Reforming Business Rates Appeals: the jury is back
The Government has released a summary of the responses on its consultation “Reforming Business Rates Appeals” and the system of “Check, Challenge, Appeal”.
Coming in at just over 3,600 words, it is rather a lightweight tome compared to some summaries I’ve read over the years but I thought a summary of the summary may come in handy for anyone with a passing interest.
Overall 214 people or organisations responded and 43% of those were Local Authorities, 38% businesses and 17% surveyors or agents, such as yours truly.
The great majority of respondents recognised the need for change and agreed with the objectives of the reforms. However, there was a clear split between businesses, surveyors and agents, who were more skeptical, and LAs which, in the main, were supportive.
Business representative groups and associations were skeptical for two main reasons: (a) they believe that ratepayers need access to more information earlier in the process in order to understand their assessments, and (b) they don’t actually believe the system will deliver the suggested benefits at the end of the day.
There were widespread calls for the Valuation Office Agency to demonstrate at the “Check” stage what evidence they have used to arrive at a valuation. Many called for a faster, simpler approach and exemptions from penalties and fees. The majority of local councils supported the proposed system and were optimistic that the changes would lead to more transparency and faster resolution, as well as discouraging speculative appeals.
In terms of when LAs should get involved in the appeal process, there was no consensus in the replies with a clear split over those who wanted more involvement with the advent of 100% business rates retention and some wishing for less. Some LAs wanted to be involved from the “Challenge” stage, others only from the “Appeals” stage. The common view was that this should be limited to cases where a significant reduction was at stake.
When it came to the question on civil penalties for providing false information, more than half supported civil penalties for providing false information – many of these were local councils, so no surprise there.
Concerns raised about this more controversial element included the fact that civil penalties could be counter-productive and encourage ratepayers to withhold potentially useful information to avoid the risk of being charged a civil penalty; measuring property accurately and completing the required VOA forms can be complicated. The risk here is that civil penalties could deter small business from entering the system. Finally, small businesses might feel they need to incur the costs of professional advice to avoid the risk of incurring a penalty through making an accidental error.
Others took the civil penalties theme a bit further and suggested it could be more effective if it were linked to the rateable value in dispute – this would be a disincentive to large businesses from submitting unsubstantiated appeals but not disproportionately deterring small businesses from making legitimate appeals.
As with anything, the devil will be in the detail to limit any errors or confusion. As it stands at the moment the Government is proposing a maximum penalty of £500 for the provision of false information “carelessly, recklessly or knowingly” provided, with a right of appeal to the Valuation Tribunal for England (VTE) with lower penalties for small businesses.
Other general comments made and referenced in the summary included:
A large number of businesses agreed that ratepayers should be able to view and confirm their information at any time, regardless of the proximity to the end of the rating list. Many also stated that “Check, Challenge, Appeal” should only be used for appeals against the 2017 rating list, with outstanding 2010 appeals treated as they are at present.
Most professional representatives and surveyors stated that ratepayers must be able to appeal at any point regardless of the proximity to the end of the list. Respondents noted that imposing restrictions would result in more appeals being made earlier in the revaluation cycle.
A large number of local councils supported a cut-off date for appeals with suggestions varying between 6-36 months before the end of the rating list. Councils felt appeals after the end of the list should only be accepted in very limited circumstances, reducing the uncertainty of the current end-of-list arrangements. Other suggestions included limiting the backdating of appeals to the beginning of the financial year or event (as in Scotland); limiting appeals to a certain timeframe at the beginning of the list, e.g. six, nine or 24 months (excluding cases where there has been a Material Change of Circumstances).
When it came to the temporary MCC cases under the new system, several respondents of businesses viewed the proposed process as unsuited for MCC cases. Many thought that if the “Challenge” stage required a fully reasoned and evidenced valuation this would often not be possible until the temporary MCC event had ended. Many proposed that either:
- There should be no requirement to provide a full valuation with evidence at the outset of the “Challenge” stage, or that;
- The existing process should adapted for MCC cases.
