HMRC: Builders Merchants Rating Valuation Guidance Detailed

• Builders' merchants are a distinct property category, separately valued since the 2010 Revaluation due to a rental premium over general industrial properties.
• Their customer base has expanded from primarily trade to increasingly include the general public, attracted by lower prices than DIY retail warehouses.
• Valuation responsibility lies with Regional Valuation Units, supported by a Class Co-ordination Team ensuring consistency and providing guidance.
• Planning authorities' classification of builders' merchants as Use Class B8 or sui generis depends on the retail proportion and regularity of public access.
• Specific national sub-locations, BLD1 and BLD2, differentiate builders' merchants based on prominence, retail element, and land-to-building ratios, reflecting varying market values.

Planning authorities' classification of builders' merchants as Use Class B8 or sui generis depends on the retail proportion and regularity of public access.

Builders' merchants (BMs) represent a distinct and significant category of commercial property, first identified and captured separately from general industrial properties during the 2010 Revaluation. This differentiation was driven by rental evidence indicating that these properties command a premium compared to standard industrial sites, necessitating a specialized approach to their valuation.

Historically, builders' merchants primarily served the construction trade. However, their market has expanded considerably in recent years, with the general public increasingly frequenting these establishments. Consumers are drawn by the prospect of lower prices than those found at DIY retail warehouses, despite the more robust, trade-oriented environment. These businesses typically offer a broad array of products, encompassing items like bricks, aggregates, joinery, PVC, hardware, and landscaping supplies, rather than specializing in a single area.

While timber merchants and wood yards are generally not included in this specific valuation exercise—often being classified as primarily land-based bulk operations with ancillary structures or open storage—it is recognized that some properties occupied by timber merchants may indeed fall under the builders' merchant classification. For clarity in property listings, builders' merchants and premises are assigned Primary Description Code IX with SCAT code 738 G, while trade warehouses and premises are identified by Primary Description Code CW with SCAT code 096 G.

The responsibility for valuing and referencing builders' merchants and similar trade warehouses falls under the purview of the Regional Valuation Units (RVUs) within HM Revenue & Customs (HMRC). To ensure consistency and accuracy across HMRC's valuation functions, a dedicated Class Co-ordination Team (CCT) provides expert advice and oversight. This team, in collaboration with the Industrial Valuation Panel, is tasked with coordinating valuation approaches, maintaining accuracy, and ensuring uniformity in the assessment of these properties. The CCT also develops Practice Notes outlining the valuation basis for revaluations and offers ongoing guidance throughout the life of the rating list.

Caseworkers are mandated to adhere strictly to the guidance provided by the CCT, and any deviation from these instructions during appeals or maintenance work requires explicit approval from the co-ordination team. A critical aspect of classification involves how planning authorities view these properties, often differing on whether they fall under Use Class B8 or should be treated as sui generis. This determination frequently hinges on the proportion of retail activity and the regularity of public access to the hereditament; properties with more frequent public access are more likely to be classified as sui generis.

The standard measurement basis for this class of property is Gross Internal Area (GIA). For precise application of this measurement, reference should be made to the Code of Measuring Practice for Rating Purposes in England and Wales. This ensures a standardized approach to property valuation across Great Britain.

To enhance coordination and accurately reflect the premium associated with certain builders' merchants, specific national sub-locations have been established. All valuation units are directed to adopt these guidelines for identifying and categorizing BMs within their respective areas. These sub-locations help differentiate properties based on their characteristics and market value.

One such category is BLD1, which designates builders' merchants situated in prime main road locations, characterized by excellent access and high visibility. These properties typically feature a significant retail component, often including a showroom, and are usually found in urban settings, though often positioned outside the most congested town and city centers to facilitate easy access for large vehicles. For BLD1 sites, the land area frequently surpasses the footprint of the enclosed buildings, sometimes approaching an ideal 70% land to 30% buildings ratio. Public access to portions of the land can further enhance their overall value.

Another sub-location, BLD2, applies to builders' merchants located in less prominent positions compared to their BLD1 counterparts. For both BLD1 and BLD2 sub-locations, it is common for the land area to exceed the enclosed building area, although the framework does not preclude builders' merchants from operating within larger buildings where this ratio might differ.

Lawyers advising clients on property acquisitions, leases, or business rates appeals for builders' merchants or trade warehouses in Great Britain must understand HMRC's specific valuation methodology and classification criteria (e.g., BLD1/BLD2, Use Class B8 vs. sui generis) to accurately assess potential rateable values, advise on liabilities, and navigate planning implications.

Source: Original reporting via internal HMRC guidance