land. They derive from section 23 of the General Rate Act 1967 which was repealed in 1988. As a consequence of that repeal the reference to that Act in section 837(2) has not been included here. Instead the general thrust of the rules have been rewritten in this section. See Change 23 in Annex 1.
823.Subsection (2) applies in relation to subsection (1). It ensures that the annual value does not include the cost of anything provided which is not provided in the case of unfurnished property. This is important in cases where the only available comparisons are rent of fully furnished and serviced properties. If, in considering what the rent of the property would be, the nearest comparison is rent for a property for which services are provided at an inclusive rent, in order to reduce the rent to that for an unfurnished, non-serviced property the cost of the services provided are deducted. This means that if there is a profit element in the provision of the services it is treated as rent in arriving at the annual value.
824.Subsections (3) and (4)  extend the process of comparison and adjustment. They follow the thrust of section 23(3) and (4) of General Rate Act 1967, which ensured that when a property was valued by looking at comparative rents of similar properties the value was not distorted by the existence (in the comparative case) of separate payments for services in addition to what one might call the basic rent. In particular it added the separate payments to the rental payments and allowed for certain deductions to be made. It did not allow any deduction in computing the value based on a comparative rent for amounts paid in respect of repairs, insurance or maintenance of other property belonging to or occupied by the landlord. In the case of payments for other types of services only the cost element of them was deducted. These subsections follow that method of comparison and adjustment.
825.Subsection (5) has the effect that the services whose cost of provision may be deducted are those which are not normally met by a landlord in the provision of unfurnished property. Again, the wording is not derived directly from section 23 of the General Rate Act 1967 but follows the general thrust of provisions of that section.