The Government’s latest proposals to improve transparency in the valuation of business rates, thereby reducing the number of appeals, is little more than ‘bureaucracy through the back door’.
The Enterprise Bill, which was published in September 2015 and proposes significant changes to the system of appeals against business rates assessments in England, passed the Report stage in the House of Lords on 25 November 2015, despite serious concerns being raised by a few Lords, the retail and property industry about some of the changes.
While reform of the current appeal system is welcomed, there are two paragraphs contained within the Bill that could potentially have a negative impact on rating appeals. Paul Easton, National Head of Business Rates at Lambert Smith Hampton, explains:
Increased difficulty in accessing information
Section 22 of the Bill is to do with who the Valuation Office (VO) can share information with. Although the ability to share information has been widened, it will not help ratepayers because they are not included. If anything, the changes will make it even more difficult for ratepayers to obtain the information they need to determine whether the VO has assessed their rates fairly or not.
A proposed amendment to include ratepayers in the list of people specifically entitled to information was dropped with little debate. The former President of the Valuation Tribunal England, Professor Zellick, has always been highly critical of the rating appeal system because it is the only tax in the UK where the ratepayer is unable to obtain details of how their tax liability (i.e. the Rateable Value) was arrived at.
Three-stage process under consultation
Section 23 of the Bill sets out a revised appeal process, which is intended to ‘simplify’ and ‘clarify’ the appeal system. It looks likely that the opposite will be the case. The Bill sets out a three-stage process – ‘Check, Challenge, Appeal’ - and a consultation is currently underway as how those stages will work in practice.
- 'Check' - The VO will look at the Rateable Value and may decide to alter it, or may provide anonymised information in support of the Rateable Value. This stage is a response to Professor Zellick’s criticism but, unless the proposed quality of supporting evidence is radically altered (Section 22 of the Bill makes this unlikely), then this stage will, in effect, have little or no meaningful impact.
- 'Challenge' - This stage requires a detailed challenge setting out exactly why the ratepayer believes the Rateable Value is wrong. The ‘Challenge’ (currently known as a proposal) is made to the VO. The VO will only discuss issues which are covered by the wording of the proposal and the Tribunals are unable to deal with any issues which aren’t covered. Current proposals use generalised wording to ensure the widest possible discussion. This new requirement is deliberately aimed at removing the ability to use generalised statements and will not help ratepayers achieve a fair outcome. The VO may, or may not, provide detailed evidence at this stage, at their discretion. The burden of proof is entirely on the shoulders of the ratepayer. The 'Challenge' becomes the most important stage in the process as all arguments and evidence needs to be set out and detailed. The VO is to be the sole arbitrator of whether the challenge is valid.
- 'Appeal' - If the challenge is unsuccessful, the ratepayer can 'Appeal' to the Valuation Tribunal, but only on the same grounds as the 'Challenge'. If, during the course of discussions with the VO, fresh information comes to light, this might not be taken into account. There will also be a fee for making the appeal. Unlike the current Valuation Tribunal process, it appears that no additional “expert witness” evidence can be submitted or heard at this stage thereby requiring it to be included from ‘Challenge’ stage!
Industry concerns ignored
The Enterprise Bill could be amended following further consideration by the Houses of Lords or Commons and the ‘Check, Challenge, Appeal’ process may be altered following consultation.
Indeed, following a recent open letter to the High Streets Minister, Marcus Jones MP, from the British Council of Shopping Centres, the British Retail Consortium, the British Property Federation, the Federation of Small Businesses and the Association of Convenience Stores, which stated that the current provisions being scrutinised by Peers would see businesses nationwide forced to pay millions of pounds to government to appeal their business rates bills, "despite being denied the right to know in detail how the amount of tax they have to pay has been determined" several amendments to the Bill were proposed, but ignored.
One thing is certain, ratepayers, or their agents, will have to be more precise and detailed at the outset of the process than ever before, and the process will be more costly owing to the fee to be paid on appeal. The ratepayer needs to be armed with all pertinent information at the ‘Challenge’ stage which could result in the need to undertake substantial amounts of research.
When the Bill is passed by Parliament, the Welsh Assembly will probably adopt the same legislation so those changes will directly affect England and Wales. There are separate consultations taking place Scotland and Northern Ireland.
The consultation also sets out time limits through the various stages, as follows:
- Stage 1 ‘Check’ - Can be initiated at any time but only one ‘Check’ permitted.
- Stage 2 ‘Challenge’ - Can only be instigated by the ratepayer within four months of the conclusion of Stage 1. It is proposed that this is concluded within 18 months should the VO consider that the challenge is valid. The VOA is to issue a decision notice detailing its opinion.
- Stage 3 ‘Appeal’ - Following the VOA’s decision notice, the ratepayer will have four months to make a formal appeal to Valuation Tribunal.
The Bill now moves onto its third reading in the House of Lords. Lambert Smith Hampton will be making representations to the consultation document issued by the DCLG before the deadline of 4 January 2016 which will be posted on our website in due course.