Power station rates appeal deals heavy blow to council’s reserves

A council once dubbed financially unviable has seen its reserves almost halved and its annual retained business rates income reduced by 16% after losing a valuation appeal on just one building.

West Somerset District Council has reopened and revised its 2014/15 accounts after the 30 June deadline as a result of a ruling by the Valuation Office Agency (VOA) in May.

The result of the appeal by the owners of the Hinkley B power station, EDF Energy, saw the gross rateable value of the plant reduced by £3.18m to £8m, throwing the council’s forecasts off track.

A report by council officers said: “The council had previously made provision for this, but it wasn’t sufficient to cover the appeal result and subsequent refund back to 2010.

“The ongoing impact of this is significant for the council and will reduce our future income streams by over £300k per annum.”

The report showed that last year’s income from retained business rates was £1.87m.

General fund reserves have reduced from £0.992m at the start of the year to £0.530m as at 31 March 2015, a net decrease of £0.462m in the year. This, again, is largely due to the impact of the Hinkley B rates appeal.

Steve Plenty, principal accountant at the council, told Room151 that the council had also been hit by a spike in business rate appeals on other buildings including a number of doctors’ surgeries.

The council is not alone in seeing a spike in business rate appeal decisions, with the VOA announcing last week that it has now resolved 93% of its backlog of appeals from businesses.

This falls just short of the target announced alongside the 2013 Autumn Statement, to deal with 95% of all appeals that were outstanding at that time by the end of June 2015.

Jerry Schurder, head of business rates at Gerald Eve, said: “By coming so close to meeting the chancellor’s challenging target, the VOA has shown what can be done when resources are effectively directed and a more open, flexible approach is adopted towards appeals negotiations and the specific merits of each assessment.”

In 2012, the West Somerset was dubbed as “not viable” as a council in the longer term by the Local Government Association.

Since then it has merged its workforce with neighbouring Taunton Deane Borough Council, with only political decisions being taken separately.

Photo (cropped): Courtesy of EDF Energy.