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AN ARTICLE by Peter Scrafton FIRRV, FCIArb, MRSA(Hon) Solicitor (Non-Practising)

December 2016.

Secrecy is a great weapon of government, and has been for quite a few years. Sometimes it is benign, but at other times some think not. The tax files of individuals are closed for a century after death. This was to protect the taxpayer and his children from intrusion and scandal. Later came the Official Secrets Acts (which are still with us and acceded to by each new Crown or civil servant, which were intended originally for wartime use, but are still with us. Then came the Data Protection Act and the Freedom of Information Act which, between them, perhaps have caused more frustration in many corners, than they have alleviated.

That this legislation can bite in two directions was illustrated in the Supreme Court in October this year in R (on the application of Ingenious Media Holdings plc and Another) –v- H M Revenue and Customs [2016] UKSC 54 (19th October) in which the Inland Revenue were told, put shortly, that they could not disclose any information given to them in pursuance of their statutory functions, with certain exceptions. The former duty of Revenue confidentiality, which was the subject of an undertaking to the House of Commons, is now contained in the Commissioners of Revenue and Customs Act 2005. The primary function of the Commissioners, according to the Supreme Court, is the collection and management of revenue.

Is valuation for rating a function of HMRC? It perhaps used not to be so, as local authorities and DCLG managed that, while valuation was supposed to be carried out in a neutral manner, by VOA who live under the HMRC “umbrella” but whose “client” is DCLG. We may be about to find out.

My belief, shared by others more eminent than I, is that that Act does not operate in that way. There is no suggestion, of which I am aware, that information given to or used by the Agency in compulsory purchase and compensation cases, is to be treated as confidential - compensation is not an HMRC function, and nor is (or was) valuation for rating.

The Department was asked to supply supporting evidence for its expressed view during the passage of the Enterprise Bill: it declined to do so, even though the Financial Secretary to the Treasury acknowledged its existence; and the question cannot therefore be said to be settled. Indeed, had it been so settled, in 2005, I cannot believe that it took VOA until 2010, as it did, to proclaim that its powers of confidentiality and disclosure were so limited, if indeed, as a matter of law, they were so limited. To assert otherwise would be to accuse the Agency of considerable inefficiency. There would therefore seem to be other reasons behind this argument, which have not been made clear.

When rating valuation was removed from the control of local government in the late 1940s rating valuers who transferred from local government to the Inland Revenue Valuation Office worked in parallel with the District Valuer service, created to deal with Estate Duty prior to the First World War. The head of a local office was styled the District Valuer and Valuation Officer, a style which lasted until agency status came along and, like the waters of equity, the two tasks flowed in the same channel but did not mix. The Board of Inland Revenue appointed a DV/VO and, for taxation purposes, the office reported to the Board; but the client department for rating was what has become DCLG.

Information given to the Valuation Office for capital taxation purposes was regarded as confidential and was to be treated as such, in the same way as information given to an Inspector of Taxes. This issue of confidentiality was debated at the highest level in the Valuation Office and a guidance note was issued, in (I believe) the nearly 1980’s, in the Chapter Instructions over the signature of Walter Williams CB FRICS and also, perhaps, that of Norman Behr FRICS (the two Deputy Chief Valuers at the time) that information received by the Office on a Particulars Delivered form could be used in negotiation “over the desk” but could not be used in rating valuation proceedings, unless the capital transaction was disclosed, separately, on a Form of Return for rating purposes.

I was instructed by the Chief Valuer’s Office, when I was in the Revenue, to prevent local offices from ignoring this guidance This is the only restriction of which I, and others who worked within the Valuation Office at the time, am aware, and no doubt the VO Circular is available and discoverable in VOA records.

It follows, therefore, that, I (at least) could not accept the assumption which DCLG invited us to make, without producing any evidence or argument that the scope and extent of the Act of 2005 was as it claimed. If I am right in this, and in relation to the confidentiality provisions of the Enterprise Act, then the government’s approach, with all due respect, is misconceived and likely to result in breaches of the rules of natural justice, quite apart from shoals of appeals by those seeking to find information to verify or challenge a rating assessment. Litigants have a fundamental entitlement to know what case they have to meet, and the proposals deny this right so that ratepayers are, in effect, all guilty until proved innocent, and VOA cannot discharge the duty imposed on it by s41 Local Government Finance Act to make and maintain fair lists of rating assessments. These proposals in effect render s41 nugatory.

But what happens when the proverbial boot is on the other foot? What happens when the ratepayer has information which the VOA wants, but will not disclose it? Litigation!

I am aware of two cases where this is going on at the moment. I will not mention them in any detail because both are sub judice.

The more immediate one involves an industry in which, unsurprisingly, VOA has no experience or expertise. They have therefore, and appropriately, brought in an independent consultant to advise them. This person has asked for certain information which has been refused, on the grounds that rating valuation is not part of the function of HMRC to collect and manage revenue, and that, were the information sought to be handed over, then there would be nothing to prevent the independent expert from using such information for the benefit of other clients in the same industry, to the financial detriment of this particular ratepayer. Is this ratepayer’s information disclosable – or not?

Rent returns are the other forum for conflict. I remember, a number of years ago, a strong demand for gross receipts at a number of hereditaments (information of consuming interest to competitors) for the declared purpose of making or maintaining a list. The forms, however, never demanded the expenses to be set against the income to enable a receipts-and-expenses valuation to be prepared. The demand was eventually dropped, however.

Now, the principle has come back, this time in relation to a former stately home-type and now leisure-type building and demands for information by VOA in the form of gross receipts – not just for the building itself but also, so it seems, for the occasional and temporary “pop-up” uses which occur, from time to time, in what I will call the grounds. The VOA, as I understand it, wants to use this aggregated gross turnover to derive a rating assessment. The ratepayer agrees not, pointing out that where percentages of gross receipts for certain classes of hereditament are agreed, they have been used as a short cut to a valuation. There is no such prior agreement here – and of course, civil penalty proceedings could be looming (as a sort of lawyer myself, and carefully declaring my interest, I suppose I should be happy about that.)

With all of this going on, and Monk now heard in the Supreme Court, I am reminded of the Music Hall song:-

“They tell me there’s a lot of it about

They tell me there’s a lot of it about

Some get it here – some get it there

Some people get it, any old where

It’s generally on the increase

Of that there is no doubt

It’s nothing you can really put your finger on

But they tell me there’s a lot of it about!”

Peter Scrafton

©J.P. Scrafton, 2016

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