BACKGROUND

Prior to April 1990 local authorities levied a tax on the domestic and non-domestic properties in their areas. This tax was known as the general rate. The tax was expressed as a rate in the £ of the properties' rental value.

This general rate was abolished on 31st March 1990. The then Conservative government took control over the setting of the non-domestic rate, which was renamed the national non-domestic rate and introduced a new local tax, the community charge.

The community charge (or poll tax), which was essentially a flat rate tax levied on the adults living in each local authority area, came into operation on 1st April 1990. To many this was a particularly apt day. The new tax proved to be very unpopular, led to many a public protest, was difficult to collect and was abolished on 31st March 1993.

The council tax came into operation as the only local tax on 1st April 1993.

THE BASICS OF THE COUNCIL TAX

The council tax is simply a property tax which is levied on the broad capital value of domestic properties.

VALUATION AND BANDING

The Inland Revenue's Valuation Office Agency is responsible for the valuation of the 21 million domestic properties in England and Wales. The agency attributes each domestic property to one of eight bands, Bands A to H. These Bands and the relationship between the taxes levied on properties are set out below.

From the above it will be noted that properties in Band A pay two-thirds the council tax levied on Band D properties and those in Band H pay twice the tax levied on Band D.

Properties have not been revalued for some time, but on 20 July 2001, the Minister for Local Government authorised that the government intend to adopt a fixed, statutory, ten-year revaluation cycle for domestic properties. Work on the revaluation is expected to start in 2005 and the new valuation lists are expected to come into operation in April 2007, i.e. after the next General Election. 

LIABILITY

The person liable to pay the council tax is normally the resident, but where no one is resident, the owner of the property is liable. Where more than one person is resident, the person liable to pay is determined according to a hierarchy of ownership and tenancy determined by the government. For example, if two people are resident and one is the owner of the dwelling and the other a lodger, the owner is liable to pay the tax.

Where more than one person is liable, for example where the dwelling is occupied by joint tenants and the landlord is not resident, these persons are jointly liable. However, if the dwelling is occupied by a number of people, some of whom are severely mentally impaired and others who are not, only those who are not impaired can be held liable to pay the tax.

Spouses- married couples or a man and woman living together as if married- are usually held to be jointly liable.

DISCOUNTS, EXEMPTIONS and REDUCTIONS in VALUATIONS

The tax bills for single person households are discounted by 25%. The bills are also discounted by 25% where all but one of the residents in a property are:

• Detained in prison or detained under the Mental Health Acts.

• Severely mentally impaired.

• Young people who have reached the age of 18, but in respect of whom child benefit is payable.

• Students.

• Patients in hospitals or homes.

• Care workers in certain circumstances.

Most domestic properties with no resident qualify for a 50% discount, but local authorities in Wales have the discretion to reduce this discount to 25% or zero on furnished homes.

Houses which are unfit for habitation qualify for a 100% discount; so properties, for example, affected by the relatively recent floods were exempt from Council Tax for 6 months, if they were unoccupied and substantially unfurnished, and exempt from Council Tax for 12 months if they were unoccupied, substantially unfurnished and required major repairs to make them habitable.

Domestic properties which were so badly damaged as to be incapable of 'beneficial occupation' could be removed from the valuation list until they had been repaired.

Some properties are exempted from the tax including the following:

• Properties occupied only by students.

• Properties which require major works to make them habitable, with the exemption valid for up to six months after they have been made habitable.

• Properties which have been vacant for less than six months.

• Crown properties.

• Properties which are unoccupied because the residents are in prison, in hospital or receiving care.

Where a property has been specially adapted for a person with physical disabilities the council tax valuation is reduced by one band, i.e. a Band D would be taxed as a Band C.

COUNCIL TAX BENEFIT

People on low incomes are entitled to council tax benefit of up to 100% of the bill. However since 1998 the benefit entitlements for people living in properties in Bands F, G and H have been restricted to the benefit allowable in respect of a Band E property.

BILLING and PRECEPTING AUTHORITES

Shire districts and unitary councils are responsible for the billing and collection of council tax. In South Kesteven, this is the responsibility of South Kesteven District Council.

Billing authorities calculate the amount to be raised through the council tax after taking into account the precepts of the major precepting authorities i.e. county councils, police authorities, district councils and of the minor precepting authorities i.e. parish and town councils.

COLLECTION and RECOVERY

Since 1 April 1998 debtors have had to be given advance notice that the recovery process is about to start.

Since 1 October 1998 only certified bailiffs are able to remove a debtor's goods for the purpose of recovering council tax debts.

COLLECTION RATES

The collection rate for the council tax is far better than that for the community charge (or poll tax).

Figures show that only 81% of the community charge due for 1992-93 had been collected by 31 March 1993, whereas 96% of the council tax due for 1999-2000 had been collected by 31 March 2000.

The improvement in collection rates is partly a reflection of the difference in the nature of the two local taxes. The community charge was a tax on individuals. Taxes on individuals are inherently more difficult to collect than taxes on fixed property. The difficulty in the collection of community charge was compounded by the fact that the tax was unpopular and perceived by many as being unfair. However the improvement in collection rates is partly attributable to the improvements many local authorities have made in recent years to their collection and recovery procedures.

LEVELS OF COUNCIL TAX

Local tax levels depend on a number of factors including:

• The level of central government support to the local authorities in their area.

• The spending decisions of individual authorities.

• The level of income the authorities recover as fees and charges.

• The extent to which authorities finance expenditure from reserves or balances.

• The level of individual's council tax bills depend on:
  
    (i)     the level of the council tax for the area;
  
  (ii)     the value of the property i.e. the tax band to which the property has been 
           allocated;
  
  (iii)    whether or not the taxpayer qualifies for a discount;
  
  (iv)    whether or not the taxpayer is entitled to Council Tax Benefit.

This coming financial year 2003/04, the council tax for Band D properties in Bourne will breach the £1000 barrier. Residents in Band D properties will be required to pay a council tax of £1024.38, an increase of £90.36 over the £934.02 paid this current year. The break down of the new level of council tax is as follows:

In addition to these there will be an additional £3.87 per annum required for Bourne's Special Expense Area. This charge is for the maintenance of the Recreation Field and Dyke's playing field. Special Expense Areas have been set up in Bourne, Grantham, Stamford, the Deepings and Langtoft. The reason for doing so is to stop the 'double taxation' occurring when many of our local villages were providing their own playing fields, funded through their local precept, whilst at the same time funding playing fields in other areas. There is a cost benefit to Bourne in so far as if these areas had not been set up, council tax would have been some £7 higher.

I must also point out that if the fully funded alternative budget I proposed at the budget meeting of SKDC had been accepted, the district council tax would have been £88.98 and £1.02 less than that which we will now have to pay.

NOTE: Information for this article has been derived from the guidance given to councillors by CIPFA.
Photograph: Courtesy South Kesteven District Council

See also John Kirkman