Business Rates Reduction Services

Kevin Hollinrake Excerpts

Wednesday 26th May 2021 Westminster Hall

[Kevin Hollinrake (Thirsk and Malton) (Con)]

I beg to move,

That this House has considered regulation of business rates reduction services.

It is an absolute pleasure to speak under your chairmanship, Mr Hollobone. I must first draw the House’s attention to my entry in the Register of Members’ Financial Interests. I am delighted to have the opportunity to talk about this issue. This debate is obviously the most important event happening in Parliament at 9.30 this morning—no doubt we will not be distracted by anything else that is going on.

This is a very simple issue. It relates primarily to one single company, and I can describe these people as no better than a group of con men, who prey on unsuspecting business people, usually very small SMEs—small and medium-sized enterprises—and con them into signing a very unfair contract, which often is completed after the event, after they have met with the business person. The contract that they tie them into, which is a very long-term contract, effectively diverts tens of thousands of pounds intended to be Government support, Treasury support, to SMEs—usually smaller businesses—from them and into their own bank account. The company that I am speaking about specifically is called RVA Surveyors. This is a company in Manchester run by a gentleman called Stephan Hughes.

The support, of course, is small business rates relief, which is supposed to be there for small businesses; indeed, it is the relief granted by the Treasury to help people through the covid crisis. About half of this support has been diverted from the businesses concerned into the relevant business, RVA Surveyors, and there is not even a service provided. It is a simple letter that is required; all these people do is send a simple letter to the local authority and that effectively diverts the relief.

Dozens of cases are known to Members of this House. I think that 13 different Members of Parliament supported a letter that I wrote to my right hon. Friend the Secretary of State and to the Insolvency Service. They include the hon. Member for Walthamstow (Stella Creasy), whom I am delighted to see here today, but also other Members who have expressed keen support for this debate, including my hon. Friend the Member for Rochester and Strood (Kelly Tolhurst) and my right hon. Friend the Member for Tunbridge Wells (Greg Clark), who is detained at other proceedings this morning.

Dozens of cases are known to Members of this House, but according to RVA’s own website, RVA has about 10,000 clients around the UK, so I think it is safe to assume that hundreds, if not thousands, of businesses have effectively been defrauded in this way. I can describe these people, RVA Surveyors, in no better terms than by saying that they are shysters, carpetbaggers, parasites. It is a simple con trick that they carry out, and this happened to one of my constituents, which is how my attention was drawn to this particular issue. My constituent, Jude Carter, who owns Dreams Hair & Beauty Salon in Hunmanby, is a small businessperson.

Imagine how it is when someone is busy trying to set up a business. These people use a freedom of information request to find out which premises qualify for small business rates relief and which are not currently getting that relief. They then call on that particular business. The businessperson is setting up the business, painting the walls, furnishing the place, getting ready for the first days of trading, and those people come in and say, “We can save you lots of money—just sign this form and we will reduce your business rates.”

There are many business rates reduction specialists that offer a perfectly bona fide service. They will measure the premises, argue with the Valuation Office Agency, reduce the business rates and provide a service for which they quite rightly should be paid. They provide fair terms for that reduction, and both the business owner and the rates reduction specialists then benefit from that reduction in business rates. That is a perfectly reasonable service to offer.

This is entirely different, because the small business rates relief is almost automatically provided for that business. All that business needs to do is notify the council that they are the occupant, that they qualify for small business rates relief, and it will be automatically applied. It is a simple, standard letter. The measure is automatically applied and the rates relief from the Government is automatically provided. Anything up to around £6,000 or £7,000 a year in small business rates relief will be provided to that business.

However, some business owners are not aware that it is automatically provided. Those people go in and tell them, “We can reduce your rates bill—sign here.” They offer a very long-term contract. In Jude Carter’s case, she signed a 12-year contract, and she believes that the contract was amended after the event to become a longer-term contract. It was for a much shorter term, but they changed it.

Jude Carter’s premises had rateable value of £6,300 a year, which means, using the multiplier, that she should be paying around £3,000 a year. Small business rates relief applies, so there should be no rates at all for a small business owner occupying those premises. RVA just writes to the council and that small business rates relief is then applied, so Mrs Carter pays no rates. Some £3,000 have been saved with a single standard letter, and the contract says that Mrs Carter owes RVA 52% of that saving. For one standard letter, for 12 years, she is paying 52% of the saving from which she benefits. Typically, over that 12-year contract, £18,000 has been diverted. The Treasury wants that money to go to Mrs Carter to help her run her business, to keep her in business, but it is being diverted to RVA. It is simply, absolutely wrong.

