YCBID: The VAT Problem EXPOSED

YCBID: The VAT Problem EXPOSED

• – an “In My View” article by NIGEL WARD, offering a lay view of “the VAT problem” presently besetting Yorkshire Coast BID Ltd and the two local authorities who have the misfortune to have become embroiled in a monumental miscalculation which is likely to bring about the demise of Yorkshire’s most despised assault on beleaguered businesses. This could be the final straw – if for no other reason than its clear implication of the most monumental incompetence (to take a charitable view).
  

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Much of the following information has previously been published on the North Yorks Enquirer website. However, collating the principle details here, in one location, may prove helpful to those who have not yet entirely understood its significance. This is a lengthy and relatively complex article (around 1,500 words); I believe YCBID Levy-payers AND the wider public will find it instructive. It demonstrates a modus operandi:

“ADMIT NOTHING, EXPLAIN NOTHING and NEVER APOLOGISE”

Thanks to the assistance of several SBC and ERYC elected members, I have been made privy to a raft of formal correspondence dating from November 2019 between a member of the public (Mr James CORRIGAN) and Scarborough Borough Council (SBC) on the subject of the way in which the Value Added Tax (VAT) inherent in various transactions between each of the two Councils (SBC and ERYC) and Yorkshire Coast BID Ltd (YCBID) has been mishandled and misrecorded.

Two over-arching observations arise from this raft of correspondence.

In the first place, it is clear that these formal letters/emails from Mr CORRIGAN have been professionally drafted by some of the finest legal and accountancy minds in the country. Accepted that opinions may differ (which is what makes for horse racing), the precision of the text and the citing of legislation, HMRC Guidance and the terms of the contracts between the parties (the ‘Operating Agreements’) leaves me in little doubt that the point of view expressed by Mr CORRIGAN is substantively beyond challenge.

Secondly, it is clear from the opening paragraphs of many of these letters that previous communications have been ignored by SBC. Answers, nor acknowledgements, came there none. Why would that be?

In light of the above, it is time for me to address some of the ‘behind-the-scenes’ machinations that have been taking place in regard to what I will characterise as “the VAT problem”.

The contractual arrangement between each of the Councils and the BID company, known as the ‘Operating Agreement’, delineates the nature of the relationship in which the BID company is ‘Agent‘ and the Council(s) ‘Principal(s)’. This seems to have been misinterpeted by the Legal and Finance Officers of both Councils.

On 22nd April 2022, following a series of emails asking the Council to clarify its position, SBC Monitoring Officer Lisa DIXON provided the following formal legal statement to Councillor Bill CHATT [C.I.M.], copying in her immediate Officer colleagues and the three Opposition Group Leaders [Con.+C.I.M.+Y.C.I.A.]. (For whatever reason, this statement was not shared with the Labour or Independent Group Leaders):

SBC’s statutory Monitoring Officer and  Legal Director, Mrs Lisa DIXON, has formally asserted this unequivocal view on more than one occassion, as has Mr Nick EDWARDS, in his former capacity as statutory s.151 Officer (Finance Director).  I have it in black and white. Two bright sparks!

It is not without significance that, amongst the elected members, there is one whose understanding of all this should have placed him in a position to recognise that Mr CORRIGAN was bang on the money. That member is the Leader, Councillor Steve SIDDONS [Lab.], who, like Mr EDWARDS, has experience of working in the Finance Department of a local authority (Leicestershire County Council), and, again like Mr EDWARDS, is an associate (at least according to his Register of Interests) of the Chartered Institute of Public Finance and Accountancy (CIPFA), a function he declares he performs “for profit or gain”:

Another bright spark!

On 24th May 2022, former ERYC Monitoring Officer Mathew BUCKLEY (ret’d) issued a ‘Briefing Note’ to members maintaining the same position; the Council is merely “the collection agent”.

According to Mr CORRIGAN’s legal/financial advisors, both Monitoring Officers were thus persisting in an error first pointed out by Mr CORRIGAN way back in November 2019.

In the absence of any direct response from the authorities, Mr CORRIGAN then wrote to Mr Clive ROWE-EVANS (Chair of YCBID) on 6th June 2022, setting out “the VAT problem” in terms any layman can understand:

Though no response was forthcoming, clearly a degree of concern was aroused. In fact, “the VAT problem” was discussed at the YCBID Board Meeting of 19th July 2022 (though, for reasons best known to Mr ROWE-EVANS, the [minimalist] minutes of the Meeting were not published until October 2022):

On 9th June 2022, I made it my business to apprise ERYC CEO Mrs Caroline LACEY of these events, replete with the necessary evidential documentation. Again, no response was forthcoming.

On 4th July 2022, I provided Mrs LACEY with further documents containing various professional opinions obtained by Mr CORRIGAN, no doubt at considerable expense.

I will not reproduce the full library here. Rather, I present the formal professional opinion of DEEKS VAT Consultants (arguably one of the country’s leading authority), which is, perhaps, the most accessible to the layman (certainly to me):

Mr CORRIGAN’s briefing note (to the Yorkshire Coast Levy Payers’ Association) is also informative. It can be viewed here.

