Business owners hit in the pocket as government cuts delay rates challenges

Adrian Smith of AS Rating – more challenges to valuations on way.


Business owners are being warned to expect long delays with challenges to rates valuations as discontent increases whilst the Valuation Office Agency (VOA) faces job cuts and office closures.

Adrian Smith, founder of Hull-based AS Rating, said the number of checks and challenges resulting from the business rates revaluation which took place last April is rising every month – and comes on top of a total of nearly 200,000 challenges still to be resolved from the 2010 revaluation.

Meanwhile the VOA is pushing ahead with plans to reduce the number of offices in England, Scotland (Scottish Assessors Office) and Wales from 52 to 28 by 2023. Hull will survive the cull, but could still be hit by job losses and a larger workload with offices in Lincoln and Sheffield set to close.

Adrian said: “The system which was introduced as part of the revaluation last April was a shambles from the start and the cuts are making it worse. Business owners have serious questions about the impact on their organisations, and there are fewer people to provide the answers.

“One industry analyst has likened it to closing a hospital because there are too many sick people to deal with. The hope seems to be that the issue will just go away, but the reality is that it will just take longer for the real problems to emerge.”

Figures releases by the VOA show that in England and Wales at the end of September 2017 there were 199,160  appeals still to be resolved from the revaluation that took place in 2010. In Yorkshire and Humber the figure was 16,980, with 1,140 in Hull and 750 in the East Riding.

The numbers indicate that the VOA is making slow progress with the backlog. The national figure peaked at 305,120 in March 1016. Yorkshire and Humber reached 27,340 in July 2016, Hull hit 1,800 in the same month and the East Riding climbed to 1,290 in December 2015.

By comparison the number of outstanding cases under the new check, challenge, appeal (CCA) procedure introduced in 2017 is minimal, but Adrian said this is merely evidence that the new system is succeeding in putting people off.

He said: “The figures show that the number of reviews carried out by the VOA following the 2017 revaluation reached 66,080 by the end of September, with 2,260 checks outstanding and around 300 challenges still to be resolved. But the system is so difficult for people to access that they haven’t got figures yet for the number of appeals which have been lodged. These numbers give a clear indication of how complex it is to go through the CCA process.”

The new system created various anomalies around scenarios such as occupying only part of a property, and buildings undergoing major refurbishment. Some people faced higher bills because of inaccurate rateable values and were invited to use the CCA facility on the VOA website, but few business owners have found the time or the technical skills to work through the complicated process.

The Royal Institution of Chartered Surveyors (RICS) has called for changes to the system and the VOA has said there will be improvements, but meanwhile business owners are being hit in the pocket.

Adrian added: “In the coming months there will be more reviews conducted by the VOA. That will lead to more requests for checks and to more challenges from people who think their rates valuation is unfair. Eventually it will lead to rising numbers of appeals as well, and coupled with the job cuts and office closures, the effect will be that some business owners will be paying too much for too long.”

Budget could bring long-term rewards for business

Business ratepayers could be rewarded for the short-term pain of increases in April with the long-term gain of a more efficient and user-friendly system.
Adrian Smith, founder of AS Rating, said the Budget brought mixed messages for businesses seeking help with their rates. He added that the key to improving the process still lies with streamlining the “check, challenge, appeal” system which was introduced this year.
Adrian said: “There were some encouraging announcements about business rates in the Budget but the continuing problems with the new system mean that things are likely to get worse before they improve.”

The announcement by Chancellor Philip Hammond that rates increases next April will be linked to the Consumer Price Index (CPI) rather than the Retail Price Index (RPI) was welcomed, as was the decision to continue the £1,000 business rate discount for pubs with a rateable value of up to £100,000.

Adrian said: “The move to the CPI was something which businesses had called for and it should have the effect of reducing next year’s planned increase of 3.9 per cent by more than one per cent. Of course this is still an increase, and we don’t know how much the CPI will rise in the future, but this was welcome.
“The discount for pubs will also be welcomed, but for many the saving of £1,000 per annum will be considered small beer.”

Adrian said businesses will benefit from legislation to address the “staircase tax”, which in many cases removed Small Business Rates Relief (SBRR) and, for larger firms, quantum relief where firms occupy parts of a property separated by communal facilities such as a staircase, corridor or lift.

He said: “Currently they are treated as separate business premises, which means they may not quality for full SBRR, so this is another positive move because two separate assessments will normally bring a higher total liability than one overall assessment.”

Another positive announced by the Chancellor is the increase in the frequency of rates revaluations to every three years. Currently they are due to take place every five years, although this year’s revaluation was delayed from 2015.

Adrian said the proposed changes should produce a much more efficient system, but he warned there will be a huge backlog to clear, with more than 200,000 appeals still outstanding from the 2010 revaluation.

