New plans to give local authorities power to charge council tax on homes as soon as they become empty could hit sellers and landlords hard – and give letting agents a mammoth administrative headache.
At the moment, when a domestic property falls vacant, the owner is granted a mandatory period of six months before council tax becomes payable. Ministers want to abolish this mandatory requirement.
Under the Localism Act, the Government is proposing to replace it with a clause that would let local authorities charge whatever they wanted on empty homes for the first six months.
They could if they wished charge nothing, or the full 100% council tax, or anything in between. The carrot for local councils is undeniable – they would be able to hang on to every penny.
After the first six months, full council tax would be payable, as now.
The actual proposal is to abolish the Class C exemption for council tax purposes.
Class C dwellings are empty homes that are largely unfurnished. Other classes, which would appear to remain untouched by the latest moves, include homes left empty after someone has become ill or because the property is subject to probate.
Of the Class C category, the Government says ‘there is no compelling reason why the first six months should be treated so generously’.
The proposal could clearly hit landlords, as well as sellers needing to relocate quickly– for example, to new jobs or, in the case of older people, to be closer to family.
It comes at much the same time that a much higher-profile move has grabbed the headlines. The Local Government Finance Bill, currently going through Parliament, will allow local councils to charge higher amounts for homes empty for two years or more, as well as to double rates for second homes.
While that too could also affect sellers of some homes which fail to sell quickly, and private landlords with voids – a spokesman for the Local Government Association told LAT yesterday that the proposals could have ‘unintended consequences’ – it would be nothing like as complicated as the proposal to abolish Class C.
However, cash-strapped local authorities clearly like the idea of being able to charge whatever they like on newly-empty properties.
In the official consultation this spring, they overwhelming voted in favour (169 councils for, 25 councils against) to the Class C exemption being abolished. They were not only by far the most enthusiastic, but also the group which responded most to the proposal.
Only five property-related businesses responded (three against the proposal, two for it), and just 70 members of the public, thought to be landlords. Of these, i 11 were for the idea and 59 against it. Just one MP responded, favouring the abolition of the exemption.
However, even the most eager of local authorities would have to face up to the logistics of having to collect small amounts of council tax on properties vacant for only a few days.
Ian Sanford, of Pennington Homes, in Huntingdon, said: “With local authority finances under pressure in the present recession it is more than likely that authorities will choose not to grant council tax-free periods, which will have major financial implications for landlords and vendors alike.
“In addition, it will provide an additional administrative burden for letting agents in that they will have to advise local authorities of all vacant periods, most of which are often only of a duration of a few days. It is also likely that, in these cases, it will cost the local authority more to collect the small amounts than the additional revenue achieved.”
Comments
This sounds almost like parking charges for everyone and anything that stops on the road even though the Queen supposedly owns the roads.
One good thing about the recession is that the 'churn' rate on my lettings has dropped significantly. This is good for all since re-letting costs all parties involved and has to be covered by increased rents. My guess is that councils will be chasing a supposed cash cow that no longer exists.
Charging for empty properties will ultimately push up the cost of living in an area and reduce the areas attractiveness to future residents.
Grab grab grab grab grab.
Our damned elected dictatorship is just a joke. All they want to do is squeeze the population until they pop. If they cant get it one way they try to get it another. It will drive people underground as far as tax evasion is concerned so there will be a large amount they just will not get their grubby little hands on. Leave things alone and they will be better off - its called economics which is what the young kids in our profession need to learn so that we can all make a decent or better living.
@Gavin - sod the poor if they cant afford they will have to go to the council, they cant provide so they will have to do what the rest of us do that is go get a job.
@Reality but this is what our leaders dont give a sh*** about.
Tax is a fine for doing things right and a fine is a tax for doing things wrong (with thanks to the poster here or was it on EA Today?)
If landlords have to pay a holding tax on unoccupied properties, they won't be able to afford to leave the properties unoccupied. They'll need to get tenants to pay rent to cover the tax bill. And if they want to attract tenants, they'll have to make the rents affordable. That's great news for the poor and the homeless -- provided of course that landlords can't avoid the tax by demolishing the property. There are various ways to close that loophole. For example, the tax can be payable if a building was present on a certain date. Better still, the tax can be levied on the value of the land alone.
Crazy idea! The admin alone for 7 days void period in between lets will cost more than the charge they'll be raising and chasing. Why not just reduce it from 6 months to 1 month?
More burden on landlords. Not conducive for encouraging investment in to residential property
@stevefrom leicester
your debating skills are amazing you should be at oxford
the point is the perception is that council tax is for services provided,however,if the council do not provide any services,you are still liable
just like you have to pay tv licence even if you don't watch terrestrial channels
we are in fact one of the most taxed countries in the whole wide world
Dave says "Its simply another tax".
Indeed. That would be why its called "Council Tax".
hmrc encouraging teachers to quiz kids about whether parents are avoiding tax
thats what they did in ussr in 80s!
http://www.dailymail.co.uk/news/article-2179090/Children-encouraged-state-spies-report-neighbours-pay-little-tax.html
Drifting nearer and nearer to an undemocratic police state - look around!
strangely council tax in general doesn't depend on you receiving any service at all
if you don't pay they can take you to court where you have no right to argue your case, and ultimately jail you just for not paying
Its simply another tax
they will also bankrupt you if you owe 750 quid or more and have assets
beware
A few days ago a Minister said it was morally wrong to pay tradesmen in cash. Isn't it also morally wrong to to charge home owners a tax when they are no longer receiving the benefit of most local services?