RATEABLE VALUE OF MUSEUMS Valuation Tribunal reduces Natural History Museum’s rateable value to £1 - A landmark decision for national museums

Richard New

Richard is the national head of Mills & Reeve’s real estate disputes team, assisting clients in the avoidance or settlement of complex disputes. He has extensive experience in all aspects of commercial and residential property disputes, but is particularly renowned for his work on infrastructure and regeneration projects, as well as resolving corporate occupier issues - particularly in business rates.  He has helped some of the largest occupiers in the UK to save millions of pounds and has been involved in Tribunal, Magistrates' Court, High Court and Court of Appeal actions such as Cyxtera, Buzz Bingo, Principled Offsite Logistics, Hammerson v Gowlett, Store First v Moore, Great Bear, and Avison Young v Jackson.

Richard outlines a very recent case concerning the rateable value of the Natural History Museum, where the outcome is a savings to the museum of £12.9million. Importantly, it reinforces the precedent for other public sector-run museums which operate at a loss. Thanks to Mills & Reeve for alerting me to this case. 

Summary 

The Valuation Tribunal for England has issued a significant decision for the museum sector, ruling that the Natural History Museum (NHM) should have a nominal rateable value (RV) of £1 in the 2017 Rating List, effective from 1 April 2017. The decision, released on 3 March 2026, allows the appeal brought by the NHM, and continues a strong line of authority establishing that museums operating at a loss cannot attract a positive value for rating purposes. 

In this article, we're looking at The Trustees of the Natural History Museum v Valuation Officer (VTE, 3 March 2026) in more detail. 

Background: From £12.9million to £1 

The Museum was originally assessed by the Valuation Officer (VO) at £12.92m in the 2017 List. This had been reduced to £4.16m on the contractor’s basis, but NHM appealed, arguing the correct RV should be £1, in line with established case law. 

The NHM, well-known to all, is a nationally significant, Grade I listed institution spread across unique Victorian and modern buildings in South Kensington, housing over 80 million natural history specimens and engaging in extensive scientific research. The NHM is an Arms Length Body (ALB) of the Department for Culture, Media and Sport. As an ALB, it receives government grant-in-aid funding on the condition of free public admission. 

The appeal was heard as a complex case over two days in February 2026. Cain Ormondroyd of Francis Taylor Buildings appeared for NHM, with Colin Hunter as expert witness. Powis Hughes Limited was NHM’s agents for the appeal, with Mills & Reeve providing legal representation. 

Why the Tribunal set the rateable value at £1 

The NHM cannot be occupied for profit 

Central to the Tribunal’s reasoning was the finding that the NHM was incapable of operating profitably, even on the statutory “vacant and to let” hypothesis. Both parties agreed the correct valuation approach was the Receipts and Expenditure (R&E) method, in line with three Upper Tribunal cases regarding regional museums: 

• Hughes (VO) v York Museums and Gallery Trust [2017] UKUT 200 (LC) 

• Hughes (VO) v Exeter City Council [2020] UKUT 0007 (LC) 

• Allen (VO) v Tyne & Wear Archives and Museums [2022] UKUT 206 (LC). 

In those authorities, the Upper Tribunal held that where a museum’s mode of occupation is inherently loss making, the hypothetical rent (and therefore the rateable value) must be nil or nominal. The Tribunal followed the same principle, noting that the NHM’s own accounts clearly demonstrated an inability to trade profitably. 

Only the Natural History Museum would bid for the hypothetical tenancy 

The Tribunal held it was “clear” that the only realistic hypothetical tenant was the NHM itself or “a” NHM with similar characteristics. No commercial organisation, philanthropist, or charitable trust could viably take a tenancy of such a large, specialist, and ultimately loss-making estate. As the Tribunal in Hughes had previously emphasised, museums of this nature are not attractive to profit seeking tenants, and “no commercially motivated person” would take such a letting. 

This conclusion was important because the actual accounts become the most reliable evidence of fair maintainable trade. 

Actual accounts provide a realistic basis 

Both parties initially presented valuations heavily based on “notional world” assumptions. These included: 

• Hypothetical admission charges 

• Assumed 35% reductions in visitor numbers 

• Expenses such as insurance 

• Adjusted treatments of scientific research costs 

• Calculations for depreciation. 

The Tribunal declined to place weight on these hypothetical scenarios. The valuation should be grounded in the NHM’s actual financial performance, not speculative reconstructions. Those actual accounts showed persistent operational losses, even with government grant-in-aid. 

Grant-in-aid cannot be treated as rent 

Central to the dispute was the treatment of grant-in-aid. The appellant argued it should be excluded entirely; the respondent argued that a significant proportion of the grant represented subsidy for scientific research and so should be included in the hypothetical tenant’s income. 

The Tribunal firmly sided with the NHM. Evidence from the Department for Culture, Media and Sport confirmed that grant-in-aid is only payable on the condition of free public entry and would not be provided to a hypothetical tenant charging admission. The Tribunal also rejected the idea that a portion of the grant could be repurposed as rent supporting income, holding: 

• The NHM operates at a loss even with the full grant 

• There was no evidence the government would continue to pay grant-in-aid if the NHM also charged admission fees to visitors 

• The Upper Tribunal in Tyne & Wear had expressly rejected attempts to monetise socio economic benefits into a rental overbid. 

In short, grant-in-aid could not practically be equated to rental income. 

Rejection of alternative valuation theories 

The valuation officer sought to rely on several alternative valuation approaches: 

• “Storage value” analogies, pointing to the value of storing collections 

• Socio economic uplift, emphasising public benefit 

• Scientific research value, treating the NHM’s research function as enhancing rental value. 

Each of these approaches has previously been rejected by the Upper Tribunal. This decision affirms that museums must be valued as museums, not as storage facilities or assets with socio economic value. 

Stand back and look approach 

The VO tried to argue that a £1 valuation “does not feel right”, pointing to other national museums like the Science Museum with a RV agreed at £2.37m and the British Museum at £6m, and even to the NHM’s own £2.395m valuation in 2010. But the Tribunal held that a “proper” stand back and look approach actually supports a nominal RV. The authorities in York, Exeter and Tyne & Wear make clear that museums operating at a loss must be valued nominally, and the VO’s comparables carried little weight because they were settled without financial evidence and those museums may not have been operating at a loss. 

Conclusion 

This decision is a clear reaffirmation of established rating principles: where a museum’s occupation is inherently loss making, the only rational rateable value is nominal. For the NHM, this meant a reduction to £1, reflecting economic reality rather than hypothetical constructs. 

More broadly, the ruling provides clarity for museums by confirming that the Tribunal will not inflate valuations through socio economic arguments, storage analogies or speculative adjustments; and under the R&E method, actual financial performance is crucial. As a result, this judgment is not only a significant victory for the NHM, but a potentially important route for other museums and public bodies under financial pressure to reassess and challenge their own rating liabilities. 

For further information, please contact Richard New, Stefano Frullini and Hannah Prew, who were involved in the appeal process on behalf of NHM.