He said: “The job of processing appeals from 2010 is ongoing, and the number of new challenges will increase once people get to grips with the changes introduced this year and with a system which is still preventing users from challenging their assessments. Changes to the staircase tax will add to the assessors’ workload.
“But there is now light at the end of the tunnel. Once all the appeals wash through – and it will take some time – we should end up with more frequent revaluations and that should bring greater accuracy, which will benefit everyone.”

Rural diversity is reflected in rates bills

Increasing diversity among rural businesses is adding to the complications for property owners when it comes to rates on their premises.

Those businesses involved in traditional agricultural activity were largely unaffected by this year’s revaluation, but some who have turned farm assets to other use have been hit hard, and they may be losing out in other ways.

Adrian Smith, founder of AS Rating, said: “Some commercial uses for agricultural properties have attracted big rates increases, and where people have seen reductions these are often phased in with the result that you have to wait years to receive the full benefit.

“The rates are based on the rental value and, as you would expect in an area of great variety among businesses, there are some big differences between the final figures.”

Adrian explained that agricultural exemption from business rates applies where a property is used purely for agricultural work. But you can lose that if you are storing grain for someone else, if you use your engineering equipment to do work for someone who is not involved in agriculture or if you turn over your farm to other commercial use such as a farm shop.

He said: “There has been change of use to create facilities such as garden centres, and there are many other sectors including various aspects of the motor trade, electrical engineers, offices including professional services, because even if the main business in an area is agriculture it needs support from others.

“If rates are low, the fact that they reflect rents indicates you are already facing the challenge of trying to run your business in a relatively poor area.

“If you’ve seen a large reduction, the effect of transitional rate relief means you could be paying more than the fair amount for up to five years or until the next revaluation.”

Angling superstore open for business – Case Study

A businessman has finally landed his dream of moving his fishing tackle shop into his favourite pub after becoming tangled in red tape from this year’s rates revaluation.

Steve Ashton was locked in discussions with the Valuation Office Agency (VOA) over his conversion of The Crown on Holderness Road, Hull, from a derelict shell into a state-of-the-art angling store. But he is now open for business after help from AS Rating.
Ashton Property Company, which is owned by Steve, bought the pub on 20 March after plans were dropped to turn it into a Netto supermarket. He promptly received a rates bill for £1,500, followed by another for £3,900 for April, and he appointed Adrian Smith of AS Rating to look into the demands.

Adrian advised Steve to challenge the amounts on the basis that the rateable value for The Crown had dropped from around £80,000 to around £23,500 and because of the condition of a building which had been ransacked by vandals during the two years in which it sat empty.
But Steve could not take up the VOA’s “check, challenge, appeal” procedure because the new system had not registered him as the owner of the property.
Adrian’s success in persuading Hull City Council to put a hold on the building’s business rates account enabled Steve to go ahead with the conversion and he has now completed the relocation of Hull Angling Centre.

The project has created seven new jobs with the prospect of more to come once work is completed on three more units. The business has been transformed, with stock expanded to include rods, reels, baits and clothing.

Steve said: “People in the area are telling us how good it is that someone has done something positive with the old building. They were sick of people wheel-spinning in the car park and dumping waste there.

“If Adrian hadn’t been able to help me I’d have paid those initial demands and then nearly £4,000 per month for a building that I couldn’t use to generate any revenue. Or maybe I’d just have sold it on to get rid of it”

Adrian said: “I explained to Hull City Council that the building was not capable of beneficial occupation and I also sent them photographs. They said they would put a temporary hold on the account until we could resolve things, but we couldn’t get the VOA to come and see the building because they don’t recognise Steve as the owner.
“If Steve had been required to pay rates on the derelict building it’s unlikely this project could have progressed. He’s created a new business, new jobs and opportunities for other businesses in a part of the city that really needs investment.”

VOA job cuts will add to delays and frustration


Job cuts at the department responsible for overseeing business rates are expected to pile more frustration on to firms already hit by confusion and delays from a new “check, challenge, appeal” system.

Adrian Smith, founder of AS Rating, said the Valuation Office Agency (VOA) is planning to streamline its online service after acknowledging that it is creating great difficulties for ratepayers. But he added that any benefits are likely to be undone as the Government presses ahead with plans to cut 1,000 VOA jobs by 2021.

Adrian said: “It appears to me that the Government has rushed the introduction of the new system to fit in with the timetable for job cuts. The system has massive flaws which are causing huge complications and delays but the government is pressing ahead with the job cuts regardless.”

The rates revaluation which took effect on 1 April this year has created various anomalies and left some people facing higher bills because of inaccurate rateable values. The new system makes provision for ratepayers to use the “check, challenge, appeal” facility on the VOA website, but the reality is that some business owners don’t have the time or the technical skills to work through the complicated process.