Many, including myself, argue that it’s difficult to determine the effect of an MCC until after the event and the “material day” should be the date the “Check” is submitted or the date the circumstances giving rise to the “Challenge” first occurred.
When it came to the “Check” stage, businesses and councils were broadly in agreement that the proposed trigger point of 12 months was too long. More suggested that between three and nine months would be suitable for the majority of cases with 12 months only necessary for more complex cases.
It was also argued by a large number that there should be an opportunity for the VOA and ratepayer to agree to extend the “Check” stage.
The Government has already said in the great majority of cases, ratepayers will, if they wish, be able to proceed sooner in cases where the facts are agreed or differences are established, so it intends to maintain the statutory right for a ratepayer to move to “Challenge” after 12 months even if the “Check” stage is not complete.
With regards the time limit for submission of a complete “Challenge” following the “Check” stage, more than half thought the four-month period was broadly correct with a smaller number of respondents – mainly councils – believing the four-month period was too long.
Overall, many respondents expressed concern that the proposals gave no assurance that the VOA will be more transparent and provide more information at an early stage in the process and that evidence required for a “Challenge” would be a barrier to ratepayers putting forward alternative valuations without a professional representative, deterring appeals.
On a question about the process allowing ratepayers to make their case in a fair and effective way, there was another fairly obvious business vs. council opinion split. Businesses and their representitves still had concerns that it was unfair to require the ratepayer to prepare a “Challenge” without access to the full information on which the original assessment was based.
They also expressed concerns about how the “Challenge” process would operate in practice, particularly given proposed VOA discretion on when the ratepayer needs to respond, when discussions have come to an end, and whether new evidence should be admitted (particularly in the light of the proposed restriction of evidence at “Appeal” stage).
Local councils – broadly supportive – said that guidance should be made available at an early stage to assist ratepayers who decide not to appoint a professional representative.
On the question about a more straightforward appeals determined on the papers negating the need for a hearing, a large majority agreed, with the ratepayer retaining their right to an oral hearing if they wished. The Government has decided to make provision for this provided all parties have agreed.
Looking at the issue of introducing new evidence at the appeal stage – the Government has decided to place restrictions on this. They hope it will encourage full disclosure and examination of the arguments at “Challenge” stage, prompt early resolution, and ensure both parties have time to consider the other’s evidence before any “Appeal” stage. This isn’t an outright ban and there will be exceptional circumstances allowed
On the thorny subject of fees, the Government is still at the drawing board on this one and is asking for more views on implementation. The majority of respondents were supportive of a fee for ratepayers appealing to the Valuation Tribunal for England, which would be refunded if successful.
Those who did express concerns about introducing fees, of which the majority were agents, surveyors and businesses, they argued that ratepayers should not have to pay fees to ensure they are paying the correct tax. It was also suggested that the fee would result in negligible revenue and become an administrative burden on both the Tribunal and ratepayer.
Some also commented that it would be inappropriate to charge a fee if the VOA failed to issue a decision notice within the 18-month Challenge period. Others suggested that the fee should be linked to rateable value.
The Government now plans propose appeal fees of up to £300, with lower levels for small businesses, and there will be refunds where appeals are successful. No fees will be payable where the VOA has not issued a decision letter.
There were other elements touched upon in the summary and you can see a full summary of the Government’s response by going to https://www.gov.uk/government/consultations/reforming-business-rates-appeals-check-challenge-appeal
The Government now plans to draft regulations for consultation but is aware that issues still remain that need to be resolved, including the role of local authorities The intention is still to have the reformed business rates appeals system to apply to the new rating list when it comes into effect on 1 April 2017.
Definitely one of my longer articles but still less than half of the Government’s version so think yourselves lucky!
This week saw business rates rise again, with the multiplier increasing to 50.4p in the pound – a hit many companies could do without.
It is looking like the Scottish Government is to follow in English footsteps by making business rate revaluations more frequent.
The appeals centered on two business rates avoidance schemes where the properties were vacant and liable for unoccupied rates.