As I say, contracts are tampered with. Mrs Carter has tried to get out of the contract, she has tried not paying the contract, but RVA has used many dubious tactics to harass her into paying. They ring the premises and speak to her or her staff, to say that the bills are overdue, which causes some distress within the business itself. Nobody wants to think that their business cannot pay its bills, so time and again, Mrs Carter has to pay the bill, despite the fact that there is absolutely no service being provided for that extortionate amount of money.

It is usually the very smallest businesses that fall prey to those tactics—and there are many cynical tactics that are employed. Those people forge signatures. There was one court case presided over by Deputy District Judge Lynds in Clerkenwell and Shoreditch County Court. That case, involving Stephen Snell, has been reported and Judge Lynds dismissed RVA’s claims. RVA will take people to court to enforce contracts. For reasons I shall come on to explain, they are perfectly enforceable contracts—that is, if they have not been forged. However, in this case, it was determined that RVA’s representative had forged a signature. The judge stated:

Ordinarily I would not come anywhere close to make an assessment of these signatures but it’s plain to me”

that the signature did not bear any resemblance to Mr Snell’s signature, and he kicked the case out. There is therefore demonstrable evidence of fraudulent activity by that company. It uses other tactics as well. It completes contracts after the event, as I believe it did with Mrs Carter, and it changes them to extend the length of the contract or the percentage that it charges. When it charges 45% plus VAT, that adds up to just over 50% of the benefit received.

The company resorts to harassing owners and their staff, and there is evidence that it lies to the Valuation Office Agency when it assesses premises. It works on a damages-based agreement. According to the law, a reason for the charges has to be provided, but the company provides no reason, so it is debatable whether the contracts should be enforceable in law. Nevertheless, the courts generally enforce the contracts and make the small business pay the amount on the contract.

We are aware of most of these cases because of a very good campaign by Andrew Penman, who writes for the Daily Mirror. He has covered many of these cases time and again and has highlighted RVA’s dubious tactics. A surveyor called Steven Simon is helping my constituent, Jude Carter, with her case. Sadly, the company gets away with such tactics time and again, and the courts rule that the small business has to pay because a contract is enforceable. Even though the contract is patently unfair, the Consumer Rights Act 2015, which makes provision for unfair contracts, does not apply to SMEs, so once a business—even a very small business that probably has all the hallmarks of a consumer—has signed a contract, it is enforceable, however unfair it is.

The only way to tackle the company and to try to challenge the contracts—closing the company would be the most desired outcome—is through the Insolvency Service. I wrote to the Department for Business, Energy and Industrial Strategy. I know my right hon. Friend the Minister will say that perhaps BEIS has a greater jurisdiction over this than the Treasury, and I wrote to BEIS about this. My right hon. Friend the Business Secretary wrote back and said that the Insolvency Service could deal with these situations where there is clear evidence of corporate abuse, fraud, scams and sharp practice. The Insolvency Service wrote to me and said that it did not see the hallmarks of that in my case, which astounds me. There is clear evidence of corporate abuse, fraud, scams and sharp practice.

I should say that RVA Surveyors is not the only organisation involved in sharp practice. There are others, such as SJ Associates. A simple solution would be to extend the consumer protection laws in the Consumer Rights Act to include microbusinesses. There is a precedent for that because microbusinesses were, for example, covered under the Financial Ombudsman Service, and that has now been extended to larger small businesses. In addition, the Financial Ombudsman Service has jurisdiction over some elements of utility contracts between microbusinesses and utility providers. There is a precedent for extending the laws for microbusinesses, which would resolve the problem, because the court would be able to look at the contracts, see that they are patently unfair and strike them out.

Another way to solve the problem would be to reform business rates completely. I have talked to my right hon. Friend the Minister about that on numerous occasions. I believe that business rates as they were first constructed are no longer fit for purpose. Businesses no longer trade only or primarily from high street premises. The business world has moved on. Business rates, based on property, were once seen as the right way to tax businesses, but I do not feel that it is the right way now. The Treasury is looking at this matter, and I know there is another review. In the recent consultation, three solutions were proposed: some kind of land value tax; an online sales tax; and an increase in VAT. The latter would be a much better option than the current business rates system or an online sales tax.

