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Cite as: [2014] UKUT 93 (LC)

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UPPER TRIBUNAL (LANDS CHAMBER)

UT Neutral citation number: [2014] UKUT 93 (LC)

UTLC Case Number: RA/12/2013

TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

RATING – alteration of rating list by valuation officer – effective date of alteration – list inaccurate on day of compilation by reason of omission of hereditament – date on which hereditament became liable to rating not reasonably ascertainable but before compilation of list – Reg. 14(2), (5) Non-domestic Rating (Alteration of Lists and Appeals) (England) Regulations 2009 – appeal dismissed

IN THE MATTER OF AN APPEAL AGAINST A DECISION

OF THE VALUATION TRIBUNAL FOR ENGLAND

BETWEEN BMC PROPERTIES AND MANAGEMENT LTD Appellant

and

DAVID JACKSON Respondent

(Valuation Officer)

Re: 8 Collingham Road

London

SW5 OLT

Before: Martin Rodger QC, Deputy President

Sitting at: 43-45 Bedford Square, London WC1B 3AS

on 24 February 2014

Myriam Stacey, instructed by Collyer Bristol LLP, Solicitors for the Appellant

Hui Ling McCarthy, instructed by the Solicitor to HM Revenue and Customs for the Respondent

The following case is referred to in this decision

Lamb & Shirley v Bliss (VO) [2001] EWCA Civ 562

DECISION

Introduction

1. This appeal raises a short point of construction of regulation 14 of the Non-Domestic Rating (Alteration of Lists and Appeals) (England) Regulation 2009 (“the 2009 Regulations”) concerning the effective date of an alteration to the 2005 rating list to include a rateable hereditament which had previously been omitted from the list in error.

2. The appeal is brought by the ratepayer, BMC Properties and Management Ltd, against a decision of the Valuation Tribunal for England (“the VTE”) given on 4 March 2003. The appeal arose out of a proposal received by the respondent (“the VO”) on 4 July 2011 to alter an entry in the 2005 list made by the VO on 22 March 2011. The alteration was to include the appellant’s premises at 8 Collingham Road, London SW5 OLT (“the Premises”) as a new hereditament in the list, with the description “self-catering holiday unit and premises” and with a rateable value of £104,000 from an effective date of 15 March 2008.

3. Before the VTE the parties had agreed that the Premises should be shown in the 2005 list as having a rateable value of £62,500 and to that extent agreed that the appeal should be allowed. The parties did not agree the date from which the alteration should take effect. The VO’s position, on reflection, was that the effective date should be the date on which the list came into force, namely 1 April 2005; the appellant believed that the effective date should be 22 March 2011, being the date on which the alteration itself had been made. The VTE decided in favour of the VO’s case and the appellant now appeals against its decision.

The Facts

4. The parties helpfully agreed a statement of facts from which I take what follows as the basis of my consideration of this appeal.

5. The Premises comprise a large Victorian house on five storeys which currently comprises 19 self-contained units used for short-term holiday letting. They have been used in that way by the appellant since its acquisition of the Premises in February 2007 and by the appellant’s predecessor for many years before that. It is not known when the Premises ceased to be used as a private residence (which is assumed to have been their original use) but it is agreed that they have been used for short-term and holiday letting since at least 16 December 1989. The basis of that agreement is a certificate of lawful use under s.192 of the Town and Country Planning Act 1990 granted by the local planning authority, Kensington and Chelsea, on 16 December 1999, by which it certified that the use of the Premises as short term and holiday lettings commenced more than 10 years before the date of the certificate. Although relevant enquiries have been made it has not been possible to establish the precise date on which the non-domestic use of the Premises commenced and it is agreed for the purposes of this appeal that that date cannot reasonably be ascertained.

6. The Premises were not included in the 1990 rating list, nor in any subsequent list prior to 22 March 2011. Instead, they were treated as a domestic dwelling and were included in the valuation lists maintained under the Local Government Finance Act 1992 for the purpose of Council Tax. It is agreed that the Premises should have been included in the 2005 rating list from the date of its compilation, 1 April 2005, and that its omission was an error.

