News and Insights
GN continue to advise clients wishing to contemplate deploying empty rate mitigation schemes and ensure we keep abreast of the developing law. Behind the scenes the Government continues to consider what action it may want to take in the future to tackling what is sees as avoidance but with the current wider review by the Treasury Select Committee taking place on the whole question of the suitability of business rates, GN are not anticipating any developments too soon.
Last, but not least, a sense of common sense has been restored and our local authorities will no longer pay business rates on their operational toilets – but will that be enough to keep them open! Only time will tell.
Note these measures relate to commercial properties paying business rates in England only, and that differing rule sets continue to apply in Wales and Scotland.
Conversely some ratepayers have in fact seen their bills reduced through the splitting of assessments, through being placed in a more favourable transitional relief scheme by moving from one Transition Band into another, or by rateable values of some parts now falling under the small business rate relief scheme.
The Consultation is accompanied by a draft Bill and proposes to allow the ratepayer to elect whether they wish to undo the division.
We will post an update after the Consultation which ends on 23 February 2018.
In the case of an error in the Certificate, a new Certificate can be issued by the VO, replacing the original certificate and deeming any appeal as withdrawn. The Certificate will have effect from the date specified by the VO so any MCC changes should lead to a new certificate being issued at the effective date of the MCC.
Amendments will be made to the Transition regulations to allow the new full fibre relief to be applied as well as transition.
The relief is aimed at supporting the roll out of new full fibre infrastructure and 5G mobile sites for the life of the 2017 list.
Publish a full list of recipients of rates relief.
A “rateable value finder” to identify unassessed properties.
Civil penalties for the non-provision of information rather than a Criminal charge.
Standardised rates bills, quicker processing of refunds and quicker process of debt recovery.
Reform the appeals system to reduce volumes and increase transparency.
3. Measures to increase fairness and ensure a level playing field.
Anti avoidance rules created and to increase the Empty Property reset period from 42 days to 6 months.
Self catering properties must have an intention to let for 140 days and actually let them for 70 days.
Scottish Government responsible for checking rates reliefs awarded.
Charity and Sports Club reliefs reformed and restricted, relief for empty listed buildings restricted to 2 years.
Focus reliefs on economically active properties and Increase liability for long term empty properties.
All properties should be entered on the Valuation Roll except public infrastructure and current exemptions replaced by a 100% relief.
Large scale commercial activity on agricultural land and on exempt parks to pay rates.
The report will now be considered by the Scottish Government.
The Judge rejected the agent’s arguments for a split rent per square metre for the new and the old parts of the refurbished and extended building, rejected the quantum, lack of car parking and Grade II Listing allowances but did allow a 7.5% allowance for layout and split floors.
The judge also commented that the valuer for York City Council should have seen that the allowances, in total, looked unreasonable on a stand back and look basis and preferred the Valuation Officer’s evidence and approach in the main.
The Court of Appeal ruled that service of the Completion Notice was not legal service on the “owner” under the statutory scheme, despite the fact the Completion Note was transmitted electronically to the “owner”.
The ratepayers appeal was allowed.
The main valuation dispute was whether a Receipts and Expenditure (R&E) valuation was appropriate or a Contractor’s basis (CB)? The Tribunal decided that R&E was the correct approach. The site that was operating at a loss was valued at £1. Cross subsidising the museums was not allowed as each site had to be valued individually. However, grants and gift aid receipts could be taken into account.
A minor argument on the exemption of the grounds as a park was not decided as it had little effect on the valuation and the parties had not sufficiently argued the issues.
It was interesting to note the Judges comments in that the presence of the ATM (non-rateable Plant and Machinery) defined the site and was only ignored in respect of the valuation.
The decision was unsurprising, although disappointing for the Banks and the Supermarkets.
It is likely that leave to appeal the decision to the Court of Appeal is likely to be granted.
The CCA Process:
“Check”: Requires validation of the VOA’s property survey details and full disclosure of all physical changes to the property. In most cases this will require a new survey to be undertaken. The VOA can increase or decrease the RV following a “Check”. This is basically a self assessment survey and there will be penalties and fines if this stage is not completed within reasonable accuracy.
“Challenge”: This can only be progressed when the VOA has accepted the “Check” or a default twelve month period has elapsed. A “Challenge” can only be instigated within 4 months of a completed “Check”. The onus is on the ratepayer or their agent to provide a full and comprehensive statement of case with valuations, evidence, comparables, case law and legal arguments etc. Only then will the VOA disclose their evidence to support their valuation and consider the “Challenge”. The VOA will issue a decision on the “Challenge” within 18 months.