The difficulty with an online sales tax is that it would create more complexity by adding another tax to an already very complex tax system. An online sales tax also assumes that businesses trade one way or the other —online or through retail premises—when actually many trade in at least three ways: online, through high street premises and click and collect. An online sales tax would therefore require a business to think about how it sold a product, whether click and collect, online or through the high street, which would add complexity. An online sales tax also assumes that retail is the only sector affected by the move to online shopping, but that is far from the case.

Due to the opportunities of online activity, there are many new competitors in various sectors, not least the restaurant sector, which sees more and more competition from dark kitchens using Deliveroo, Just Eat and others for deliveries. In my business world—I am in the estate agency business, as you know, Mr Hollobone—we have seen new online competition, too. An online sales tax may look from that retail perspective as if new competition is only for retail in the high street, but that is not the case.

A much simpler way of levelling the playing field between online businesses and high street or premises-based businesses is a simple increase in VAT. It would affect everyone in the same way and, if we increased VAT by about 4p in the pound, we could scrap business rates altogether. Perhaps we could look at the VAT threshold as well, which can be a barrier to some businesses growing. With that, there would be no need for rates and therefore no need for rates relief, no need for rates reductions and no need for the Valuation Office Agency and many of the rates specialists, who could move into the productive economy and do something far more constructive than, say, two surveyors arguing about the rates on a particular property. It would settle the issue once and for all in Parliament and create that fair and level playing field for all businesses. The best thing is that there would be none of the reprobates from RVA, because there would be no business for it to try to hijack, moving rates relief from a business to its own bank account.

That is one way of solving the problem—but we need to solve the problem. It cannot be right that we leave these smallest of businesses at the mercy of complete charlatans such as RVA. I therefore urge my right hon. Friend the Minister to do what he can to persuade the Department for Business, Energy and Industrial Strategy to get the Insolvency Service to look at this, close down RVA and ensure that the relief that he has directed from the taxpayer to small and medium-sized enterprises ends up where he intended.

--- Later in debate ---

[Kevin Hollinrake]

May I associate myself with the hon. Gentleman’s words? Brian was a great man—a great man who did much work for many businesses that could not fight for themselves, in the battle against larger banks. He did a tremendous job, in his inimitable way. He was humble. It was never for himself. It was always, as the hon. Gentleman says, for the underdog, fighting an almost impossible battle. He had many a great success in that regard.

[Jim Shannon]

I thank the hon. Gentleman for his intervention. His words resonate with my own. The family will be greatly encouraged by our comments.

It is a pleasure to follow the hon. Member for Walthamstow (Stella Creasy) and her reasoned and valuable contribution—a well-thought-out contribution, which we wholeheartedly support. She referred to cross-party support. I hope my comments today will add cross-party support to the two previous speakers.

I understand that the regulations for business rates relief are handled in a different way in Northern Ireland than here on the mainland, and in Scotland, but the issues are the same. The ten-minute rule Bill regarding business rates means that we perhaps can and should take a UK-wide, holistic view of this matter.

I read with great interest the comments that highlight the belief that business rates were designed for a bygone era, where business went hand-in-hand with high street premises. The way we shop is now changing forever and the coronavirus has exacerbated those changes. Online sales now account for 33% of all retail sales, compared with 20% only a year ago.

I have been very impressed with my local council in my constituency of Strangford, which is working with businesses on the high street to retain their presence while they enter online forums. I have seen businesses, many of which were only able to open last week in Northern Ireland, come to terms with the new click-and-collect era and other ways of doing business. As we have watched businesses roll with gut-wrenching punches, it has highlighted to me that perhaps we, too, in this place, must advocate for change that makes sense in the post-covid world, where we are today. I see the wisdom, as I have seen many times in the past, of the rationale of the hon. Member for Thirsk and Malton. I am interested to hear more and learn more of the outworking of the proposals that I have heard from my respected colleague and friend, as well as of those from the hon. Member for Walthamstow.

