The Department for Communities and Local Government has published draft regulations that are intended to implement major changes to the business rates appeals system from 1 April 2017. The new appeal system will apply in England to all appeals made against the 2017 rating lists, due to come into force on 1 April 2017. Appeals against 2010 rating lists will not be affected and, for the time being at least, there are no equivalent proposals in Wales or Scotland. As we have set out in previous news items, the present two-stage process of “proposal” and “appeal” will be replaced by a new three-stage process of “check”, “challenge” and “appeal”.
The regulations are difficult to understand because, rather than replacing the existing regulations, they set out a series of amendments that can only be read effectively in conjunction with the existing set of regulations. But the process will start with a “check” stage which is initiated by a request to the Valuation Office (VO) for information about the property. The VO will then provide information about the property. The information itself is not specified in the regulations other than that it must “reasonably relate” to the grounds on which a rating list entry may be challenged. This is a very broad definition and will no doubt allow the VO to provide as much, or as little, information as it chooses. The person making the request must then review the information provided and confirm in writing to the VO which of the information is accurate and which is inaccurate. When this review is returned, the VO must “as soon as is reasonably practical” notify the person providing the information of the details of any alteration the VO proposes to make to the rating list and any facts that have been changed as a result of the information provided. This will be an important stage for ratepayers because they face civil penalties if inaccurate information is provided “knowingly, recklessly or carelessly”, by them, or on their behalf. The penalties will be £500 or a reduced figure of £200 for “small businesses”. The proposal is that any businesses with a staff headcount of less than 10 and a turnover or balance sheet total of less than £2 million, will be treated as a “small business”. Those ratepayers that are not businesses (for example clubs or societies that are not registered as businesses) will be treated as “small businesses” for this purpose. This appears to give rise to the strange possibility that local authorities or government departments would be treated as small businesses. It would be ironic if that were the case as it would lead to HM Treasury being treated for this purpose as a “small business”!
Only once the check stage is completed by the VO’s notification, or if no such notification is made within 12 months of the return of information, may the ratepayer proceed to the second stage. This is the challenge to the rating list, which will, rather confusingly, not be called a “challenge” but will continue to be termed a “proposal” as at present. It must be made within four months of the completion of the check stage. There are some alterations as to who may make a proposal but these will not affect most ratepayers and it will continue to be open to those who have a legal interest in the property to make a proposal if they have completed the check stage. The major change in respect of proposals is that, as well as the existing required information, the person making the proposal must include a statement setting out: particulars of the grounds of the proposal; evidence to support the grounds of the proposal; how the evidence supports those grounds; and details of the proposed alteration to the rating list. This will mean that ratepayers will have to have their case very fully prepared before making a proposal, but will have available to them only the information that the VO has chosen to provide at the check stage. The VO must refuse a proposal that is “incomplete” because it does not contain the necessary information. This replaces the current provisions for invalid proposals and offers the proposer the opportunity to make a new proposal, including the missing information.
Once a proposal is received the VO must provide to the proposer “any information the VO holds in response to the particulars of grounds set out in the proposal”. The proposer then has the opportunity to supply further evidence to the VO in response to what has been sent from the VO. The proposer may also provide additional evidence, but only if that evidence “was not known and could not reasonably have been known” at the date of the proposal.
The proposal stage will end with a the VO serving a “notice of decision” which will tell the proposer whether the VO accepts the alteration that they have proposed, or intends to make some other alteration, or intends to make no alteration to the rating list. The notice of decision must include the reasons for the decision, including a statement of the evidence used to make the decision, and a statement in relation to each of the grounds of the proposal setting out why the VO considers that the grounds have not been made out. The proposer may make an appeal to the Valuation Tribunal for England (VTE) against the decision notice, within four months of the decision notice or may appeal to the VTE if no decision notice has been issued within 18 months of the date of the proposal. Appeals will involve an appeal fee of £300 or £150 for “smaller proposers”, which are defined in the same way as for small businesses in respect of civil penalties. These appeal fees will be reduced to £200 and £100 respectively if it is agreed that the appeal can be dealt with by written representations without a hearing, and will be refunded in all cases where the VTE issues an order to alter the rating list.
As if the changes to the check and proposal stages were not contentious enough, and onerous enough for ratepayers, the changes to the appeal stage appear harshest of all to ratepayers. The VTE is limited to considering only evidence that was provided to the VO or used by the VO before the decision notice was issued. The only exception to this will be evidence that relates to the ground of appeal and was not known, and could not reasonably have been known, at the date when the decision notice was issued. This seems to bring the position of the VTE into conflict with the position of a person giving expert evidence to the VTE, who will have a duty to make the VTE aware of all relevant evidence.
Additionally, the VTE is limited in its decision making to making orders only that relate to “the grounds on which the proposal was made”. And, as final nail in the coffin for any idea of the appeal process being one to determine a fair assessment for the property concerned, the VTE may only order an alteration to an assessment where it considers that the rateable value is “outside the bounds of reasonable professional judgement”. These restrictions seem inimical to the idea of the Tribunal as an independent body with the role of determining disputes in a fairly.
Taken together, all these changes are likely to leave ratepayers with the view that they are not being treated fairly by the appeals system and that the changes to that system are designed more to protect the yield from business rates, than to provide a simple and fair means of determining disputes about rating assessments. Many business ratepayers are not voters, and one is tempted to wonder what would happen if similar proposals were introduced for those taxes where the taxpayers are voters.