Enterprise Bill

Written evidence submitted by the Royal Institution of Chartered Surveyors (RICS) (ENT 52)

RICS is the leading organization of its kind in the world for professionals in property, construction, land and related environmental issues. As an independent and chartered organization, RICS regulates and maintains the professional standards of over 100,000 qualified members (FRICS, MRICS and AssocRICS) and over 50,000 trainee and student members.

It regulates and promotes the work of these property professionals throughout 146 countries and is governed by a Royal Charter approved by Parliament, and monitored by the Privy Council, which requires it to act in the wider public interest.

Since 1868, RICS has been committed to setting and upholding the highest standards of excellence and integrity – providing impartial, authoritative advice on key issues affecting businesses and society. RICS is a regulator of both its individual members and firms enabling it to maintain the highest standards and providing the basis for unparalleled client confidence in the sector.

Small Business Commissioner

RICS welcomes the introduction of a Small Business Commissioner; however there is a lack of clarity regarding how the commissioner will operate in regards to the many other already established aspects within the system including the Ombudsman and mediation services. There was some clarification of this within discussions, however not enough to be able to give industry and small business the stability and confidence that they would need for this concept to be successfully rolled out and implemented.

There is the need for a simpler, more transparent system especially regarding dispute resolution a sentiment unanimously agreed upon, something that was also raised in discussions with our members. More has to be done to clarify what the role of the commissioner will be and how they would work with the previously mentioned other organisations, otherwise this concept which we strongly support will be just more bureaucracy and complications for the many small business owners in England and be of no support or service to them.

Through discussions, it became clear that mediation and alternative dispute resolution (ADR) was a very high priority for the department and the Small Business Commissioner. RICS supports ADR, many of our members specialise in ADR within the property sector and we as an organisation run many CPD days regarding ADR techniques which are well attended, RICS also offers a wide range of ADR services through its Dispute Resolution Service, and we help to resolve 1000s of disputes in the UK each year. Some other parties during discussions were wary of ADR and believed that it would actually be a deterrent to small business to solving conflict. We do not agree with this and actually within our membership see it as the most suitable conflict resolution pathway, especially to avoid prolonged expensive court cases.

With a clear directive, the commissioner can bring transparency into the industry with small businesses knowing where to go first to get valuable information, instead having to search over many different government departments and websites. This is something that is constantly being flagged as an obstacle to small businesses, finding the right information or knowing where to go for it, RICS successfully provides this with our small business hub, but outside of this particularly within the public sector there is no equivalent. Anything implemented or codes coming under the directive of the commissioner must be enforceable with actual repercussions to provide stability and confidence to small businesses about the commissioner.

VOA sharing Business Rates information

In terms of the Enterprise Bill (Clause 25 and Clause 26) there is a need to introduce requirements for transparency with the release of information. Many appeals are submitted by ratepayers trying to get information underlying their valuation as it is only sometime after the lodging of a formal appeal that the VOA will share the underlying rental evidence. RICS support the release of information including rental values of comparable properties. Given the two year gap between the antecedent valuation date and the time when this information would be shared, any market sensitivity would have dissipated. Making this information available to affected ratepayers prior to formal challenge so that they can audit their assessment will make the process more transparent and decrease appeals substantially.

Business Rates Appeals system reform

RICS responded to the DCLG consultation into Check Challenge Appeal, and would be happy to provide our full response or discuss our response in further detail. We would also refer you to our response to an earlier DCLG Consultation Paper entitled ‘Checking and Challenging your Rateable Value’ which was published in December 2013.

All of the observations and comments we made at the time of both of the referred to consultations remain valid. Our overall impression of the structure and methodology of the latest proposals (Check, Challenge, Appeal) is that they are overly complex, will not serve the interests of ratepayers and will save neither time nor money. They appear to offer no significant advantage over the existing system whilst adding additional layers of bureaucracy and new burdens upon businesses. If it is Government’s intention is to dissuade ratepayers from investigating, understanding and challenging their assessments then these measures may have a degree of success but surely in circumstances where an explanation and justification of an assessed tax is sought, brevity and transparency should be the aspiration.

Government has long used the number of withdrawn rating appeals as a justification that the system is in some way broken and dysfunctional. This attitude misses the point. Those appeals are the only means by which the ratepayer can adduce the information on which his assessment is based. A withdrawn appeal may be seen as a waste of resources by the Valuation Office Agency (VOA) but for the ratepayer it will be time well spent in the pursuit of information to reassure himself that he is not being over taxed.

Refusal by the VOA to release the appropriate rental evidence at the start of the process is at the heart of problem and these new measures will perpetuate the established behaviours of both the VOA and those seeking to ascertain the evidence for their assessments. All of this is particularly pertinent in respect of a tax (business rates) that is subject to such a high tax rate. The Uniform Business Rate for 2016/17 will be almost 50% for larger businesses, and more in London where supplements apply, making it the highest rate of corporate tax for most businesses. UK property taxes are amongst the highest anywhere in the world. It is little surprise that ratepayers want to scrutinise their liabilities closely.

We have set out our views before on how the system could be improved but it is worth setting them out again:

1. The basic valuation information currently provided is insufficient. It is impenetrable to the lay person.

2. The rental evidence on which the assessment is founded should be available (in anonymised form if necessary) at the outset prior to any formal appeal process.

3. The Valuation Office Agency should explain how the evidence applies to the property and how the value has been arrived at.

4. The existing automatic referral of proposals to the Valuation Tribunals as appeals should be discontinued and replaced with an elective approach.

We would urge the Committee not to pass Clauses 25 and 26 unamended. In the same way as Clause 25 will introduce a provision permitting sharing of relevant data between the VOA and local authorities, a provision is required to authorise and require the VOA to share rental evidence with ratepayers whose properties have been valued for rating purposes having regard to that evidence.

February 2016

 

Prepared 15th February 2016