7. On 22 March 2011 the VO issued a notice of addition to the 2005 rating list to include the Premises as a new hereditament for the first time. The effective date of the alteration was shown as 15 March 2008 (more than three years before the alteration itself was made). I was informed by Ms McCarthy, who appeared on behalf of the VO at the hearing of the appeal that, at the time the alteration to the list was made, the VO had understood that the circumstances giving rise to the alteration had first existed in March 2008. It is now common ground that that understanding was incorrect but it was one of a number of misconceptions by the VO in relation to the Premises. Ms Stacey, who appeared for the appellant, was critical of the way in which the VO and his colleagues had dealt with the Premises, but, as she agreed, those criticisms have no direct relevance to the single issue which now divides the parties and it is therefore unnecessary for me to say anything further about them.

8. On 1 July 2011 the appellant’s agents submitted a proposal to alter the 2005 list by deleting the new entry made by the VO. The basis of the proposal was said to be that the rateable value shown in the list by reason of the recent alteration was inaccurate. The logic of the appellant’s position was that, for reasons I will explain in greater detail, the effective date from which any alteration to the list could have taken effect was the date on which the alteration itself was made. That date was 22 March 2011, and as it fell outside the period of the 2005 list, it was said that the entry should be deleted in its entirety.

9. By the time the appeal came to be heard by the VTE the VO had acquired more information about the Premises, the history of their occupation and their value. The VO now contended that the effective date of the alteration to include the Premises in the list ought to be 1 April 2005.

The VTE’s decision

10. The VTE held that the effective date was to be determined by reference to regulation 14(2) of the 2009 Regulations and was 1 April 2005. That, in the VTE’s view was the date which satisfied the reference in regulation 14(2) to “the day on which the circumstances giving rise to the alteration first occurred”. In paragraph 29 of its decision, it interpreted that expression as meaning “the first day within the period of the list [on which the hereditament] met the criteria for inclusion in the list”.

The relevant statutory provisions

11. Section 41 of the Local Government Finance Act 1988 (“the 1988 Act”) requires the valuation officer for a billing authority to compile and then to maintain a local non-domestic rating list for the authority’s area. The first list was to be compiled on 1 April 1990 with further lists on 1 April in each subsequent fifth year. Such a list comes into force on the day it is compiled and remains in force until the next list is compiled five years later.

12. Section 41(4) provides that “before a list is compiled the valuation officer must take such steps as are reasonably practicable to ensure that it is accurately compiled on 1 April concerned.” The valuation officer’s duty is therefore to compile and maintain an accurate list, which necessarily requires that the list be kept up-to-date.

13. Section 55 of the 1988 Act makes provision for the alteration of rating lists. By section 55(2) the Secretary of State may make regulations concerning the alteration by valuation officers of list which have been compiled under Part 3 of the Act. By section 55(6) such regulations may include provision as to the period for which or day from which an alteration of a list is to have effect, “including provision that it is to have retrospective effect”.

14. The 2009 Regulations are made under the power conferred by Section 55 of the 1988 Act. Regulation 2(1) defines a “proposal” as “a proposal for the alteration of a local list or the central list”, while regulation 3 defines “alteration” as meaning “alteration of a list in relation to a particular hereditament.” The grounds for making a proposal for the alteration of a list are set out in regulation 4(1). Materially for this appeal they include: at sub-paragraph (a), that the rateable value shown in the list for the hereditament was inaccurate on the day the list was compiled; at sub-paragraph (d), that “the rateable value shown on the list for a hereditament by reason of an alteration made by a VO is or has been inaccurate”; and by sub-paragraph (f) that “the day from which an alteration is shown in the list as having effect is wrong.”

15. The time from which an alteration in the rating list is to have effect is determined in accordance with regulation 14 of the 2009 Regulations, which (relevantly) provides as follows:

“14 – Time from which alteration is to have effect: 2005 and subsequent lists

(1) This regulation has effect in relation to alterations made on or after 1 October 2009 to a list compiled on or after 1 April 2005.

