North West LA accuses firms of “aggressive” business rates avoidance

Salford City Council has accused companies of using “aggressive business rate avoidance tactics” which it is alleged has caused the LA to set aside money to cover refunds in business rates overpaid.

Meanwhile, the Council forecast that £87.36million will be brought in from business rates this year. They believe £84.68million is expected to materialise – a deficit of £2.68million or a 3% loss.

Apparently since 2010, there have been some 11,000 appeals against rateable values in the city with the current total rateable value subject to appeal cited as over £200million. People are quick to jump on these figures particularly against a backdrop of funding squeezes that are leading to cuts to local services.

Salford is also one of the authorities to pilot the Government’s scheme allowing LA’s to manage and retain 100% of the business rates it collects. But these headlines have no bearing on businesses legally challenging their rateable values or challenging the level of business rates charged. People make mistakes, they over pay in error, raise charges in error or rateable values can be set to high. Businesses are entitled to have charges corrected as a result.

This is all set against the back drop of the new Check Challenge Appeal (CCA) system that is rationalising the number of speculative appeals. Whilst I criticise the complexity of this new system, from a LA point of view there are benefits. This is because when Challenges are lodged against assessments appellants must set out their proposed rateable value and specific reasons for that proposal. This allows LA’s to manage properly expected changes in the rateable value base with the help of the Valuation Office Agency. But a proactive approach has to be taken. In addition LA’s need to invest in business rates by having inspectors and others making sure that all possible revenue is captured covering property being properly entered in the rating list and empty property rates being charged correctly. But at the end of the day, 3% of revenue identified as at risk would be tolerable for most.

Is Salford more than any other Local Authority suffering at the hands of the business rates appeal system? Probably not. Would the same criticism be levelled at a householder who wished to challenge their Council Tax which was based on inaccurate or out of date information? I doubt it. Business is an easy hit for headlines. I am certain that every appellant, given the option, would just rather pay the business rates they are legally obliged to, rather than spend months, even years battling to correct errors. Indeed if they could have certainty about 97% of their revenues I am sure they would be delighted!

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I agree with much of this. Ratepayers are not to be criticised for seeking, legitimately, to minimise their outgoings, not least of all when a property is empty. The rate multiplier rises and, for the last decade, empty property also pays 100% whereas, within the working lives of some of us, it paid nothing at all (except in the City)

CCA may be of some help to BAs, but they remain excluded from valuation proceedings and VOA are apparently allowed to tell them very little, whereas in former times there was a pretty open exchange of information. Some authorities have complained over the delays in resolving appeals, and there are concerns in some quarters that the provisions made for potential refunds cannot be sufficient, if the provision of local services is not to suffer as a result. All rating information is now “taxpayer confidential” since 2016, and so VOA cannot say much at all, to anyone.

This impacts on the reforms to CCA, for which we are still waiting. I am due to see the Minister about this, later this month.

By Peter Scrafton