These scammers have found a way to cash in on small businesses wanting to cut their business rates bill.
Business rates are a significant overhead, a major headache and a major source of controversy. It's hard to read business pages without finding a call from major retailers for these costs to be cut. And local media are full of stories about how “rip-off business rates” are ruining neighbourhood stores, leading to half empty high streets.
These rates affect us all because their expense is built into the cost of what we buy.
Now if someone could dramatically reduce business rates in return for a moderate fee, it would be well worth paying. Or that's what one of my local shopkeepers thought – until I warned him that this is just the latest scam to hit the UK's million or more small businesses with premises.
An appealing suggestion
My greengrocer had been approached by a firm based in Manchester. It claimed that it could significantly reduce costs across the board by appealing against the current assessment. The fee would be £750 now and £500 a year for “ongoing” monitoring.
The only trouble is, as I pointed out to him, that it does not work. Yes, there are a tiny number of premises that have been wrongly assessed, just as there are homes in the wrong Council Tax band. No system is perfect and changes in a property over the years can push the bill down on appeal.
But in an equally small minority of cases, an appeal will push the bill up. For the vast majority, there is no solution other than paying and perhaps lobbying MPs to change the system.
Failing to deliver
Just recently, however, a firm involved in “business rates reductions” was closed down in the public interest – government code for “it's a rip-off”. J&S Surveyors Ltd, (“J&S”), David Scott Surveyors Ltd (“DSS”) and C&R Surveyors Ltd (“C&R”) made unsolicited calls to business operators claiming they could get business rates significantly reduced for a fee, but failed to deliver what they promised.
According to the Insolvency Service, J&S was the first to be set up, but ceased trading in July 2011 at around the same time that DSS started to trade. DSS was abandoned around October 2011, when C&R started trading in its stead, before it too was later abandoned. Each of the three companies was controlled by the same two individuals and continued the same business model as its predecessor company.
Insolvency service investigations found that that once a business owner agreed to make an appeal against their business rates, a cancellation fee was payable. However, clients said that the cancellation terms were not explained to them and they encountered difficulties in contacting the companies.
The success rate of C&R was estimated at between 1% and 3% and yet potential new clients were assured that a significant reduction could be achieved in every case.
Clients were encouraged to sign a 15-year contract, but the contracts were abandoned along with the companies when each ceased to trade, despite clients having paid between £495 and £1,295 for the service.
All three companies failed to maintain or preserve adequate accounting records, such that, with particular regard to J&S and DSS, it was impossible to adequately account for their income and expenditure.
Scott Crighton, Investigation Supervisor with the Insolvency Service, said: “Each of these companies misled clients, mostly proprietors of small businesses, into paying money through deception. Those in control continued these sales practices from one company to the next with little or no expectation of success and no apparent regard for the interests of those clients, who were systematically abandoned.”
Anyone who believes that their business rates assessment is incorrect, can contact the Valuation Office Agency which will review it for them, free of charge.
It's not the only scam targeting small business owners
Companies undertaking this activity tend to come and go faster than the seasons. The three which were shut down were run as successor companies. But there are plenty more using the same script, including the one which contacted my greengrocer, first by phone. And when he showed interest – who wouldn't? - he was visited by a “representative”.
Oddly enough, the Manchester area was also the centre of two other scams aimed at small businesses. One now shut down racket offered to find EU grants for local traders. These took £499 a time from businesses and delivered EU grant application forms (available free). But while anyone can fill out a form, that does not mean there is money. All the forms were rejected, including that from a London pet shop – there have never been EU grants for stores selling dog and cat accessories.
A second Manchester-based scam was “data protection registration”. This relied on a misplaced fear that legislation would force anyone who has kept a record of customers to register. There was a £135 charge for this. But the vast majority of businesses do not need data protection registration. And for the minority which do, application is free.
I really have no idea why these rackets seem to come mainly from the Manchester area. Any ideas?