Local authorities have made provision for a potential loss of £180m due to a series of major appeals against business rates by Virgin Media.
The media firm has an ongoing appeal against the value of its ratings in around 68 authorities in England, dating back to 2010, as well as a claim that its ratings should be merged and collected by central government.
In addition, Virgin Media is expected to appeal against 2017 valuations, which have risen by an average of 411%, according to a survey of those affected.
A survey seen by Room151, which had responses from 33 authorities (46% of the total affected), found that the level of provision being made at March 2017 was £48.9m. Extrapolation across all affected authorities gives a total of more than £100m. In addition, the annual sum being set aside for an appeal on the 2017 valuation is £36.3m, meaning the annual total going forward could be £80m.
A note that accompanied the results, which were distributed to respondents, said: “The result drives up provisions against the risks involved, syphoning off £180m so far without any consistent or reliable basis. Half of this, the local share, is coming from service budgets.”
The survey, by one of the local authorities involved in the appeals, also revealed that most chief finance officers have made judgements on the provision they should make for the appeals without independent advice.
Of five that took into account advice from external sources, only one obtained anything in writing, it said. No-one has yet received any independent advice on the 2017 revaluation.
Councils chose a range of accounting treatments of the Virgin Media provision relating to changes of circumstances, with three making 100% provision, one a 50% provision and the other leaving it as a contingent liability.
On the merger appeal, 20% are accounting for a potential payout as a contingent liability.
It has also emerged that the Virgin Media appeal issue could scupper a business rates pool in south Essex.
Basildon District Council is one of the 68 councils affected by the Virgin Media appeals, and is currently in a pool with Thurrock, Dagenham and Havering councils.
A briefing released by Basildon said: “The benefits of remaining in the pool are that a higher proportion of growth in business rates income can be retained by the four authorities that would otherwise be payable to central government through a levy.
“However, it is possible that changes due to the revaluation could cause unacceptable losses for the pool, in which case the parties would decide to dissolve the pool with effect from next April.”
In 2015, the Virgin Media appeals led to the dissolution of the Gloucestershire business rates pool due to the high level of appeals provisions made by Tewkesbury Borough Council.
At the time, a report to Gloucestershire County Council said: “This is clearly a very volatile and significant development and undoubtedly an unintended consequence of the government’s policy on business rates retention.”
Virgin Media had not responded to a Room151 request for a comment by the time of publication.