“Appeal”: An appeal can be made to the Valuation Tribunal for England (VTE) within 4 months of the VOA decision notice or after 18 months have elapsed from the date of the “Challenge”. The Ratepayer (or their agent) has to submit the full bundle of evidence and correspondence to the VTE. In addition, a fee of £150 for a small property and £300 for any other property, is payable by the ratepayer for submitting an “Appeal”. If successful, the fee will be refunded in full or in part (in part if decided without an oral hearing).
The new CCA system puts a greater onus on the ratepayer to progress a disagreement to an appeal.
The regulations that amend the 2010 appeals regulations are complex and run to some 15 pages!
The new CCA system is designed to reduce the number of appeals against the rating list.
No doubt there will be delays and problems with the new system as it beds in.
This means that the RV of property undergoing reconstruction, that is incapable of beneficial occupation, should be reduced to £1. The principle of reality won over the repairing assumptions in Schedule 6 of the Local Government Finance Act 1988.
Medium Properties with RV greater than £28,000 in Greater London and RV greater than £20,000 outside Greater London and RV less than or equal to £100,000:
Rate year starting Cap on liability Increase Cap on liability reductions
1/4/2017: +12.5% -10.0%
1/4/2018: +17.5% -15.0%
1/4/2019: +20.0% -20.0%
1/4/2020: +25% -25.0%
1/4/2021: +25% -25.0%
Small Properties with RV less than or equal to £28,000 in Greater London and RV less than or equal to £20,000 outside Greater London:
Rate year starting Cap on liability Increase Cap on liability reductions
1/4/2017: +5.0% -20.0%
1/4/2018: +7.5% -30.0%
1/4/2019: +10.0% -35.0%
1/4/2020: +15.0% -55.0%
1/4/2021: +15.0% -55.0%
It is unlikely that there will be any transition in Wales, as is the case for 2010 list.
The transitional position in England is interesting in that only London (all classes apart from perhaps Industrial) will benefit from upwards phasing.
Upwards or downwards transition is likely to only affect the Southeast “Other” class but only for a year (assuming +12.5% + RPI).
8. Only evidence and submissions made at the Check and Challenge stages will be considered by the VTE on appeal.
9. Introduction of appeal fees – at the appeal stage (Small businesses £150. Other businesses £300). Fee is refunded only if VTE orders a list alteration and can be reduced to £100 and £200 if no oral hearing.
10. Introduction of penalties for providing false information – knowingly, recklessly or carelessly (Small businesses £200, Other businesses £500). Appeals against penalties to the VTE.
The VO is likely to publish details only from when an assessment is subject to a Challenge.
A subjective definition of “inaccurate” as “within reasonable professional tolerances” may prevent many list alterations for minor MCCs such as building works. There will be a question of whether the definition of “inaccurate” will apply to VO list alterations by VO notices as well as ratepayer appeals?
Click here to read the published article
Appeal reform with Check, Challenge and Appeal with provisions for uncertainty.
Remove high value, high risk assessments from local lists.
Income protection and safety net.
Flexibility to reduce the multiplier.
Infrastructure levy open to Combined Authorities and elected Mayor authorities.
National and local accountability and balancing budgets.
Responses are due by 26 September 2016
2. Business Rates Reform. Fair Funding Review:
Following the government’s proposal for 100% rates retention, DCLG published a Consultation in July 2016 on the needs assessment formulae that will replace central government grant funding for local authorities.
Responses are due by 26 September 2016
stages with appeal to the VTE
• Fast tracking system with reduced fees for small businesses
• Pre-Challenge clearance system for groups of ratepayers in the same location outside the formal Challenge process
• New system in place from 1 April 2017 but not retrospective for the 2010 list
Three areas requiring further attention by the government are:
1. Involvement of Billing Authorities in the Check, Challenge and Appeal Process
2. Appeals to the UKUT(LC) on a point of law only
3. Transparency of the VOA’s information behind their valuations
Transparency of the VOA’s data behind their 2017 Revaluation schemes is essential to the new system working.
The next step is for the government to produce draft regulations for Check, Challenge and Appeal for further consultation.
Localism details are sketchy and the Devil is always in the detail. No doubt there will be Local Billing Authority winners and losers under the Localism agenda. However, the business rates system is set up to collect the same revenue in total so ratepayers may not see any real benefit.
Rates retention moves on with 100% pilot schemes announced in the Greater Manchester, Liverpool City Region and the Greater London Authority areas with a move towards 100% rates retention in the future.
