When are cold storage buildings exempt from business rates? Upper Tribunal clarifies 'agricultural building' rules.

Neutral Citation Number: [2026] UKUT 236 (LC) Case No: LC-2025-150 IN THE UPPER TRIBUNAL (LANDS CHAMBER) AN APPEAL AGAINST A DECISION OF THE VALUATION TRIBUNAL FOR WALES Royal Courts of Justice, Strand, London WC2A 2LL 26 June 2026 TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007 RATING – EXEMPTION – buildings used for the cold storage of potatoes grown by third party growers – ratepayer growing other crops on dispersed land holdings – whether buildings occupied together with agricultural land – para.3(a), Sch.5, Local Government Finance Act 1988 – appeal allowed BETWEEN: [APPELLANT] (vAluation officer) Appellant -and- PUFFIN PRODUCE LTD (1) PUFFIN FARMS LTD (2) Respondents Units 12-28 Rosemary Lane, Withybush Road, Haverfordwest SA62 4BN Martin Rodger KC, Deputy Chamber President and Mrs Diane Martin MRICS FAAV 16-17 June 2026 Guy Williams KC and Isabel McArdle , instructed by HMRC Legal Group, for the appellant Luke Wilcox, instructed by Cameron McKenna Nabarro Olswang LLP, for the respondent © CROWN COPYRIGHT 2026 The following cases are referred to in this decision: Bunyan (VO) v Fridays Ltd [2025] 1 WLR 4112 Farmer (VO) v Buxted Poultry [1993] AC 369 Hilleshog Sugar Beet Breeding Co Ltd v Wilkes (VO) [1971] RA 275 John Laing & Son Ltd v Assessment Committee for Kingswood Assessment Area  [1949] 1 KB 344 W & JB Eastwood Ltd v Herrod [1971] AC 160 Introduction 1. The issue in this appeal is whether cold storage warehouses occupied by the respondents and used by them for the storage of potatoes belonging to independent growers are “agricultural buildings” within the meaning of paragraph 3(a) of Schedule 5 to the Local Government Finance Act 1988 . If they are, the buildings will be exempt from non-domestic rating. The Valuation Tribunal for Wales (the VTW) decided that they are. The Valuation Officer now appeals against that decision.

2. The buildings in question are three large cold storage warehouses built by Puffin Produce Ltd (PPL) between 2014 and 2018 at Withybush Road on the outskirts of Haverfordwest in Pembrokeshire. The buildings were built one at a time and entered in the rating list as each was completed but on 28 May 2020 PPL proposed their removal from the 2017 list with effect from 1 September 2018 on the grounds that they were exempt. PPL subsequently underwent a corporate restructuring under which part of its business was hived off to Puffin Farms Ltd (PFL). On 30 March 2023 PFL made a second proposal for the removal of the buildings from the 2017 list with effect from 28 March 2022, the date of the corporate restructuring on which it is said PFL became the rateable occupier of the buildings. We will refer to PPL and PFL jointly as Puffin.

3. The proposals were not accepted by the Valuation Officer but appeals by Puffin succeeded before the VTW.

4. At the hearing of the Valuation Officer’s appeal she was represented by Mr Guy Williams KC and Ms Isabel McArdle while Puffin were represented by Mr Luke Wilcox. We are grateful to them all for their assistance. The agricultural buildings exemption 5. Section 51 and Schedule 5 to the Local Government Finance Act 1988 have the effect of exempting all or part of certain hereditaments from local non-domestic rating. The particular exemption relied on by PPL and PFL in their proposals is in paragraph 1 of Schedule 5, which provides that a hereditament is exempt to the extent that it consists of agricultural land or agricultural buildings.

6. Agricultural land includes land used as arable, meadow or pasture ground only (paragraph 2(1)(a) of Schedule 5).

7. So far as is relevant, paragraph 3 of Schedule 5 provides that: “A building is an agricultural building if it is not a dwelling and – (a) it is occupied together with agricultural land and is used solely in connection with agricultural operations on that or other agricultural land, […]” 8. To be an agricultural building within paragraph 3(a), a building must therefore satisfy two requirements: it must be “occupied together with agricultural land”; and it must be used solely in connection with agricultural operations on that or other agricultural land. In Bunyan (VO) v Fridays Ltd [2025] 1 WLR 4112 , Lewison LJ referred to the first of these requirements as “the occupation test”, and to the second as “the use test”.