(2) Subject to paragraphs (3) to (7), where an alteration is made to correct any inaccuracy in the list on or after the day it is compiled, the alteration shall have effect from the day on which the circumstances giving rise to the alteration first occurred.

(3) – (4) …….

(5) Where the day on which the relevant circumstances arose is not reasonably ascertainable –

(a) where the alteration is made to give effect to a proposal, the alteration shall have effect from the day on which the proposal was served on the VO; and

(b) in any other case, the alteration shall have effect from the day on which it is made.

(6) …..

(7) An alteration made to correct an inaccuracy (other than one which has arisen by reason of an error or default on the part of a ratepayer) –

(a) in the list on the day it was compiled; or

(b) which arose in the course of making a previous alteration in connection with a matter mentioned in any of paragraphs (2) to(5)

which increases the rateable value shown in the list for the hereditament to which the inaccuracy relates, shall have effect from the day on which the alteration is made.

(8) Where an alteration needs to be made after the first anniversary of the day on which the next list is compiled, it shall have retrospective effect only if it is made to give effect to a proposal.”

16. The procedure for altering a list by means of a proposal made by an interested person does not apply to alterations made by the valuation officer on his or her own initiative. Such alterations are required by regulation 17(1) of the 2009 Regulations simply to be notified to the relevant billing authority in writing within four weeks of the alteration being made. Regulation 17(2) requires that notice of the alteration also be given in writing to the ratepayer. Where a ratepayer or other interested person objects to an alteration made by the valuation officer, the alteration may be challenged by the ratepayer making a proposal to vary the list under regulation 4(1), relying on sub-paragraph (d).

The appeal

17. In her statement of case and skeleton argument in support of the appeal Ms Stacey did not dispute that the Premises had been used for non-domestic purposes and ought to have been included in every rating list compiled since the first in April 1990. By way of background to her submissions on the effect of regulation 14 of the 2009 Regulations Ms Stacey made a number of forensic points. She drew attention to the fact that the alteration in the list to include the Premises had substantially increased the amount payable by the appellant (which had previously been liable to council tax only) and had exposed it to significant backdated bills. This misfortune was compounded by the fact that the appellant’s backdated liability would be payable immediately in response to a demand, rather than by instalments, as it would have been if the Premises had been included in the 2005 list when it was compiled. This misfortune, Ms Stacey submitted, was the fault of the VO and his colleagues who had failed in their statutory duty to maintain an accurate list.

18. When she came to the proper interpretation of regulation 14, Ms Stacey first focussed on regulation 14(2) and on the direction that where an alteration is made to correct an inaccuracy in the list on or after the day it is compiled “the alteration shall have effect from the day on which the circumstances giving rise to the alteration first occurred.” The “circumstance” which had given rise to the alteration in this case was the change in the use of the Premises from domestic purposes to non-domestic purposes. It was therefore necessary to identify the point in time at which that change had “first occurred”. If that date was ascertainable, and was within the period of the list, regulation 14(2) directed that the alteration would have effect from that ascertained date of first occurrence.

19. Where the circumstances giving rise to an alteration occurred either before the date of compilation of the list, or on a date which was incapable reasonably of being ascertained, Ms Stacey submitted that regulation 14(2) had no application and that regulation 14(5)(b) determined the date from which the alteration was to have effect. In those circumstances the effective date would be the date on which the alteration in the list was made, and that was so no matter how long before the compilation of the list the relevant circumstances had first occurred. This, Ms Stacey submitted, was the natural meaning of regulations 14(2) and (5) and that, since the 1988 Act and the 2009 Regulations were concerned with taxation, effect should be give to that natural meaning.

20. As an alterative contention, Ms Stacey submitted that the relevant circumstances referred to in regulation 14(2) as giving rise to the alteration included the date on which the VO had first inspected the Premises and so had became aware that they were in non-domestic use and liable to be included in the rating list. That date was shown by a document emanating from the Valuation Office Agency to have been 8 January 2008.

