Alan Murdie, LL. B, Barrister gives his views on council tax in this guest blog.
I am often asked how did the council tax become such a muddle, given that no dispute can be called a ‘simple council tax problem’ any more?
A growing number of home-owners and small landlords are certainly asking this question. What seemed straightforward is now complicated. Here’s a short version of how it happened…
History of council tax
When introduced in 1993, council tax was fan fared as being a simpler, fairer and more efficient system than the ill-fated poll tax which preceded it (1990-1993).
The last 25 years has seen so many changes that it has become a fragmented system with no-one sure where it is heading or increasingly knowing what is going on.
Originally, all taxpayers on low incomes received 100% benefit reductions. All seemed fine. Hard to believe now, but during this time you could usually fix a council tax problem with a couple of telephone calls or one letter.
But from 1998 successive governments kept tweaking the regulations. It’s still an annual event, sometimes twice or three times a year. Small changes accumulate building the law into an almost impenetrable regulatory jungle that councils struggle to administer or even understand themselves.
Additionally, in 2000 the government joined up DWP computers with council computers. Two computers talking to each other did not help matters. Consequently, the DWP now drops data into calculations, making billing more complicated. Your reduction can keep shifting or suddenly removed entirely. The system in increasingly fragmented, governed by computers and any human being you manage to speak to will only understand a part, not the whole. The number of telephone calls, e-mails and letters needed in resolving a problem has multiplied enormously.
Then in 2012…
After another dozen years of new regulations – the Coalition government removed Council Tax Benefit entirely, telling each council to set up its own reduction scheme.
Consequently, each council has different rules in its own area for people under 60 and chooses for itself discounts to take away.
The result is 326 different local reduction schemes operating in England, 14 in Scotland and 22 in Wales. (My own reaction to this – editing the Child Poverty Action Group Council Tax Handbook and forcing me to examine them all – is best not described here….). With the national system of 100% benefits gone, there is no guarantee anyone under 60 on benefits or low incomes will be helped.
No longer having automatic protection, many struggle to pay. With wider benefit cuts, many people on low incomes run out of money. More people have fallen into arrears than at any time since the poll tax, making council tax Britain’s biggest debt problem.
This means councils running short of money to – so they need to find it from others.
Property owners forced to carry the shortfalls
Freely using their new local powers, councils are increasing bills for property owners (a group deemed to have money) and creating new ways of demanding tax. Indeed, dreaming up new ways to charge householders and property owners appears a growing pastime for some authorities.
The latest round of taxpayers discovering this are small landlords, particularly those owning houses in multiple occupation with tenants and licensees sharing facilities.
Problems are arising with billing houses of multiple occupation (HMOs) let out to more than one tenant. The basic council tax rule used to be a shared household would have only one bill, paid by the owner. But many HMOs – treated hitherto as a single property are suddenly being classed as multiple flats – either by the council or the Valuation Office (VO).
Often, this overturns years of settled arrangements. Suddenly, seven council tax bills arrive instead of one, or whatever number of dwellings are now determined to exist.
In other cases, councils remove exemptions and discounts, almost at random, often derived from on guesswork or limited information.
Valuation Office (VO) woes
Further complicating the situation is the inconsistent and increasingly eccentric performance of the Valuation Office. The VO is responsible for listing your home or property as chargeable to tax in the first place, over-seeing banding and the classification of properties for council tax or business rates, and fundamentally what constitutes a taxable dwelling.
After the VO decides what is taxable, the council calculates a bill for you, based on what the VO has concluded is a dwelling.
Unfortunately and increasingly, the VO is failing to get its decisions right. The VO has less staff to inspect properties and examine arrangements in detail. Indeed, they struggle in even maintaining an up to date the Valuation List, still based on 1991 values in England for all builds.
Getting the VO to correct decisions (and put the new one in writing!) proves increasingly difficult. Meanwhile council tax bills keep arriving. You can end up falling between two official bodies, needing to challenge decisions from both. The process is hugely time-consuming. You may then be forced to appeal both the council and VO separately to the valuation tribunal – an increasingly long-drawn out process.
Valuation tribunal judgement
By the time the valuation tribunal passes judgement, you may well already have enforcement action and liability orders against you, including visits by bailiffs, and worst of the lot, bankruptcy proceedings. Worse still, an enormous amount of legal corner-cutting occurs as councils panic over falling collection levels. Certain organisations that kept authorities in check have also been abolished entirely (e.g the National Audit Commission).
To cap it all and indeed most worryingly of all there are growing signs that the courts and tribunals themselves cannot cope in sorting out the mess correctly. Our justice system creaks from restrictive cuts, ever-more complex legislation and the sheer case volume.
Unsurprisingly, many small landlords are selling up and quitting the HMO letting market altogether…with detrimental effects across the entire housing market for many more.
So, the reason why council tax is in colossal mess is a combination of numerous little muddles, the law of unintended consequences and the lack of any joined-up thinking. Fundamental change is becoming imperative.