The Royal Institution of Chartered Surveyors (RICS) has called on the VOA to make changes to the system and the Institute of Revenues Rating and Valuation (IRRV) placed the subject at the top of the agenda for its annual Rating Diploma Holders’ Conference.

Mary Hardman, Chief Valuer at the VOA, told the IRRV audience that improvements will be made to the online service by the end of this year, with more planned for spring 2018.

Adrian said: “It was clear she recognised there are problems with the system. They need more people to sort this out but instead they are facing job cuts, with properties likely to be assessed from the plans rather than by proper inspections.

“The job cuts will affect the ability of the VOA to carry out a professional service and I think the system will get worse before it gets better, with ratepayers becoming more frustrated. Any improvements that result from streamlining the online system could be at least cancelled out by the loss of more staff.”

More must be done over Revaluation

Businesses hit by the controversial rates revaluation process could find support as the agency behind the changes comes under pressure to improve its services.

Adrian Smith of AS Rating said benefits could also result from local authorities now adopting the cap on business rates increases of £600 which was promised in the March budget – but Adrian warned that more needs to be done.

He said: “Rates revaluation has been handled very badly and has been condemned nationwide as a shambles. There is now evidence of measures being taken to ease the burden on businesses, but for many it is too little too late.”

Adrian warned six months ago that companies which lost small business rate relief could end up paying increases of more than £600 because of the impact of the real terms transitional relief cap.

He said: “It appears that problem is now being resolved in some areas where local authorities have applied the £600 cap. But many businesses are still finding it almost impossible to use the online system set up by the Valuation Office Agency to handle appeals.”

The VOA’s “check, challenge, appeal” procedure starts with a registration process which has been criticised as lengthy, complicated and likely to deter people from using the system.

Adrian said: “The online facility has been branded widely as not fit for purpose and there are reports that the VOA is now receiving support from HMRC to make improvements.

“We have been inundated with requests for help since we began alerting people to the problems of rates revaluation more than a year ago, and we continue to support clients in trying to get their business rates set at a level which is fair to everybody.”

Revaluation anomalies are top priority for rating professionals

Property professionals and rating specialists are stepping up their efforts to tackle the confusion around rates revaluation which is hitting some businesses in the pocket.

Top of their list of concerns is the new check, challenge and appeal system which is paralysing the investment plans of some companies because of its continued complexity.

Adrian Smith of AS rating said: “The rates revaluation which took effect on 1 April this year has created various anomalies and left some people facing higher bills because of inaccurate rateable values.

“In theory, the amounts can be challenged using the Valuation Office Agency website, but in practice there are business owners who don’t have the time or the technical skills to work through what is a complicated process.”

The General Election added to the delays to address the problems, with professional bodies postponing events organised to examine the changes. The Royal Institution of Chartered Surveyors (RICS) has placed the check, challenge and appeal system at the top of its agenda for a conference in September. The Institute of Revenues Rating and Valuation (IRRV) is expected to discuss rates revaluation at its annual conference in October.

Adrian, founder and owner of Adrian Smith Rating, will provide feedback to both organisations and is hopeful that changes will result from other practitioners facing similar experiences.

He said: “When the changes took effect the Chancellor said that businesses which lost small business rate relief would have their increases limited to £600. We warned at the time that this interpretation was incorrect, and we have since been approached by clients who are being asked to pay more.

“We have other clients who are being forced to delay property refurbishment projects, partly because of disputes over the rateable value of premises which are not yet fit for purpose but also because the new system is not even up to date about who owns the building!

“Before embarking on the new process to check a rateable value and then consider whether to challenge it and appeal against it, a business owner must register on the Valuation Office Agency website.

“Unlike the procedure with other taxes, they even have to register themselves before they can appoint an agent to investigate the matter. It’s a complex process which could put some people off checking. There will be business owners who have no idea of what is involved and therefore no idea whether their payments are correct.”

Rating advice in demand at Chamber Expo

The controversial rates revaluation process led to a rush of business for AS Rating and more than justified the company’s decision to strengthen its presence at this year’s Chamber Expo.

Adrian Smith, founder of the company, said he was inundated with enquiries from business owners who remain baffled by the changes months after they were introduced. He added that he expects the confusion to continue as the Valuation Office Agency (VOA) struggles to streamline its “check, challenge, appeal” system.

Adrian said: “This year at Expo I had four times as much space and there wasn’t a gap of more than about five minutes between people coming to see me. That’s because the issue of business rates is so topical this year.”

Various questions arose from business people making assumptions about information which they had heard from other people involved in rating issues. There were also specific questions from people who wanted to know about their rates liability for only occupying part of a property, and who were concerned about having to pay rates on premises undergoing major refurbishment.

Adrian said the confusion is compounded by the need for business rates payers to register on the VOA’s website before they can check the rateable value of their property.

