Andrew Hetherton Director, GL Hearn Head of Business Rates Past - - PowerPoint PPT Presentation

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GL Hearn Business Rates

Andrew Hetherton

Director, GL Hearn – Head of Business Rates Past President of the Rating Surveyors’ Association IRRV Council Member – Chairman of the IRRV Valuers’ Association Accessible Retail, Deputy Chairman and Director

Agenda

• What is wrong with the Business Rates System
• Legislation as proposed
• Check, Challenge & Appeal Implementation
• Changes to the Tribunal’s approach
• Changes in Case Law affecting parties

Inflation / Retail Sales

• RPI 3.5%* up from 3.1% CPI 2.7%* up from 2.3%
• Retail Sales rebound up 2.3% from March 2017
• Online shoppers spend more on line than any other

country

– £4,611 per household using payment on line in 2015 higher than Norway, the US and Australia – £154bn spent on the internet using cards in 2016 up by a quarter in two years – Raises the issue of how taxing companites should be taxed ?

* April 2017

Business Rates in the News

The Times – Monday 10th May 2017

Legislation

Enterprise Act

• Appeals Reform

‒ Too many appeals, little supporting evidence ‒ Based on Checking & Challenging your Rateable Value Consultation paper

• Proposals

‒ A new Check stage, between 4 and 12 months to complete; ‒ Penalties for provision of false information; and appeals against those penalties ‒ Challenge will require additional information

• Expanded grounds for the challenge
• Valuation and supporting evidence
• Case Law and other argument to be provided in support of the challenge

‒ Could take up to 18 months to complete ‒ Decision Notice issued by the Valuation Officer ‒ Appeal separate process after the Decision Notice – possibly 4 to 6 months ‒ Payment fees may be required

9

Stage one “Check”

• “Interested Person” wishing to make a proposal must

confirm “information” using online system

• Or put forward revised information
• With penalties for incorrect information provided

“carelessly, recklessly or knowingly”

• Any information from a professional representative will be

shared with the ratepayer

• “Information” not defined but must “reasonably relate” to

the grounds on which a proposal may be made

End of “Check”

• At this stage one of two things happens

−

The Valuation Officer notifies the ratepayer that the check has been completed and of any changes made to the facts on which the Rateable Value is based and any revision to be made to the rating list; or;

−

The time limit is reached – this is 12 months after the return of information to the VO

• Only once the “Check” stage is complete in one of these

ways will it be possible to make a proposal to alter the Rating List

Stage 2 “Challenge”

• A proposal must be made within 4 months of the

completion of the “Check” stage

• A proposal must include a statement of:

−

Grounds of the proposal, including “particulars of the grounds”

−

Evidence to support the grounds

−

How the evidence supports the grounds

−

And details of the proposed alteration of the list

−

In effect a statement of case or rather more

• Only when this is done will the VO respond

Stage 2 – “Challenge”

• The regulations set out a procedure for dealing with

“incomplete proposals” which are refused

• In such cases the Valuation Officer must state what

information is considered to be missing

• With an opportunity to re-submit the proposal
• Within 4 months of completing the check
• But in calculating the 4 months the time between the

proposal and the notice of refusal does not count

• The current invalidity process no longer applies

Conclusion of “Challenge” Stage

• The Valuation Officer accepts the alteration proposed by

the ratepayer and alters the list; or;

• The parties agree a different alteration; or;
• The ratepayer withdraws the proposal; or;
• The Valuation Officer issues a Decision Notice, setting out

his considered decision with reasons; or;

• The time limit is reached – this is 18 months from the date
• n which the proposal was made
• Only once a Decision Notice is issued or the

time limit is reached will it be possible to move to the next stage

Stage 3 – “Appeal”

• Only once “Challenge” stage is completed either by a

Decision Notice from the Valuation Officer or if no Decision Notice is issued within the time limit

• Any appeal must be made within 4 months of the end of the

“Challenge” stage

• It will involve the ratepayer submitting an appeal to the

Valuation Tribunal for England against either:

−

The Valuation Officer’s Decision Notice, or,

−

The failure to issue a Decision Notice

• An appeal fee of £300, or £150 for a “small

proposer”, with no fee if no Decision Notice issued subject to regulation

Stage 3 – “Appeal”

• The appeal will have to include:

−

A copy of the Decision Notice (if issued)

−

A copy of the proposal and any evidence forming part of it

−

Any information provided by the VO in the “Check”

• The Valuation Tribunal will
• Or further evidence if it relates to the grounds of the

proposal and was not known, and could not reasonably have been known, before the proposer had the right to appeal to the VTE

Statutory Instruments 155

• The Non-Domestic Rating (Alteration of Lists and Appeals) (England)

(Amendment) Regulations 2017

• Had to be in force from 1st April 2017

– To coincide with the compilation of the 2017 Revaluation, – Any later would have resulted in ratepayers continuing to be able to make proposals under the existing system, – Creating as a result a two tier system – Possible unfairness for rate payers – Significant financial impact on the VOA

Statutory Instruments 156

• The Valuation Tribunal for England (Council Tax and Rating Appeals)