The legal position is summarised in the following screenshot taken from a briefing note produced by one of the north’s leading solicitors:

Cracks Appearing

The first discernible evidence of genuine concern at the local authorities soon showed up in an SBC Briefing Note dated 6th July 2022 (more than two-and-a-half years after Mr CORRIGAN first outlined “the VAT problem” – but just three days after Mr CORRIGAN contacted Mr ROWE-EVANS):

Prudent? Not ‘alf!

Pinched cheeks, or what?

Three weeks later, on 28th July 2022, with no opposition from Legal Officers (who had yet to concede to members that “the VAT problem” even existed), SBC Full Council returned a Vote of No Confidence in the governance arrangements of YCBID, calling for its “speedy closure”:

This compounded and reinforced a substantively similar (but slightly less emphatic) motion passed at ERYC on 22nd June 2022 – “following recent professional and VAT expert advice to businesses” (I quote).

Clearly, both Councils were deeply concerned that the VAT aspect of the billing procedures to and from YCBID were not as they should have been – as Mr CORRIGAN had been pointing out almost from the outset. Neither Council opted to go public with those concerns. Instead, ostrich-like, they sent out Levy ‘reminders’ to Levy-payers, threatening Court action.

But it subsequently transpired that SBC Officers must indeed have been in grave doubt. They had already commissioned KPMG to examine “the VAT problem” (at a cost to the public purse of £5,000 + VAT). KPMG’s invoice in this amount was, according to SBC’s Open Data records, settled on 10th October 2022, some six weeks after the Report was delivered:

Astonishingly,two months later, I know of no elected member who has been permitted sight of this document – though it has been requested. Indeed, NYCC/NYC Councillors have been asking me for a copy. I confidently predict that it will be withheld on the spurious grounds that it would be “inappropriate” to allow its escape into the public domain while there are Court cases pending (January ’23 – perhaps April ’23), feigning not to realise that the Court will require it to be introduce in evidence.

Even Freedom of Information requests for sight of the KPMG opinion are being ignored and are overdue, for example:

I believe any sixth-former would conclude that the KPMG report must confirm the specialist professional opinion commissioned by Mr CORRIGAN, for the obvious reason that if it confirmed the Officers’ diametrically opposite position, it would have already (and very conveniently) been ‘leaked’, accompanied by much gloating from the Executive.

To add to Officers’ woes, Scarborough Borough Council has failed to acknowledge an FOIA request (which I lodged following an earlier article of mine and a very pertinent reader’s Letter to the Editor), much less provided the requested information:

Not a peep.

The lights are on in the Town Hall . . .

ERYC has, to its credit, acknowledged an identical FOIA request from me, but has yet to provide the requested information (due, latest, on 16th December 2022).

Further, I learn from my Council contacts that elected members have been given “the mushroom treatment” (Google it). SBC never shared any of the professional advice contained in Mr CORRIGAN’s various letters to SBC Officers with SBC or ERYC elected members, nor any of the attached professional opinions obtained by Mr CORRIGAN from the country’s leading experts.

Fortunately, I did.

The cat is now out of the bag, but . . .

What Next?

It is common knowledge that Scarborough Borough Council’s External Auditors – MAZARS (who also act in the same capacity for ERYC) – have been unable to sign off SBC’s Annual Accounts since the Financial Year 2014/15, due to a Formal Objection from the ‘Fight4Whitby’ Group, challenging the accountancy methodology of revenue from Whitby Harbour. I have long predicted (and attempted to forewarn then CEO Mike GREENE) that a challenge to the Annual Accounts regarding Scarborough Harbour revenue is also very much on the cards. Mr GREENE has since departed.

It is important to remember that, throughout these seven years of unratified Annual Accounts, Mr Nick EDWARDS was the Council’s statutory s.151 Officer and Finance Director. Yet balancing the books seems to have been beyond his capacity.

Following the departure of former CEO and Head of Paid Service, Mike GREENE, Mr EDWARDS has now assumed that position, vacating his s.151 Officer role, which has been passed to Ms Kerry METCALFE on an ‘Interim’ basis:

It is my confident prediction that Ms METCALFE is about to be notified of a further Formal Objection – this time challenging SBC’s 2021/22 Annual Accounts in regard to the improper reversal of Mr EDWARDS’ treatment of the Minimum Revenue Provision (MRP) – the way depreciation is calculated – and I anticipate that this new Formal Objection will also include copious evidence regarding “the VAT problem”, thus confirming that Ms METCALFE’s promotion is something of a poisoned chalice. It is by no means out of the question that the treatment of the Scarborough Harbour revenue will also be formally challenged. Clearly, SBC Officers will be hoping that the can will be kicked down the lane until North Yorkshire Council inherits this mess on 1st April 2023 – All Fools’ Day, would you believe?

It is also my anticipation that, very sadly, Mr EDWARDS will come out of all this smelling not of roses, but of the ‘nutrient’ that helps them to grow.

And how clean are Mrs Lisa DIXON’s hands?

North Yorks Enquirer ‘Photoon’

10th August 2022

‘Always Ahead of the Game!’