When I read the Library briefing for today’s debate, I was dismayed but not shocked at the companies seeking to take advantage of struggling businesses who are appealing the rates. The scams were wide-ranging and intricate, and it is clear that the current system leaves itself open for the kinds of abuses that both hon. Members refer to—yet another indicator that something needs to change, and change soon. The FSB contacted and asked me to put on record, as others have done, that they believe business rate companies should be licensed to access business rates records on behalf of businesses. There would be a low barrier to access, but a condition of the license would be to ban cowboy practices. The hon. Gentleman for Thirsk and Malton’s introduction used a lot of descriptive nouns for them without using any bad language, which I thought was quite good and I really relate to that. We could probably think of other things which would be unparliamentary and not appropriate. Nonetheless, it illustrates how we all feel.

While recent business rates reductions during the pandemic were welcome, too many businesses find themselves with an unexpected bill from these companies. Their predatory payment tactics mean that where Government policy reduced the bill to nil, these companies claim the reduction as part of their work, and charge year on year. Many businesses end up with a bill for £1,000 plus, when the only change has been as a result of Government policy. The Government does it, and they do it because that is their job. These guys come along and charge for it, when the Government does all the work. It reminds me of the cuckoo. We all know what the cuckoo does—he jumps into the nest of another bird, eats all the food that the parents give and has nothing to do with the parent birds. These are cuckoo companies and in my opinion deliver something that is totally wrong. Too often the conditions are hidden in the trading terms and conditions.

I welcome the schemes in England, such as extra targeted support packages for businesses and relief for retail, hospitality and leisure businesses, and the corresponding help in Northern Ireland. I put on record my thanks to the Minister and the Government—my Government—for all they have done to help businesses in the constituency of Strangford, and across the whole of the United Kingdom of Great Britain and Northern Ireland. They have kept those businesses afloat and we thank them for it. However, the fact of the matter is that businesses will need ongoing help. Rather than further complex and detailed schemes, now is the time to overview and change the entire system, as the hon. Gentleman for Thirsk and Malton referred to in his introduction. There must be a genuine review of how we can support businesses to survive, maintain a presence, and importantly continue with job creation. I believe we will get a bounce whenever we come out of lockdown, but we need to continue that bounce right through into the months and years ahead. When it comes to business, we have to play the long game, investing in small businesses, and knowing that in the end we will recoup every penny that has been outlaid when jobs continue and taxes are paid in manageable amounts to keep the business open and viable.

In conclusion, I believe the suggestions of the hon. Member for Thirsk and Malton are useful in moving forward, and I join him and the hon. Member for Walthamstow in asking the Government to put serious thought and manpower behind making this change for the good of business, our economy, and consequently, the quality of life throughout the whole of the United Kingdom of Great Britain and Northern Ireland.

--- Later in debate ---

[Kevin Hollinrake]

I thank all hon. Members for their support in this debate. Everybody made very well thought through comments. I particularly thank the Minister. There is no doubt that this issue has arisen as an unintended consequence of the generous targeted support from the Treasury for small businesses. Very small businesses, generally, are then subject to predatory behaviour from the rip-off merchants, as has been mentioned by various hon. Members today. In the case of Jude Carter, the contract will divert £18,000—which the Treasury intended to give to her in taxpayer support—from her to RVA. That is simply unacceptable. In many cases—hopefully not in Jude Carter’s case—that would be a matter of life or death for a business of that size; £18,000 is a huge amount of money over 12 years.

Clearly, this is a scam. It is disappointing that the Insolvency Service has chosen not to investigate. It did write back to me, saying that, despite the fact that it does have jurisdiction over scams of this nature, it found no grounds on which to take further action within its powers. It is very surprising that the Insolvency Service will not act in this clear case of abuse by a business of other businesses. It has the power to close down this business. It has the power to strike off directors. I hope it will listen to the debate and act. It has decided to look at the issue again—it recently wrote to me asking for more information about hon. Members who have such cases—so I really do hope it will act.

I appreciate the comments from my right hon. Friend the Minister. This is a specific case, but there are other cases of predatory behaviour inflicted on microbusinesses. I am very heartened to hear what he said. There is a good case for extending the Consumer Rights Act 2015 to cover microbusinesses, which would resolve this problem, because I am sure that these contracts would be struck out by the court on the basis of the very unfair terms. I think there will be other contracts, under which small businesses are subjected to unfair behaviour to persuade them to sign, where the courts could intervene to prevent that behaviour from happening in the future.

I thank all hon. Members for their contributions to the debate, and I hope we can make more progress.

Question put and agreed to.

Resolved,

That this House has considered regulation of business rates reduction services.