(Procedure) (Amendment) Regulations 2017 – Provides for the introduction of the new appeals system – Provides for appeal management powers – Regulations for the regulation of the admission of new evidence – Sets out matters that must NOT be taken into account by the Tribunal – Regulations relating a fee to be paid when lodging a non-domestic rating appeals which can potentially be refunded if successful

VTE and VTS Changes

• Introduction of a Consolidated Practice Statement

– Wholesale review of Practice Statements – Number of practices statements reduced from 26 – Common implementation date from 1-4-2017 tied to new regulations – focus on an effective and cost effective mean to justice – case clearance given the number of outstanding appeals circa 260,000

• Changes in approach

– VT Pilot ran for 6 months in Kent & Leicestershire – A proactive approach to communication and case clearance – Arrangements in place to deal with multiple cases – Making best use of the resource time – Supports active dialouge and appropriate listing volumes

Reasonable Professional Judgement (RPJ)

• One of the original proposal in the consultation on statutory

implementation related RPJ

• Proposals were outlined that the VT may only order an

alteration to the rating list where it considers the list is inaccurate

• “Inaccurate” being defined as “outside the bounds of

reasonable professional judgement”

• For the time being there would remain an unfettered right
• f appeal to the Upper Tribunal (Lands Chamber)

Reasonable Professional Judgement (RPJ) cont’d

• Leading Trade Bodies and the Professional Bodies (IRRV),

RSA and IRRV) expressed significant concerns

• Representations were made to the Joint Committee on

Statutory Instruments correspondence was sent by Berwin Leighton Paisner to the Clerk of the Committee.

• The legislation has been held in abeyance due to the

forthcoming General Election

• A “Prayer of Regret” has been tabled
• The matter will await the State Opening of Parliament as

the revised working of “reasonable valuation” is is still of concern to many practitioners.

The End of the 2010 List

• Disappointing – not what was promised !

Supporting Date Information

• Issues surrounding the provision of

information to include details surrounding:

– Clearance of BA reports versus VO Reports – Withdrawal of supporting information:

• Transitional Certificates,
• Type of proposal,
• Proposer / Date of Proposal

“As part of the new website we have reviewed all the information we publish. We

will include everything needed to fulfil our obligations whilst retaining the confidentiality of taxpayers’ information in our care and complying with information law requirements. We are working through publishing appeals information in the next few weeks. This will include the code of grounds, proposal case number and the settlement outcome for the appeal (including if it was outstanding).”

Check, Challenge Appeal and the Government Gateway

The 2017 List

• Went live on 1st April 2017
• Statutory List provided on time
• Central List provided to “Client” on time
• Figures suggest:

– 860,000 unique visitors to the website ( up 36%) – Digital enquiries up from 11k to 36k – Telephone enquires down to 9,500 – Letters down from 12k to 460.

VOA Portal 2017

Working with the VOA System

• Work on developing this now portal has been ongoing for a

number of months.

• Since 2005 protocol had worked to facilitate a digital solution

to the submission of proposals which operated from the proposal submission all the way through to appeal

• Communication was enabled between systems operated by

firms dealing with proposals that communicated with the VOA and the Valuation Tribunal Service

123456789

Issues

Concerns

• Engagement has not been adequate
• The approach adopted by the VTS to their

system has been very positive and welcome

• Whilst a new system it remains “basic”

– Lacks functionality – Designed by those without a basic understanding – Lacks clarity and is difficult to navigate – Digital by default

Digital by default

Case Law Update

• Woolway v Mazars

‒ Issue of Unit of Assessment recently decided by UKSC ‒ Reconstitution of many assessments likely ‒ Also the issue giving rise to revised assessments for mall commercialisation

• Monk v Newbigin

‒ Issue of repair Currently subject UKSC hearing in November 2016 ‒ When is a property in repair ‒ Whether works to building are part of

• ngoing scheme of refurbishment

‒ State of repair to be considered

Rating Cases of Note

• Woolway (VO) v Mazars LLP [2015] 2 WLR

386

But it does not stop there ……

• The approach in Mazars has lead to a more

fundamental review by the VOA

Rating Cases of Note Monk v Newbigin

A Rating Cases of Note

Newbigin (VO) v S J & J Monk (a firm) [2017] UKSC 14

• The Parties

– SJ & J Monk (a firm) – the ratepayer landlord – The Valuation Office Agency – Intervenors

• BPF
• Rating Surveyors’ Association

The intervention: 8.8.1 A person who is not a party to an application for permission to appeal may apply for permission to intervene in accordance with rule 15 or rule 26.

Intervention – Monk v Newbigin (VO)

• 8.8.2 Attention is drawn to paragraphs 2 and 3 of Lord

Hoffmann's opinion in E v The Chief Constable of the Royal Ulster Constabulary (Northern Ireland Human Rights Commission intervening) [2008] UKHL 66, [2009] 1 AC 536, where he said this: “…In recent years the House has frequently been assisted by the

submissions of statutory bodies and non-governmental

• rganisations on questions of general public importance. Leave is

given to such bodies to intervene and make submissions, usually in writing but sometimes orally from the bar, in the expectation that their fund of knowledge or particular point of view will enable them to provide the House with a more rounded picture than it would

• therwise obtain…”

“…An intervention is however of no assistance if it merely repeats points which the appellant or respondent has already made.”