9. The use test was originally confined to buildings used solely in connection with agricultural operations on the agricultural land together with which the relevant building was occupied, but in 2004 the test was modified and its scope expanded to include use in connection with operations on other land. But the occupation test has remained in substantially its current form since the separate exemption for agricultural buildings was first introduced in 1928 and was authoritatively interpreted by the House of Lords in Farmer (VO) v Buxted Poultry [1993] AC 369 .

10. This appeal is concerned only with the occupation test.

11. In Fridays the Court of Appeal confirmed that the changes introduced to the use test in 2004 had not caused any change to the occupation test, and that the guidance provided by the House of Lords in Farmer v Buxted was still applicable. In reaching that conclusion the Court of Appeal reversed the decision of this Tribunal in Fridays . The decision of the VTW now under appeal was reached by it before the Court of Appeal’s decision in Fridays . The VTW had quite properly followed the guidance of this Tribunal which the Court of Appeal has now disapproved . It is therefore agreed between the parties in this appeal that the VTW’s reasons for finding that the buildings are agricultural buildings cannot stand. Puffin nevertheless maintains that the same outcome should be arrived at by applying the approach of the House of Lords in Farmer v Buxted.

12. The ratepayer in Farmer v Buxted occupied buildings which it used for processing of poultry sourced from 67 separate farms which it owned and occupied but which were situated at distances of up to 120 miles from the buildings. The ratepayer sought exemption under paragraph 3(a). The Lands Tribunal agreed with the ratepayer that the exemption applied and interpreted the occupation test as depending purely on functional considerations so that mere geographical separation was not relevant. The Court of Appeal rejected that purely functional approach, holding that geographical factors were a legitimate consideration and that the poultry processing buildings were not occupied together with the farms “as part of the same enterprise” (as Glidewell LJ put it). The House of Lords agreed with the Court of Appeal in the outcome but concluded that the sense of “togetherness” implied by the occupation test required more than simply that the land and buildings be occupied by the same person or as part of the same business. The sole speech was delivered by Lord Slynn, who explained the occupation test in the following passage at p.378 D-G: “I agree with Glidewell L.J. that for one building to be 'occupied together with' another for the purposes of this Act they must be in the same occupation and the activities carried on in both must be jointly controlled or managed. I also consider that the buildings must be so occupied and the activities so controlled and managed at the same time. These are necessary conditions to be satisfied but to satisfy each of them separately or together is not sufficient to establish that one building is 'occupied together with' another for rating purposes. Nor is there any geographical test which gives a conclusive answer - though the distance between the buildings is a relevant consideration, as the Court of Appeal held. It is not, however, sufficient to ask generally whether the buildings or buildings and land in question are all part of the same business enterprise. What it is necessary to show is that the two buildings, or as the case may be the buildings and agricultural land, are occupied together so as to form in a real sense a single agricultural unit. Contiguity or propinquity may go far to show that they are. Thus farm buildings surrounded by land which is farmed with other land nearby though not contiguous or even land in another neighbouring village may well as a matter of fact be found to be 'occupied together with' each other. On the other hand separation may indicate that they are not and the greater the distance the less likely they are to be one agricultural unit.” 13. At p.378 H Lord Slynn also referred to W & JB Eastwood Ltd v Herrod [1971] AC 160 (a case concerning the use test in which the occupation test had been conceded) and considered that observations by Viscount Dilhorne at p.180 indicated “the right direction”. Viscount Dilhorne had expressed scepticism that a poultry packing station could be said to be occupied together with agricultural land located nine miles away and suggested that the occupation test “was intended to include buildings used and occupied together with the land for the purpose of farming the land, not buildings far distant and not used in connection with an operation on the land, even though owned by the same person.” Those and other observations in earlier cases suggested to Lord Slynn that “the important question” is “whether the buildings and land are worked together so as to form one agricultural unit.” The facts 14. Before the VTW the facts appear not to have been in dispute and the matter proceeded on the basis of submissions. It was therefore a disappointing feature of this appeal that the parties were unable to agree a useful statement of relevant facts. The Valuation Officer’s approach was characterised by excessive scepticism towards Puffin’s explanations of its own business, and a lack of comprehension of the norms of land use and farming relationships in a close rural community. The Valuation Officer was unwilling to accept facts which could not be supported by documentary evidence, notwithstanding the provision of a detailed witness statement, supported by a statement of truth, by [NAME], Puffin’s Chief Financial Officer. No alternative version of the facts was advanced in evidence, nor was [NAME]’s account seriously challenged in cross examination. In his oral evidence [NAME] was able to provide some helpful clarification on points of detail concerning the “demerger” of PFL from PPL, but the facts on which the appeal turns are substantially those described in his written evidence, which we accept. We were also assisted by a report prepared by [NAME], a director of Savills, who provided evidence about patterns of land occupation and farming in West Wales.

