Rates – no handing back the yolk

Representing the Port of Liverpool, Ms Ellman said in the latest debate: “The problems arise because of mistakes made by the Government’s Valuation Office Agency, part of HM Revenue and Customs. The mistakes are particularly significant because of the current unprecedented economic crisis.”

She went on to explain that the changes involved significant redistribution of rates from port operators to companies, which resulted in some companies being rated for the first time. The changes were to be implemented in 2005.

However, it was not until September 2008–three and a half years later–that the VOA started to instruct local authorities to issue vastly increased backdated rates bills: “…demands could not have been anticipated or budgeted for by the companies concerned”. she said. “Where rates had previously been paid to port operators with the rent, it meant double billing. No impact assessment of the change was made.”

She went on to point out that “two stevedoring companies in Liverpool have already closed, with the loss of 27 jobs. A major company faces a 400% rates increase, with a demand for £2.6m-worth of backdated liability. One company has received a final demand for £500,000 for 2008-09 and, six weeks after lodging an unanswered appeal, is considering its future.”

But this is only the local Liverpool situation – the country-wide problem is much graver, with one estimate claiming that as many as 700 businesses are affected.

The debate continued last week with MP Ian Cawsey – representing Brigg and Goole – making the point that the government’s ‘fast track’ system to re-evaluate the rates was nonsensical. He says “The idea that people can now unpick the rent from their cumulo [the combined charge operators were paying to the port owners], but that if they cannot do so they cannot have a fast-track appeal, is a bit like handing back an omelette to the chef and saying, ‘Give me the yolk’. They cannot do it because there is just an overall figure.”

Further, the government’s proposal to spread the backdated element over eight years does not resolve the problem, say the ports. Not only does the downturn make recouping this kind of money difficult for many operators, a liability on the company account books shows on the year it is raised – which could push companies into technical, followed by real, insolvency as credit can not be raised by a company who is even ‘technically’ holding this kind of debt.

However, despite the obvious problems of trying to collect debts from insolvent operators, UK Minister of State John Healy told parliament that it could not simply ‘waive’ the tax raised – although Mr Cawsey is now to chair a meeting on February 9 between the Valuation Agency and local businesses to try to resolve the situation.