Successful appeals against business rate assessments by telecommunications firm Virgin Media have forced the dissolution of the Gloucestershire business rates pool, LGC has learned.
Tewkesbury BC will leave at the end of the financial year and has protested to communities secretary Greg Clark that it has huge liabilities for valuation errors that pre-date the localisation of business rates.
Other members will reconstitute the pool without the borough.
For historic reasons a large proportion of Virgin Media’s national fibre optic network is on Tewkesbury’s business rate register.
A series of successful appeals against valuations from 2005 have seen Virgin Media entitled to a £10.7m refund.
Under the safety net system the national business rates pool is top sliced to compensate councils for any fall in business rates receipts greater than 7.5% of their baseline.
But Gloucestershire councils are liable for a share of this because they operate a local pool.
Tewkesbury directly lost £373,000 because of the appeals in 2014-15 and had also to contribute £225,000 for its share of the pool’s £3.95m safety net payment.
Appeals lodged by Virgin Media against its 2010 business rate assessments could involve further losses.
Tewkesbury will therefore leave the pool in March 2016 as “we are pretty toxic to other members,” chief executive Mike Dawson said.
Mr Dawson and leader Robert Vines (Con) argued in a letter to Mr Clark: “Tewkesbury and the other Gloucestershire authorities feel it is grossly unfair for the councils to pay such a heavy and disproportionate cost as a result of significant inaccuracies in the valuation methodology.
“This injustice is compounded by the backdating of the impact some eight years prior to the introduction of the retained business rate scheme and has resulted in substantial revenue balances being diverted away from their originally intended purposes.” Mr Dawson said no response had yet been received.
Other Gloucestershire councils have seen a resulting loss of business rate growth.
A Gloucester City Council report noted the appeals had “more than wiped out” growth from other sources and “represents an issue that could not have been foreseen when the decision was taken to pool business rates in Gloucestershire”.
Mr Dawson said he did not know why parts of Virgin Media’s national network were credited to Tewkesbury and 67 other councils that have lesser sums involved, but thought “it must have made sense at one time”.
A further threat to Tewkesbury lies in a separate appeal by Virgin Media which argues its network is an entity and so should pay business rates in one place, rather than 68.
Tewkesbury could receive the company’s entire business rates were the Valuation Office Agency (VOA) to accept that argument.
But Mr Dawson said: “We’d be quids in, but the indications are that the DCLG would not allow such a windfall to one council.”
He said the government was more likely to treat the network as national infrastructure and keep the income itself, so Tewkesbury faced the loss of all Virgin Media’s business rates.
A VOA spokesman said a decision on this case was pending. Virgin Media has been contacted for comment.