Westway Development Trust: a developer's claims were "taken at face value" - 3/3

This auditor's report will make little sense if you haven't read Brian Deer's Notting Hell from The Sunday Times of June 17 2001. In July 2002 the trust renamed itself Westway Development Trust. A Westway Development Trust index of materials is also available

<<< Continued from district auditor's report part two

Rate Relief Applications

Findings

23. The Council granted the Trust mandatory and discretionary rate relief on the property since its use was established as a community centre up until the decision to withdraw those reliefs in 1999.

24. In order to qualify for mandatory relief (80%), the ratepayer of an occupied property must be a charity or trustee for a charity and the property must be wholly or mainly used for charitable purposes. The full cost of mandatory relief is borne by the national pool.

25. The criteria for granting additional discretionary relief are less tightly defined and considerable discretion is available but authorities should nevertheless consider each case on its merits against set criteria. The Council has adopted such criteria, which broadly follow the conditions for considering mandatory relief but giving weighting to the degree that the organisation benefits the local community. The local authority must meet 75% of the cost of any additional discretionary relief, with the remaining 25% being offset against the authority's contribution to the national pool.

26. There is no record of NKAT submitting an application for mandatory or discretionary relief prior to 1996. Annual rate accounts were sent which detailed the reliefs but there was no requirement for annual or periodic applications by organisations in receipt of relief. So it appears that the situation of them receiving both reliefs was carried forward from the old General Rates system, which became defunct on 31st March 1990. This was a common practice for Councils on the transition from the old to the new system.

27. Under revised arrangements effective from 1996, discretionary rate relief was subject to triennial review and a report to the Council's Corporate Management Committee. This review could also be used to consider eligibility for mandatory relief but was not intended specifically to do so. Under contract arrangements for Non Domestic Rates, we understand from officers that Capital plc, which provides the service, were meant to undertake a review of mandatory cases every three years. However there are no records to document that the mandatory relief in respect of 12 Acklam Road (Subterania) had been reviewed during the period 1990-1996.

28. NKAT were required to complete an information return as part of the review of discretionary relief. The procedure for considering rate relief for NKAT was the same as that applied to other discretionary rate relief reviews at that time. The form required minimal information and the only additional information it elicited was the percentage of those benefiting from the use of the property that came from the Royal Borough of Kensington and Chelsea. The degree of detail required should be considered in the context of the amounts involved and, in this case, the full rates due in respect of Subterania amounted to £7,865 for 1996/97 with the 20% discretionary element amounting to £1,573. The procedure was not designed to test the more fundamental question of whether the conditions for mandatory relief applied. Consequently, there was no detailed scrutiny of the activities at Subterania that may have alerted officers to the need to review the relief granted in greater detail.

29. The results of the reviews were considered at the Corporate Management Committee in September 1996. Some concerns were raised by one of the Members of the Committee and assurances were sought from the Trust that the conditions for charitable purposes and discretionary relief still applied. This was not minuted, but was dealt with by correspondence and subsequent discussion with the Chairman of the Committee. The assurances provided by NKAT were accepted at face value.

30. We note that one of the Members of the Committee (Councillor Tomlin) was also serving as a Member of NKAT's Management Committee at the time. The minutes show no record of Councillor Tomlin declaring a non-pecuniary interest in the particular item. Although we understand that it is not a specific requirement to declare a non-pecuniary interest, we not that Members will generally do so and that another Member (Councillor Levitt) declared a non-pecuniary interest as a director of the City Challenge company under the same item and took no part in the proceedings in respect of the application from that organisation.

31. The next triennial review fell due in 1999 and, due to the decision taken on the public entertainment licence, the rate reliefs (for both discretionary and mandatory relief) were subject to more detailed review and were withdrawn. We note that there is no systematic process for cross-checking differing types of reliefs granted to the same or similar organisations.

32. The views of the Director of Legal Services and the Director of Finance and Information Systems have been sought as to whether there is a case for seeking to raise bills retrospectively in respect of rate relief granted in previous years on the basis that the eligibility criteria for mandatory and/or discretionary relief were not met. The views of both officers are that the Council is not entitled to withdraw discretionary relief retrospectively and, in respect of mandatory relief, it could be argued that the Council could have checked what use was being made of the premises earlier and that therefore it is not reasonable to withdraw the mandatory relief retrospectively. This is a matter of rating law and it is not an area where we have expert knowledge.

Conclusions

33. The decision to withdraw mandatory and discretionary relief in 1999 was correct, based on the evidence and the criteria for granting relief. In our view, a similar decision would have been reached in 1996, had the process on that occasion been designed to test, in more detail, the eligibility criteria for mandatory relief. There appeared to be some element of confusion about the responsibility and process for reviewing mandatory relief on a periodic basis.

34. The issues of potential concern were identified in 1996 following the concern expressed at the Corporate Management Committee. However the assurances sought from NKAT were not sufficiently detailed and were accepted at face value. We consider that the decision not to pursue the issue more rigorously was based on the close and long established relationships with NKAT, both at Member and officer level and the relatively small amounts involved in comparison to the overall level of financial support for NKAT by the Council.

35. We consider that the current arrangements for reviewing discretionary relief are sufficiently robust and we have no specific recommendations in that respect. We understand that the remaining rate reliefs granted to NKAT are currently being reviewed again by officers as a precautionary measure and that the results of this review will be available shortly. We also understand that a specific requirement will be included in the specification for the next NNDR contract for triennial reviews of mandatory relief cases.

36. We have made the following recommendations, which are of a precautionary nature and are intended to address potential areas of confusion or inconsistency.

Recommendations

The Council should consider the need for any further guidance to Council Members who also act as Members of the Trust's Management Committee.

The Council should consider the introduction of a more systematic process of sharing information between different parts of the Council that award discretionary rate relief.

The Director of Legal Services and the Director of Finance and Information Systems Council should complete their review of the Council's rights and duties in respect of the mandatory rate relief granted to NKAT in respect of Subterania for the period from 1996-1999 and document the conclusions and decisions.

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