21. As a final fallback, Ms Stacey submitted that the case fell within regulation 14(7)(b) because it involved an alteration made to correct an inaccuracy for which the appellant was not responsible and which arose in the course of making a previous alteration and increased the rateable value shown in the list for the hereditament to which the inaccuracy related. In those circumstances the effective date should be the day from which the alteration was made. In support of that contention Ms Stacey drew attention to the fact that the VO’s original notice of addition to the 2005 list had proposed an effective date of 15 March 2008 and that that position had only changed to an effective date almost three years earlier in the VO’s submissions to the VTE. Despite its informality, the circumstances of that change of position (which Ms Stacey acknowledged had not been reflected in an alteration to the list itself) ought, she submitted, to be taken to fall within Regulation 14(7).

22. More conservatively Ms Stacey suggested that it was both anomalous and inexplicable that an alteration made necessary through no fault of the ratepayer and which increases the rateable value shown in the list for a hereditament for which an entry already exists had effect only from the date on which the alteration was made, whereas, if her contention were not accepted, an alteration made to add a hereditament which had erroneously been omitted from the rating list would be backdated and would take effect from the date on which the list was compiled. That anomaly could be avoided in this case by treating the reference in regulation 14(2) to the circumstances which give rise to the alteration as referring to the relevant event or change of circumstances alone. That would have the result of disregarding the compilation of the list with the omission of the hereditament as part of the relevant circumstances giving rise to the alteration.

23. In response to those submissions Ms McCarthy supported the decision and reasoning of the VTE. The answer to the appeal was to be found in regulation 14(2) alone which did not have the effect asserted by the appellant. The alterations with which regulation 14(2) was concerned were those necessary “to correct an inaccuracy in the list”. The phrase “the circumstances giving rise to the alteration” was therefore properly understood as referring to the existence of an inaccuracy in the list, since that was the whole purpose of the alteration. In order to identify when the date on which the circumstances giving rise to the alteration first occurred it was necessary to ask when the inaccuracy in the list first occurred. In this case, the inaccuracy in the 2005 list first occurred on 1 April 2005, the date on which the list was compiled, because on that date the list was inaccurate by reason of the omission of the Premises, whereas before that date the list could not be said to have been inaccurate because it had not yet been compiled.

24. Ms McCarthy criticised the appellant’s argument that the words “the day on which the circumstances giving rise to the alteration first occurred” must mean (in this case) the day on which the use of the Premises changed from domestic to non-domestic use. That assertion assumed what it set out to prove, namely, that the relevant circumstances giving rise to the alteration cannot not include the fact that the list was inaccurate when compiled.

Discussion and conclusion

25. The purpose of regulation 14 is to identify a date from which an alteration in the rating list is to have effect. It is clear that such an alteration cannot have effect before the earliest date on which the rating list itself has effect.

26. Regulation 14(2) contemplates that a list may be inaccurate on the date on which it is compiled. Regulation 14(2) must therefore be construed in such a way as to accommodate the making of an alteration in the list with effect from the day on which the list itself was compiled. Accordingly it seems to me to be necessary that “the circumstances giving rise to the alteration” should be taken to include the fact that the list has been compiled and contains an inaccuracy.

27. Where a list was inaccurate when it was compiled there seems to me to be nothing unnatural or impermissible (in fact quite the opposite) in a reading of regulation 14(2) which treats the existence of the list as one of the circumstances giving rise to an alteration which is necessary to correct the inaccuracy. Of course some of the relevant circumstances which ultimately give rise to an inaccuracy may have existed before the compilation of the list, as where a material change in circumstances had occurred which was not appreciated when the list was compiled. But the existence of those circumstances could not be said to make the list inaccurate, or to give rise to an alteration to correct an inaccuracy, until the list itself is compiled. When considering when the circumstances giving rise to the alteration first occurred, the earliest point in time at which all of the circumstances can be said to have occurred is on the date of compilation. It is the compilation of the list, and the inclusion in it of an inaccuracy, which completes the circumstances giving rise to the alteration required to correct that inaccuracy.