Councils will have powers to cut business rates to aid growth but I have to question if this power will be used by hard pressed local authorities. However, discretionary powers to provide rates relief to support public lavatories may be popular with local authorities.
Elected Mayors will also have the power to levy a business rates premium to fund local infrastructure projects. What is not clear is will the greater London Authority be able to charge an additional levy whilst the Crossrail supplement is still in force?
News from Scotland:
The First Minister announced on the 18th March that the Scottish small business bonus scheme will be retained until 2021 at least.
The Scottish review of business rates is to be led by Ken Barclay the former chair of RBS Scotland with the main aims of being revenue neutral, supporting growth and simplifying the system.
The new regulations will require:
- Timescales and circumstances for the steps in the Check, Challenge and Appeal stages.
- The grounds of appeal.
- What matters the Valuation Tribunal for England cannot take into account.
- Restrict the submission of new evidence.
- Introduce a Civil Penalty (up to £500) for providing false information.
- Introduce fees for appeals (£100 – £300), refundable if successful.
The second reading of the Enterprise Bill is due on 2 February 2016 and the new regulations should be in force in time for the 2017 Revaluation on 1 April 2017.
Goodman Nash is recognised as one of the first audit business rates recovery specialists and can help businesses get temporary relief from business rates and look into other business rates mitigation opportunities. Contact Goodman Nash to see what our specialists can do for your business. www.goodmannash.co.uk.
What does this mean in practice for ratepayers?
From 1 April 2016 the VO will also be restricted to an effective date of 1 April 2015, or later, for any 2010 list alteration, other than as a result of appeals made before 31 March 2015. By missing the 31 March 2016 deadline, ratepayers, with no outstanding appeals made before 31 March 2015, will have no recourse to reduce the rateable value of their property and obtain the rates refunds for overpaid business rates back to 1 April 2010. On the other hand the Valuation Office will be restricted to an effective date of 1 April 2015 for any list alterations made after 31 March 2016 in respect of new properties, any alterations to existing properties or for any material changes in circumstances that occurred before 1 April 2015.Goodman Nash is well placed to help clients obtain the savings due by persuading the VO to make relevant list alterations that generate refunds back to 1 April 2010. However, the clock is ticking and this opportunity will not be available after 31 March 2016. Time is of the essence.
The appeal stage will be the first time a case will be transmitted to the Valuation Tribunal for England (VTE) and it is proposed a fee of £100 – £300 will be applied, refundable if successful. This is also a sensible stage, freeing up the VTE from mountains of unnecessary administration of appeals that end up agreed or withdrawn.
The VTE will sensibly only deal with genuine cases required to be decided by a tribunal. However, the sting in the tail comes in the condition that the VTE will only consider if the VOA’s decision notice is correct or incorrect, based on the evidence and reasons exchanged at the Challenge stage and the proposal to make the VTE the final arbiter on facts. The proposal to allow appeals to the Upper Tribunal (Lands Chamber) only on points of law would be a retrograde step in my opinion.
There is also a proposal to allow relevant billing authorities to be party to the process. Will this result in tri-partite discussions making agreements even more difficult and protracted?
The proposed new rating appeal system is in danger of becoming a one way mirror in favour of the VOA rather than a transparent window to a fairer appeals system.
In 2014 the Valuation Tribunal for England (VTE) heard an appeal on “the Modern Industry Standard” in respect of the Cable & Wireless National backbone fibre optic network in England (2005 Central List assessment) deciding that a modern industry standard network required less lit fibres and smaller equipment areas. In essence this was a technical obsolescence case. The VTE decision was not appealed to the Upper Tribunal (Lands Chamber) by either party and is now being applied to 2005 and 2010 backbone fibre network assessments.
It is interesting to note that VM have outstanding 2010 list appeals to merge all the Cable TV (CATV) access networks (circa 67 assessments in different Billing Authority areas) with the VM backbone network back to 1 April 2010. If successful, all the VM network assessments would merge to create one assessment (circa £100m) in one Billing Authority list and all the separate CATV assessment would be deleted back to 1/4/2010.
The Tewkesbury case may only be the tip of the iceberg. Numerous Billing Authorities’ rates retention schemes are steaming towards troubled waters ahead.
A similar consultation was announced by the Scottish Government in August with responses requested by 23 November and by Welsh Assembly Government with responses required by 25 September.
What impact does this have on car parking spaces, adjascent buildings occupied together but only connected by common parts? Time will tell.
In the time of preparation for the 2017 Revaluation, where will the resource come from in the VOA to review all the current multi-floor assessments and split them?
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