15. Puffin traces its roots to the Pembrokeshire Potato Marketing Group, a cooperative of local potato growers whose members incorporated PPL in 1994 and were its original shareholders. PPL remained in the control of its 18 grower members until 2020 when a management buyout saw control pass to its Managing Director, one of its largest growers, and [NAME] (who joined PPL as Finance Director in 2012).

16. Originally the Marketing Group, and then PPL, provided ambient storage buildings for the early season potato crop typically grown in the district by their members in the 1980s and 1990s. But by the 2010s demand had developed from wholesale markets and large retailers for a year-round supply which could be marketed as Welsh potatoes. To meet this demand it was necessary both to increase the area under potato cultivation and to invest in cold storage facilities at which the crop could be held for up to 12 months before being released to the market.

17. In Pembrokeshire the cost of construction of smaller commercial buildings greatly exceeds their capital value on completion. For the provision of cold storage to be commercially viable the needs of individual growers must therefore be pooled and their collective requirements met by the provision of very large buildings with the assistance of grant support from the Welsh government. Funding was secured by PPL in 2013 to meet 40% of the cost of development of new cold storage and packing facilities. The provision of the necessary facilities in Pembrokeshire enabled growers to avoid the excessive transportation and storage costs of alternative remote provision and contributed to the creation of a distinctive Welsh brand.

18. The three appeal buildings are located to the north of Haverfordwest in an area of commercial and light industrial buildings and warehouses which straddles Withybush Road (although the buildings are referred to by Puffin as the Rosemary Lane site). The three buildings are purpose built potato cold stores with a combined gross internal area of more than 8,000 sqm. The first was completed by 2016, the second by 2017 and the third by late summer 2018. The buildings themselves occupy a site of 10.5 acres and in 2018 they adjoined an area of agricultural land covering 31.86 acres. This agricultural land was referred to in the evidence as the Adjoining Land and it was acquired by PPL together with the site of the cold stores in 2012.

19. The washing, grading and packing of the potatoes and other produce takes place at a separate site further north on Withybush Road from the cold stores. There is no suggestion that any of the buildings on that site are agricultural buildings.

20. Puffin’s growers comprise about 26 independent farmers from across Pembrokeshire. Potatoes are a demanding crop which must be grown as part of a long rotation; having taken a crop of potatoes in one year, the same ground will not be capable of producing another crop for between five and seven years. Potato growing also requires expensive specialist equipment. Growers who have invested in the necessary equipment will often therefore rent suitable land in small parcels for a single season, as well as contracting to undertake the specialist cultivations required to enable other farmers to grow some potatoes of their own. Once the crop has been harvested the grower will require somewhere to store it.

21. Puffin provides storage and packing facilities for its growers and agrees to purchase their potato crop (which it arranges on its own behalf to supply to retailers). We were shown a sample contract for the 2018-19 growing season which had been entered into by PPL in December 2017. Under the contract the grower contracted to supply an agreed tonnage of potatoes in return for a fixed price for certain specified varieties and a variable price for other varieties. Storage, grading, haulage and box hire charges were to be deducted by PPL from the agreed price which it would then pay to the grower when the potatoes were moved from the cold store to be packed and sold on by PPL to wholesalers and large retailers. Under the terms of these contracts ownership of the crop remains with the grower until the crop is packed, at which point title passes to PPL and payment is made by PPL to the grower within 28 days. While each grower’s crop is held in the cold store it is stored in labelled boxes each holding a tonne or more. The output of different growers is not mixed and is handled and processed separately. Occasionally a grower might remove their boxes from storage if part of the crop is found to be spoiled and unsuitable for storage, but otherwise the crop remains in the buildings until it is required for onward sale.

22. Before 2015 PPL also marketed daffodils (and possibly other vegetable crops) grown by small local growers. In 2015 its main supplier of daffodils retired, but as part of its distinctive brand development PPL wished to be able to continue supplying Welsh daffodils to its customers. It therefore rented some land, acquired the necessary specialist equipment and employed a small farming team to grow its own crop which it harvested in the spring of 2016. In subsequent years PPL extended its own farming operations to include the growing of cauliflowers and leeks. It rented land for these crops from its potato growers and other landowners on seasonal cropping licences. It also utilised the Adjoining Land for this purpose.