28. If a list was inaccurate because it was drawn up in ignorance of a change of circumstances which had already taken place by the date of its compilation, it would indeed be anomalous if the effective date of an alteration to correct the inaccuracy had to be determined under regulation 14(2) if the date of the change of circumstances was reasonably ascertainable, but under regulation 14(5) if it was not. The most important fact in both cases is that the list can be said with assurance to have been inaccurate on the date it was compiled. In both cases, but for the failure to appreciate that a prior change of circumstances had occurred, the list would have been accurate on the date of its compilation. In both cases, nothing which occurred between the date of the relevant change and the date of compilation of the list would have made any difference to the entry in the list which ought to have been made. Why therefore should knowledge of the date on which the relevant circumstance first occurred be critical to the date from which the correction of the inaccuracy is to take effect? The only explanation Ms Stacey was able to offer for such an unprincipled approach to the correction of inaccuracies was that it was necessary to encourage compliance with the valuation officer’s duty to compile and maintain an accurate list. That seems to me a most insubstantial basis for differentiating between the liability of two ratepayers in otherwise identical circumstances, one of whom has more knowledge of the history of his property than the other, but both of whom know that the list was inaccurate in relation to their property when it was compiled.

29. As for the supposedly anomalous effect of regulation 14(7) relied on by Ms Stacey on in support of her primary argument, it was rightly pointed out by Ms McCarthy that the anomaly would exist whichever party was correct in its approach to regulation 14(2). A ratepayer would always be outside the scope of regulation 14(7), and therefore worse off, if the property was omitted from the list entirely, than he would have been if it had been included but its value incorrectly calculated. It was agreed between counsel that regulation 14(7) was concerned only with alterations to the list necessary to correct inaccuracies in the rateable value shown for an existing hereditament in the list and that it did not apply to an alteration which had the effect of including a hereditament in the list for the first time; support for that consensus was derived from the decision of the Court of Appeal in Lamb & Shirley v Bliss (VO) [2001] EWCA Civ 562.

30. I am therefore satisfied that the VTE was correct for the reasons it gave to dismiss the appellant’s primary argument. As for the secondary argument, Ms Stacey suggested only faintly that the date on which the VO had become aware of circumstances demonstrating an inaccuracy in the list could itself be one of the circumstances giving rise to an alteration within the meaning of regulation 14(2). That does not seem to me to be a credible suggestion as it would introduce an element of uncertainty and capriciousness into the process of ascertaining the effective date of an alteration which cannot have been intended. The appellant’s third argument based on regulation 14(7)(b) fails for at least three reasons: first, because of the absence of any alteration in the list to correct an inaccuracy which arose in the course of making a previous alteration; secondly, because the VO’s change of position before the VTE cannot be regarded as a relevant “alteration” because of the definition of alteration in regulation 3 as “an alteration of a list in relation to a particular hereditament”; and, thirdly, because the VO’s change of position related not only to the effective date, but also to the rateable value shown in the list, and secured a reduction in that value rather than an increase.

31. Finally there seem to me to be two appropriate responses to the appellant’s general submission that the effect of the VTE’s decision was unfair. The first is that the language of the 2009 Regulations is clear and makes provision for alterations in the rating list to be backdated for up to a year after the date on which the subsequent list comes into force (Regulation 14(8)). In those circumstances there cannot be said to be any relevant unfairness in an outcome which results in the appellant being presented with a large backdated rating assessment. Secondly, the appellant is a commercial corporation which acquired a large and no doubt valuable property in 2007 from which a business had been conducted for many years and which it was the appellant’s intention to continue. It has not been asserted in evidence that the appellant was unaware that such a property ought to have been included in the non-domestic rating list and that its omission was a mistake, nor that its directors believed that it was properly assessed for council tax only. If that was the appellant’s understanding it can only have been by reason of an inexplicable omission to take advice. Routine enquiries before contract would, for example, have revealed the advantageous status which the owner of the property had by that time enjoyed for a period of almost 17 years.

32. For these reasons for appeal is dismissed.

Martin Rodger QC

Deputy President

Dated 11 March 2014