In a recent Upper Tribunal decision, commercial occupiers have been reminded that business rates do not exist in a vacuum.

Published: 19 May 2026
Author: Sophie Tracey

Where offices have moved beyond a basic Cat A fit‑out to a more bespoke Cat B configuration, rateable value should reflect the physical reality of that enhanced hereditament.

Fit‑out decisions, dilapidation strategies and occupation profiles can therefore all have unintended rating consequences – meaning that occupiers need to take early advice on the knock-on effects of customisation of their premises.

How is rateable value calculated?

Rateable value (RV) is an estimate of the annual rent a ‘hereditament’ (essentially, a unit of property) could achieve on the open market.

It is a hypothetical rental value, assessed by reference to the antecedent valuation date (AVD), but reflecting the physical state of the property and any relevant circumstances on the ‘material day’. For properties entered onto the ratings list after the AVD, the material day is typically the date they were entered – meaning that strong comparative evidence is crucial to the exercise.

In the Upper Tribunal’s recent decision on appeals by two valuation officers (considered together and known as Re Dyer and Re Johnson), the relevant premises were occupied on the material day and were therefore valued including the sitting tenant’s fit out, known as ‘Cat B’ condition.

How does tenant’s fit out affect the RV of its premises?

As highlighted in Re Dyer, most lettings in the office market are actually of properties in Cat A condition (i.e. a standard developer or landlord’s shell or standard fit-out). These lettings are therefore of limited use to valuers, but direct Cat B comparables are themselves limited.

The starting point is therefore often Cat A rental evidence, ‘toned’ by adding an uplift to reflect the value of the element of the Cat B fit out that would have general market appeal. In Bunyan v Acenden [2023], for example, this was assessed at 4.4% of the capital amount of expenditure. However, where the tenant’s fit out is overly bespoke, this can instead depress values.

In Re Johnson, the primary evidence came from sub-lettings between law firms, where the expected fit out was relatively consistent across occupiers.

Key considerations for occupiers

1.     Plan early

The 1 April 2026 revaluation has reset RVs across England and Wales, based on a new AVD of 1 April 2021. The result is sector- and location-specific shifts, with some occupiers seeing significant movement. The introduction of more permanent reliefs/multipliers (particularly in retail, hospitality and leisure) has also altered the landscape, making forward planning essential.

2.     Do your due diligence

There is evidence both in the property and national press that the new list has not been implemented consistently, with errors in RVs, multipliers and reliefs. It is well worth your time checking rateable value, factual accuracy for the property e.g. floor area, use and layout, and whether correct multiplier and reliefs have been applied.

3.     Check, challenge, appeal

The system for challenging rates valuations first requires you to raise a ‘check case’ and then ‘challenge’ via the Valuation Office’s electronic portal. This can then be appealed if you still disagree with the challenge decision (within four months of the date of the decision), or if you have not had a reply within 18 months.

In another Upper Tribunal appeal, Caffe Concerto v Johnson [2026], the VTE confirmed its discretion to extend appeal deadlines, applying the Denton principles – but this should not be relied on, and deadlines remain critical.

4.     Factor rating into fit-out and works

Physical changes to property such as tenant fit-out can increase RV where it adds value, but landlord works or contributions may also have unintended rating consequences. Occupiers should therefore price rating risk into fit-out decisions and negotiations.

In the Hitchings appeals [2025], the Tribunal was reluctant to determine whether a landlord’s contribution to a Cat B fit out should be preferred over the actual cost of the fit out.

Instead, whilst there is no automatic ‘strip back to Cat A’ rule, the Tribunal must look at the actual physical state of the property and its utility in the market.

5.     Evidence is king

As highlighted in Re Dyer, the Tribunal is often dealing with “less than helpful” evidence, particularly given the scarcity of Cat B comparables (described in one case as “virtually impossible to come by”).

The Tribunal will engage closely with hard factual evidence of the condition of the hereditament, not general market narratives. Floorplans, photos, specifications and evidence of actual works carried out can all be decisive.

Where necessary, an application to the Tribunal for an order for disclosure or a witness summons could encourage production of better evidence.

6.     Remember it’s not all about works

Changes in mode or category of use of the property can also trigger revaluation.

Remember too that certain tenancy arrangements will be subject to more scrutiny than others – there are known issues with valuing flex or serviced office space either per individual tenant or as a single office space, for example – so be alive to potential issues. Once a valuation ‘tone’ is established, the Tribunal may seek to prioritise consistency across the list rather than seeking to arrive at the ‘perfect’ number.