While many of us were enjoying the summer sun (or rain), the government kindly published a consultation paper, in case we got bored of the latest John Grisham novel.
If your taste in reading is something more frightening than a crime thriller, then the unpleasantness lurking in Check, challenge, appeal: Reforming business rates appeals – consultation on statutory implementation, published in August, was right up your street.
The proposals set out in the consultation, and in regulation 5 (b) of the draft Non-Domestic Rating (Alteration of Lists and Appeals) (England) (Amendment) Regulations 2016, were particularly spine chilling if you are a business ratepayer in this country.
The draft regulations are due to be implemented on 1 April 2017. The new appeal system will apply in England to all appeals made against the 2017 rating lists.
Reasonable professional judgment
The government is proposing that the Valuation Tribunal for England (VTE) is prohibited from ordering an alteration to the rating list, following an appeal hearing, where the VTE considers that the assessment is inaccurate, but the difference between the VTE’s determination of the correct figure and the current figure falls within “the bounds of reasonable professional judgment”.
This restriction is completely unfair where a ratepayer has persuaded a tribunal panel that the assessment is excessive, but the hands of the VTE are tied because of this ill-thought-out clause.
The term “bounds of professional judgment” is open to wide-ranging interpretation with negligence cases involving valuation matters ranging from 10%-20%. This subjective tolerance
will create significant inequalities to ratepayers and result in inconsistencies across the board. It is difficult to imagine many panels understanding what the “bounds of professional judgment” are unless they are prescribed and, as soon as they are, those regulations or guidance notes will be the focus of even more legal challenge.
In essence the government is saying to ratepayers: we know your assessment is incorrect and excessive but it is “there or thereabouts”, so keep paying.
Previous governments have looked at the issue of banding and blunting before but have failed to bring them in because any consultation made clear the basic unfairness in doing so. This is an underhand way of introducing them, but without changing the primary legislation or altering the basis of business rates that has been around for centuries.
No individual taxpayer would put up with being asked to pay too much tax for 12 months, never mind five years, so why are ratepayers being treated in such a shoddy fashion?
Appeal deterrent – or encouragement?
I have spoken to a number of people in local authorities who initially took the view that these proposals would grant them greater certainty over their budgets because fewer appeals would take place and, even if they reached the VTE, a rubber-stamping exercise would be carried out, eventually deterring all but a trickle of appeals.
When the magnitude of the unfairness to ratepayers over a five-year period was explained to them – and the fact that, because so much money could be unfairly demanded, legal challenges would be commonplace, and in some cases could be lengthy and last for many years – the penny began to drop.
A clause put in by a clever civil servant to deter appeals and grant certainty to local authorities will undoubtedly have the opposite effect – perhaps the person who dreamt this one up had too much summer sun?
Local authority influence
The draft regulations set out in more detail how local authorities will step out of the shadows in relation to the appeal process. Following the onset of localism, they have had a growing influence on the outcome of appeals, although in the vast majority of cases they are not a party to any of those appeals. This has led to agreements between the Valuation Office Agency (VOA) and ratepayers being rescinded following discussions. This process takes place under the banner of “liaison with the local authorities” but has no legal authority.
These new regulations will allow local authorities to “influence the outcome”, which in plain English means they will carry on as they do now but with statutory authority – putting pressure on the VOA to prevent ratepayers getting a reduction in their business rates where there are large amounts of money at stake.
The growing role of local authorities, as set out in the draft regulations, will also see the potential growth of either the internal rating expert, or the emergence of private firms giving advice on business rates matters. For ratepayers this could raise the real prospect of private firms advising private clients within a city while at the same time giving advice to a local authority. The opportunity for conflict will be one that ratepayers should be very aware of, when choosing their advisers for 2017.
Have your say now
The government has invited responses to these draft proposals by 11 October 2016. I would urge you to look at the detail and respond accordingly as these are potentially the most draconian changes to the business rates system in 400 years.
With draft rateable values due to be published on 30 September, which are likely to show large increases for many sectors, and for parts of London and the South East, as well as a uniform business rate that could be as high as 60p by the end of the 2017 rating list, do not let the government get away with treating business like this.
A government that pretends to be business friendly would not impose these changes on a country that is trying to cope in a post-Brexit world. Let us hope that, once the responses to this consultation are seen, some sense can prevail and we can put some of the unhelpful nonsense in these draft regulations down to a Whitehall mandarin having too much sun.
John Webber is head of rating at Colliers International
The government consultation can be found at: www.gov.uk/government/consultations/reforming-business-rates-appeals-draft-regulations