He said: “Under the new check, challenge, appeal regulations a business owner has the opportunity to check their rating assessment, but first that they need to carry out a registration process which can be quite lengthy and complicated.

“You can’t check your valuation until you have been through the registration process, and that requirement could put some people off checking and mean they end up paying more than they should. There will be business owners out there who have no idea of what is involved and therefore no idea whether their payments are correct.”

Businesses face rating confusion from “nightmare” system

Businesses looking to check their rates liability following the recent round of changes are likely to be deterred by delays and complications built into a “nightmare” of an online system, according to ASR.

Adrian Smith said the new “check, challenge, appeal” website which is being phased in by the Valuation Office Agency (VOA) could trip up a lot of users with processes which are rigid and time-consuming.

He said many business owners will need expert help to tackle the procedures and, faced with a waiting time of up to 18 months for a response from the VOA, they may decide not to bother.

Adrian added: “Businesses and their agents need to register with the Government Gateway, identify whether they should challenge their assessment and then start the procedure. Then they wait for up to 18 months, and some businesses could fold in that time.”

Under the revaluation process which came to a head in recent months, some businesses received a cut in the rateable value of their property, and some qualified for 100 per cent small business rates relief as the threshold was doubled to £12,000.

Others were hit with sizeable increases, prompting the Chancellor to try and soften the blow with measures in this year’s Budget. AS Rating’s view that the Chancellor’s provisions were inadequate is reinforced by the outline publication of the VOA’s procedures for rectifying faults.

The new rating list came into effect in theory on 1 April but the website is still under construction, with the Royal Institution of Chartered Surveyors warning that completion is not due until late 2018.

Ratepayers who want to check the rating assessment of their properties must register through the Government Gateway, which may involve setting up a new account. They must also register the details of their agent if they decide to appoint one.

A ratepayer who wishes to challenge their valuation is asked to compare their property with others of similar age, size and character in their area. They must also set out why they think their valuation is incorrect. If their challenge is dismissed – or if the VOA has not responded within 18 months – they have the right to appeal to a Valuation Tribunal.

Adrian said: “The new website is the essential tool for businesses to check their valuations and, if appropriate, challenge and appeal. It is complicated and time consuming and has been imposed by the Government, who don’t seem to be aware of the problems it will cause. It is a nightmare and people will find it very difficult to deal with it.”

ASR advises 50,000-strong nationwide business network

The country caught up with concerns about business rates as the subject became a key talking point in the Budget, and ASR was in demand from nationwide business group 4Networking to supply advise for its membership of more than 50,000.

We offered six tips to help businesses manage their rates and avoid unfair charges.

Be fair to yourself

Every business has a legal and moral responsibility to pay the fair business rates for which they are liable, and the safest and best way is to manage your rates in the same way that you would manage salaries and rent. That means adopting a proactive approach and making sure you are fair to yourself and to HMRC.

Winner, loser or don’t know?

For the 2017 revaluation, the Valuation Office Agency calculated the rateable value of a property based on its hypothetical rental value at 1 April 2015. Some businesses saw a reduction, a minority were hit by a big increase and many face confusion because of errors with the figures. Such errors may have resulted from information being inaccurate, delays in processing appeals and changes announced by the Chancellor in his Budget.

Relieving the pressure

There are various types of business rates relief including for rural areas, enterprise zones and charities. Small business rate relief is the most widespread and underwent a big change as part of the 2017 revaluation. The previous threshold of £6,000 was doubled, meaning that you qualify for 100 per cent relief if your property’s rateable value is less than £12,000. There is a sliding scale of relief to £15,000.

Check, challenge, appeal

A business can contest a ruling on its rateable value through the Valuation Office Agency’s “Check, challenge, appeal” process. It can be time-consuming, and if you go to a Valuation Tribunal you will face a fee of up to £300 which may be returnable if you succeed. We will check the facts on which your rateable value is based, and if appropriate we will challenge and try and secure a revised assessment by negotiation. We will also represent you in an appeal at the Tribunal if required.

Take care when taking advice

Anybody can embark on the “check, challenge, appeal” process but you risk wasting time and money if you don’t get expert advice. There are companies which will offer to help. They may charge you a fee for “obtaining” an “adjustment” which you would probably have secured anyway through a routine relief. As members of the Royal Institution of Chartered Surveyors, the Institute of Revenues Rating and Valuation and the Rating Surveyors’ Association we recommend you take the trouble to check consultants’ credentials.

Planning for change

By planning ahead you can help yourself and identify likely changes to your rates in advance. Influential factors may include extensions to your property, improvements to the part of a town or city in which you operate, or investment in substantial items of plant and machinery. You should consider the rating implications around these issues in the same way as you would when planning a move to new premises.