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Small Business Rate Relief fraud is costing the country millions

Originally published in IRRV Insight Magazine’s April 2018 edition

 

The promise of 100% rates retention has put business rates back into the spotlight as a potential growth area for Authorities. As a result there is a growing impetus for Authorities to better understand their case load and a need to assess the stability of local businesses and accurately audit relief schemes.

Over £25 million in SBRR fraud in England
As with any revenue generating area in local government, business rates are susceptible to fraud. The Local Government Associations’ initial estimates suggest that around £230 million per annum could be lost to avoidance. The abuse of rates relief is a contributory factor to this and following some analysis we have recently conducted using our new business rates data pooling solution; HUB, we estimate there could be over £25 million worth of fraud in Small Business Rates Relief in England alone.

98.5% of English business rates data analysed
Small Business Rates Relief (SBRR) is provided to a number of businesses across England on the basis that they either only use one property or have a rateable value of less than £15,000. Historically information provided by small businesses claiming relief has been extremely difficult for Local Authorities to verify due to lack of resources and an inability to access a country-wide view of businesses and the properties they occupy. We have addressed this issue by consolidating all business rates information published by the 98.5% of English Local Authorities who make this information publicly available.

Updated monthly, this data incorporates rateable value of properties, relief currently assigned to properties, as well as addresses and names of companies. We’ve then put this data into a business intelligence portal that Authorities can access, query and view. What was subsequently uncovered following the merging, consolidation and processing of over 1.3 million hereditaments with a combined rateable value of £23 billion, was that a number of businesses claiming relief have been doing this erroneously or falsely.

£2.68m in suspicious claims found in sample dataset
A significant number of businesses had other branches set up in neighbouring and other Authorities and are therefore not entitled to the relief they are claiming. This practice appears to be widespread throughout England. We analysed a sample dataset of 24 Authorities (representing just over 7% of all English Councils) to try and identify instances of fraud. Our findings identified a potential £2.68m worth of suspicious claims which warranted further investigation. If we were to extend this analysis out to encompass all 324 English Authorities, we believe the true extent of Small Business Rates Relief fraud would be in excess of £25 million.

Feedback from Local Authorities on HUB has been very positive. Buki Adekoya, Head of Revenues and Benefits at Tandridge District Council comments “using information we received from HUB, we identified a fraudulent SBRR claim dating back almost 10 years which we have been able to cancel and issue a revised bill to the company in question for £16,000.

Fraud audit trail
The data being uncovered is not only helping Authorities identify fraudulent claims and halt them, saving annual expenditure on relief, it is providing Authorities with an audit trail of how long false claims have been occurring, enabling them to backdate invoices to recover funds. The act of doing this and the growing awareness that this kind of data is now available to Authorities, should provide a strong deterrent, discouraging businesses from engaging in these kinds of practices going forward.

This data is available to access now and does not require any additional effort from Authorities, other than to keep publishing the data they are all ready reporting on, on a monthly or quarterly basis.

Collaborative working and inter-authority data share with minimal effort
For those businesses found to be occupying more than one property across multiple Authorities, this could pave the way for Authorities to use a more collaborative approach when challenging particular cases in court and sharing the costs and expertise associated with this.

Duncan Baxter, Director at Destin Solutions goes on to say “this is another great example of tapping into the wealth of data which exists within Local Authorities. For the first time ever, we have been able to go beyond the localised view and compare information on businesses across the whole of England to offer insights as to the extent of potential fraud on rates relief.”

We believe this is one of the first data solutions to truly support inter-authority information share on a country-wide scale. With all the hard work being done by the technology, Local Authority resources are left free to focus on investigations and recover falsely claimed relief.

If you want get an idea of the extent of potential SBRR fraud being perpetuated in your Authority, contact Destin Solutions on info@destin.co.uk or call 01772 842092 for a no obligation review.

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