A test case dispute over the effects of relegation on the calculation of business rates for football stadia has been dismissed by the Valuation Tribunal.
Wigan Athletic, which in recent years had dropped from the Premier League down to League One, but last season managed to return to the Championship, argued that such demotion constituted a “material change of circumstance” and should lead to lower business rate bills. It argued that the devastating financial impact of the relegation should be taken into account immediately and not put off until the next revaluation. Clubs in the Premier League receive at least a £100 million of income from TV rights from Sky and others- so any demotion has a material impact on finances.
Although President of the Valuation Tribunal for England agreed that relegation impacted on finances, he did not agree the club had seen a” material” change to its circumstances- since the stadium did not change physically and: “Football is still football”.
“The revenue the football club received from broadcasting rights, when it was in the Premier League, represented more than 80% of its income. This percentage fell to 23% when it was in the Championship and further reduced to around 13% in League One”.
“Whilst I accept that the relegation from the Premier League would have a significant detrimental impact upon a football club’s revenue stream, I am of the opinion that this loss of revenue is an economic factor and cannot be considered until the next revaluation.”
John Webber Head of Business Rates at Colliers International disagreed on the finding, “It is highly likely that this case will be appealed to the Upper Tribunal and perhaps even the Court of Appeal. Unlike most other business premises, the rateable values of football stadia are arrived at by reference to a number of factors, the principal one being the estimated cost of building a replacement stadium -but there is also an adjustment that recognises the ability to pay, based on income.
On the facts presented the agreed difference in revenue value between leagues is stark - £1,100,000 in the Premiership; £450,000 in the Championship and £250,000 in League One.
“We disagree that relegation is not a material change. Since dropping leagues, the club has seen much smaller crowds, the stadium is not using as many seats, which have affectively become advertising hoardings and some of its TV viewing boxes are now also redundant. We think the VOA should move into the modern world in the way it approaches such valuations and look generally at its methodology. Leaving matters until the next revaluation is too late for many clubs to cope with.”
Wigan was relegated from the Premier League, after a seven-year stay, in 2013. It was then relegated to League One two years later, following which point it was paying more than six times the average business rates of its rivals in the division: £590,000 compared with an average of £88,000. The club secured promotion back to the Championship last season.
Webber continued: “This is a sad day for Football Stadia, but I don’t think they will give up. Even the President of the Tribunal agreed that “Someone needs to look again at the valuation approach to stadiums which are occupied by football clubs”. I hope the VOA takes heed and does not continue to pursue a totally inflexible and increasingly out of date valuation method but embraces the needs of the modern football world. “