Rating Cases of Note – Monk v Newbigin

Court of Appeal Decision

• Para 40: Davis LJ states:

“…the language of paragraph 2(1)(b) is unambiguous.”

• Paragraph 2(1)(b) of Schedule 6, LGFA reads:

“the second assumption is that immediately before the tenancy begins the hereditament is in a state of reasonable repair, but excluding from this assumption any repairs which a reasonable landlord would consider uneconomic;”

• Para 41 he goes on to say:

“reasonable repair”: a notion well understood by valuers, surveyors and property lawyers. The “repairs” – again a word well understood by valuers, surveyors and property lawyers”

Rating Cases of Note – Monk v Newbigin

• Para 13: On Baroness Farrington’s statement in the House of

Lords on 5 May 1999

“Pepper v Hart [1993] AC 594 permits reference to statements of this kind where (a) legislation is ambiguous or obscure, or leads to an absurdity…”

Lewison, LJ makes clear at Para 16: “…Baroness Farrington’s

statement …in my judgement … is confined to a statement of

• f the Government’s intention… I do not, however

consider that a Minister’s view of what the case law amounts to is a matter on which a Pepper v Hart statement is of any value. What the case law decides is a matter for the judiciary: not for Parliament or the Executive.”

Where next ?

• UKSC unanimously allowed appeal and restored decision of

the Upper Tribunal … though for slightly different reasons to those given by the UT(LC)

• Rebus remains a fundamental principle in rating
• The repairing assumption does not displace rebus, or at least

not in the way the Court of Appeal thought

• 1999 Act intended to, and did, preserve the pre-LGFA

distinction between disrepair and works of redevelopment (para 20)

Where next ?

• UKSC unanimously allowed appeal and restored decision of

the Upper Tribunal … though for slightly different reasons to those given by the UT(LC)

• Rebus remains a fundamental principle in rating
• The repairing assumption does not displace rebus, or at least

not in the way the Court of Appeal thought

• 1999 Act intended to, and did, preserve the pre-LGFA

distinction between disrepair and works of redevelopment (para 20)

• The assumption of repair is not relevant to the

question whether a building is capable of beneficial

• ccupation, which is “logically prior”

– Similarly, the repairing assumption is only concerned with a property’s physical state – it cannot require the hereditament’s mode or category

• f occupation to something other than it is rebus

– Proper analytical approach as per the RSA/BPF: a) First, is the building capable of rateable occupation at all? If not, not a hereditament b) If it is a hereditament, what is its mode or category? c) Is it in a state of reasonable repair for use consistent with that mode or category?

What to consider

• Decision has largely restored the position pre-Monk
• Focus of proposals likely to shift away from

considerations of what is or is not repair in the landlord and tenant sense, and more towards consideration of capability for beneficial occupation

• Similarly, proposals less likely to focus on economics
• f repair, where a scheme can be shown

End of the issues surrounding Barber (VO) v CERP III

The implications of the decision

Labour Manifesto

• Introduce a package of reforms to business rates

– switching from RPI to CPI indexation, – exempting new investment in plant and machinery from valuations, – ensuring that businesses have access to a proper appeals process – while reviewing the entire business rates system in the longer run. – Switch Land Tax for Council Tax

• Corporation Tax at 26% ?
• Income Tax Increases ?

Liberal Democrats

• Reviewing the Business Rates system

– prioritising reforms that recognise the development of the digital economy, – lessening the burden on smaller businesses, – ensuring high streets remain competitive.

• We will also consider the implementation of Land

Value Taxation.

• Reforming Corporation Tax

– to develop a system that benefits the smallest companies whilst ensuring multinationals cannot avoid paying sums comparable to nationally based competitors.

Conservatives

• Balance the budget by 2025
• No increase in VAT
• Corporation tax 17% by 2020
• A full review of Business Rates

“Keeping taxes as low as possible”

Key Quotes:

• Business rates system presents considerable challenges to some smaller

companies.

• That is why we have supported those businesses most affected by the

recent revaluation of business rates. That is not all we will do

• We will make longer term reforms to the system to address concerns

about the way it currently works. – Revaluations are conducted more frequently to avoid large changes – explore the introduction of self-assessments in the valuation process. – To ensure the system is sustainable for the future – A full review of the business rates system to make sure it is up to date for a world in which people increasingly shop

• nline.

Conclusions

• Problems ahead……
• Business Rates News items at the fore
• The practical approach to the process and

how this is being implemented

• Case Law still remains relevant despite a raft
• f legislation regulatory changes

Andrew Hetherton MRICS IRRV (Hons) Head of Business Rates Director, GL Hearn, part of Capita Real Estate 280 High Holborn London WC1V 7EE andrew.hetherton@glhearn.com DDI: 02380 210680 Mb: 07484136138

@AndrewHetherton