23. During the 2018 growing season which included the first material day for the purpose of this appeal (1 September 2018) PPL grew leeks, cauliflowers and daffodils at 41 separate locations. The area under its cultivation totalled 340 acres in widely dispersed parcels of between 3 and 27 acres at distances from the Withybush Road sites of up to about 20 miles. Other than at the Adjoining Land, which it owned, it farmed this acreage under short term cropping agreements which were arranged the previous autumn and which gave it access to the land from March onwards until it had harvested its crop. The land was then returned to the landowner with whom PPL had contracted. Although PPL’s occupation of these individual parcels was for the growing season only, its relationship with the landowners (who were often its own potato growers) was usually of long standing and involved PPL taking different parcels of land from the same owners each year to fit in with the rest of the owner’s crop rotation. For the most part these transactions were agreed face to face by owners and growers who knew each other well, and who were familiar with the land concerned and the entirely conventional nature of the arrangements.

24. Initially, PPL grew no potatoes and made no use of the cold store for its own produce. This was the case in 2018 and at the first material day none of the potatoes in store had been grown by or belonged to PPL. All of the produce was owned by the independent growers and was stored by PPL on their behalf. (There was a faint suggestion that PPL may have stored some daffodils in the cold store at one stage but we are satisfied that, if this occurred, it was on such a small scale as to be legally irrelevant).

25. During 2019 PPL grew potatoes of its own for the first time. These were a variety of seed potato which PPL planted on 8 acres of rented land in the spring of 2019, harvested in the autumn and stored at the cold store over the winter of 2019-20 ready to be planted out as seed by its independent growers in the spring of 2020. The decision to grow its own seed potatoes and to supply its own growers was taken by PPL in response to severe restrictions on the availability of seed potatoes from the European Union following the UK’s 2016 Brexit referendum. The quantity of seed potatoes grown by Puffin increased in subsequent years with 31, 52 and 45 acres being cultivated during 2020, 2021 and 2022 respectively. In comparison, the acreage of potatoes grown by Puffin’s growers in the same years did not fall below 2,789 acres. As a result, [NAME] estimated that from 2020 only about 2% of the potatoes held in the cold stores belonged to Puffin, with the rest belonging to the growers.

26. By March 2022, PPL’s farming operations had increased in scale. It had purchased some further land of its own and had acquired long term farm business tenancies from Pembrokeshire County Council. The land in its occupation for longer than a single season exceeded 800 acres, although some of this comprised woodland or was otherwise unsuitable for agricultural production. PPL continued to take additional land on seasonal cropping licences, including the land required to grow seed potatoes. One advantage of the cropping arrangements from the landowner’s point of view is that under the rules of the Basic Payment Scheme (BPS) for the payment of subsidies to farmers, the landowner, and not the cropping licensee, is treated as having sufficient control of the land to claim the basic payment.

27. In 2021 a decision was taken to demerge the cold store and farming operations on the one hand from the produce marketing operations on the other and this was implemented on or by the second material day, 28 March 2022. [NAME] explained that the contracts of three senior staff members and the ownership of the warehouses and equipment used in the farming business was transferred by PPL to PFL. PPL continued formally to employ the remaining staff, many of whom were seasonal workers, but their employment costs were recharged to PFL in the annual accounts of the group. The only document we were shown recording these arrangements was a copy of the land certificate for the warehouses which showed that a purchase price of £3.8m was paid on 25 March 2022 with registration being completed on 27 April 2022. It was on the basis that PFL had become the occupier of the warehouses that it made its own separate proposal to amend the valuation list.

28. The Adjoining Land remained in the ownership and occupation of PPL, and by the second material day a substantial area had been taken out of agricultural use for the construction of a new building. The parties’ submissions 29. Mr Williams KC submitted that, in light of the decision of the House of Lords in Farmer v Buxted the occupation test should be addressed in the following steps: first, the relevant land and buildings said to be occupied together should be identified; secondly, it should be considered whether the land and buildings had the same rateable occupier at the relevant time; thirdly, it should be considered whether the activities on the land and buildings were jointly controlled and managed; fourthly, regard should be had to the geographical and physical relationship between the land and the buildings; and fifthly, in light of the previous steps a conclusion should be drawn whether the buildings and the land were worked together so as to form one agricultural unit. The only proper conclusion, he submitted, was that the buildings were not exempt.

