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Government tells small retailers not to pay under-fire rates relief firm

Justifiably believing they provide an above-the-board service ensuring their clients pay only what is due, many in the sector are appalled by the prospect that others could be bringing their profession into disrepute. Stories abound of firms promising the world and then abstracting a disproportionate fee, or worse, seeing their clients incur a higher tax bill.
 
Now, as a result of a campaign orchestrated by Labour MP for Rochdale Simon Danczuk, the government has intervened in the sector. Last month the business department issued a statement singling out one firm, RVA Surveyors, trading as the Rating and Valuation Agency (RVA), which advised small businesses not to pay invoices sent out by the Greater Manchester-based firm. So how did such a situation arise and, more imporantly, what is being done to resolve it?
 
No small beer
The coalition introduced its business rates retail relief in the 2013 Autumn Statement, in a bid to support high street businesses. The relief provides a discount of up to £1,000 in the 2014/15 financial year and £1,500 in 2015/16 for companies occupying retail properties with a rateable value of £50,000 or less.
 
While that sounds like small beer, an extra £1,000 could allow small companies to make improvements to a property’s appearance, for example, or invest in new IT. What’s more, the relief applies to each property a company occupies, meaning that larger chains can save many thousands of pounds, provided they do not break EU state aid rules.The relief isn’t necessarily automatic, but it is simple enough to get. Although the policy imposed an administrative burden on councils as business rates collectors, it is straightforward for qualifying retailers, with the process simply involving filling out an easily accessible two-page form.
 
However, the fact that the relief in many instances isn’t an automatic process has left the door open for rates advisers to make a fast buck by claiming they had succeeded in reducing their clients’ business rates and demanding a cut of the reduction. And that leads us back to RVA.
 
At the end of last year, Danczuk began receiving complaints from numerous companies in his constituency and beyond about increasingly aggressive correspondence and calls they had received from RVA demanding payment. The retailers were being threatened with court action and, convinced that something wasn’t right, turned to their local MP for help.
 
The small businesses had signed up to RVA’s ‘rates savers package’, which does not require an upfront payment but demands a cut - up to 45% - of any savings achieved by the company on behalf of its clients. The standard RVA contract, seen by Property Week, states: “The fee will be payable whether or not RVA is shown to be the effective cause of any such reduction in the rateable value (including any repayment of rates, relief, reliefs and refunds).”
 
Several firms that complained to Danczuk said they had contacted their local authority themselves in order to take advantage of the relief - thereby involving no work for RVA whatsoever - and were appalled to subsequently receive invoices from RVA, followed by phone calls and then threats of legal action. Some felt foolish for having signed the contract, but hoped a form of redress could be found.
 
Government intervention
Danczuk took up the cause on behalf of his constituents and sought a meeting with business minister Jo Swinson. The MP was successful and the result of the meeting is an extraordinary statement from the business department, shared with Property Week, that effectively advises firms to refuse payment to RVA for work relating to retail relief, even if that means court action.
 
“Businesses that have contracted with RVA are advised not to make any payment,” it reads. “The government’s action is not a reduction in rateable value. Businesses are asked to report any such demands to the Insolvency Service and to Action Fraud.”
 
Danczuk is pleased his intervention prompted such a robust response. “Businesses up and down the country have been struggling in the recent economic climate, especially because of the burden of business rates,” he said.
 
“To see businesses targeted in this way by firms like RVA really is appalling and I am glad that the government has advised businesses not to pay up.”
RVA described Danczuk’s comments as “incorrect and misleading”.
 
Ratings specialists are also quick to condemn firms seeking to take advantage of small retailers, but they also believe the government has a case to answer. By introducing the relief, the government wanted to send a message they were supporting small businesses on our high streets, they say, but by making it incumbent upon firms to apply for it they were also providing an opening to opportunists.
 
“The real problem here is that the government structured the scheme on a ‘by application’ basis rather than simply applying it across the board,” says Mark Higgin, partner and head of rating at Montagu Evans. “This has saved them money because the take-up has not been complete, but it has opened the door [for this sort of issue].”
 
Unsurprisingly, RVA isn’t best pleased with the situation. Property Week contacted the company to ask for its reaction to Swinson’s statement. “We take issue with the document issued by Jo Swinson, which is not accurate and we will be contacting his [sic] department directly to rectify these matters, which appear to be fuelled by the individuals not understanding what actually happens in the property taxation world in real life,” RVA said.
 
Asked to specify which elements of Swinson’s statement were inaccurate, RVA said “it’s the whole document” and that it would raise the matter with the minister. RVA admits that a “very small number of invoices… were raised in error”, but adds: “We stand by the service we provide, which identifies and achieves reductions in rateable values and rates payable, and also identifies and secures numerous types of reliefs that are not being received by businesses.”
 
Then there is the matter of RVA’s professional affiliation, or rather the lack thereof. A 2011 contract between the company and a local retailer, passed to Property Week, includes the Royal Institution of Chartered Surveyors (RICS) logo on the document’s letterhead, implying that RVA was a RICS member and therefore subject to its regulation. A quick call to RICS, however, confirms that RVA is not a RICS member.
 
For its part, RVA says that at the time the contract was signed the company was entitled to use the RICS logo, but that it has since decided to “remove our RICS accreditation”.
 
A spokesman for the company says: “The decision was taken a long time ago [to] remove our RICS accreditation as RVA believes the restrictions imposed impede our ability to advise and maximise the reductions for its clients, and we believe that our duty of care to do this is with our clients. In no way does RVA try to represent itself as RICS accredited.”
 
Asked to explain how exactly RICS accredition impedes RVA’s ability to advise its clients, the spokesman adds: “It is an opinion that RVA holds and stands by. We do not believe that we need to substantiate this and that it would serve no benefit to do so.”
 
From a small business’s point of view, of course, one benefit of using a RICS-accredited company is that if they feel they have been mistreated, they have access to the institution’s complaints protocol.
 
“Any business seeking impartial, specialist advice on business rates should always seek a RICS member so that they have the confidence in professionalism and, if necessary, access to independent redress should the service be unsatisfactory,” says RICS global property standards director Peter Bolton King. He adds that small businesses can get further advice from RICS’ online small business hub.
 
It will certainly be interesting to hear the outcome of RVA’s complaint to Swinson’s office, although in practice her advice may make little difference to the small businesses that have already complained about RVA. After all, her statement concludes by advising firms affected to “seek independent legal advice”. Faced with the choice of coughing up around £500 - half of the £1,000 rates relief - or taking on the costs of litigation, some small retailers may take the low-risk option.

Adam Branson
Professional & Legal Editor
Publication: Property Week
Date: 20/03/2015

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