30. For his part, Mr Wilcox emphasised that whether buildings and agricultural land are occupied together should be considered broadly, having regard to geographical, functional and practical agricultural factors, and with modern agricultural practices and structures in mind, rather than those of the 1920s. He referred to an observation of Lord Reid, in Eastwood v Herrod , at p.168 E, that the exemption was “intended to benefit agriculturalists”, and submitted that the application of the occupation test should be sensitive to the diversity of agricultural operations in different parts of the country. We bear those qualifications in mind and accept that while Mr Williams’ framework has its attraction, it should not be treated as comprehensive or exclusive (as we will explain, we also question how Mr Williams has formulated his second step). As both sides agreed, the statute does not refer to an “agricultural unit”, nor is that a term of art. It authoritatively describes what the occupation test is driving at but it should not be substituted for the statutory language or be allowed to supplant the requirement that the buildings be “occupied together with agricultural land”.

31. Mr Wilcox described Puffins’ operation as a functionally and practically integrated business adapted to the needs of the Pembrokeshire farming community. The relationship between Puffin and its growers was not materially different from that between members of a farming cooperative, who would obtain exemption under a different paragraph of Schedule 5, and it would be surprising if the way in which Puffin was organised led to a different result. Puffin was engaged in farming activities in a manner consistent with agricultural practice in this time and location, and its land holding pattern is typical of farms in the area. The individual parcels of land it occupied at the material dates were not agricultural units in their own right, but as a whole they formed a single unit which included the buildings. The provision of cold storage was an ancillary agricultural activity which was integrated with Puffin’s farming business. At the second material day the produce in the buildings included seed potatoes belonging to Puffin which would be utilised by its growers in the forthcoming growing season to produce the crop which would then be brought back to the buildings and stored by Puffin until required for sale. The proper conclusion, Mr Wilcox submitted, was that the buildings were exempt. Discussion 32. The only issue to be determined is whether the three cold storage buildings are occupied together with agricultural land in the sense explained by Lord Slynn in Farmer v Buxted . For that purpose it is not necessary for the buildings to form part of a single hereditament with any agricultural land.

33. We do not think it is necessary for the relevant agricultural land to be identified with the precision suggested by the Valuation Officer. Puffin was criticised for a suggested lack of clarity over where exactly in larger registered titles the parcels it occupied in a particular season were located, or when precisely a particular crop had been harvested. That criticism was misplaced. [NAME] explained that his operational colleagues would have had no difficulty, whether at the time or subsequently, in identifying exactly where a particular crop had been grown and giving an account of its progress, and we have no doubt he is correct. But that exercise would not have provided information material to the issue we have to determine.

34. At each of the material days Puffin occupied agricultural land. The only area in continuous occupation was the Adjoining Land, the relatively small area in PPL’s ownership immediately adjoining the cold stores. In 2018 the whole of the rest of the land it cultivated comprised the dispersed parcels we have described for which it held seasonal cropping licences. By 1 September 2018, the first material day, PPL’s occupation of some of these parcels had already been completed and the crop harvested, but in most places it will have remained in occupation until later in September or October. In 2019 the core area in Puffin’s longer term occupation was much larger but the rest remained under short term occupation agreements. At the second material date, 28 March 2022, there is unlikely to have been any crop in the ground over most of the acreage available to Puffin for the forthcoming growing season, but it is likely that preparatory cultivations will have commenced.

35. At both material days, therefore, Puffin occupied agricultural land and it occupied the cold stores. But common occupation is not enough. What is required is that the stores be occupied “together with” the agricultural land in the sense explained by Lord Slynn. Mr Williams submitted that this required that the buildings and the agricultural land be in the occupation of the same rateable occupier, and suggested that Puffin was not in rateable occupation of the land over which it held seasonal cropping licences. We take issue with both of these propositions.

36. The four well-known ingredients of rateable occupation were identified by Tucker LJ in  John Laing & Son Ltd v Assessment Committee for Kingswood Assessment Area   [1949] 1 KB 344 , 350: “... there are four necessary ingredients in rateable occupation ... First, there must be actual occupation; secondly, that it must be exclusive for the particular purposes of the possessor; thirdly, that the possession must be of some value or benefit to the possessor; and, fourthly, the possession must not be for too transient a period.” Mr Williams submitted that occupation under a short term cropping licence which left the owner of the land with a sufficient degree of control to enable it to claim agricultural subsidies under the Basic Payments Scheme was not rateable occupation. He did not specify which of the four ingredients was missing when a field is given over by the landowner to enable a third party like Puffin to cultivate the ground, plant its own crop, carry out the required agricultural operations to grow the crop on, and then harvest it at the end of the growing season. The way in which different forms of occupation are treated for the purpose of a particular subsidy regime does not seem to us to be