Property Taxation In England & Wales

Property Taxation Occupiers of dwellings and business premises (hereditaments) are taxed rather than owners (unless the property is empty) Residential capital valuations and non-residential rental valuations are undertaken by the VOA For 23.2m residential dwellings the tax is known as Council Tax and is based on capital values The value estimate is then used to place the dwelling into one of eight value bands and the amount of tax paid depends on which band the dwelling is in For 1.8m hereditaments the tax is referred to as Business Rates and is based on rental values, known as rateable values The VOA is also required to assist administration of other property- related taxes including Stamp Duty Land Tax (transfer tax), CGT and IHT

Valuation Office Agency (VOA) Property tax in England and Wales used to raise revenue for the provision of local services Government agency charged with producing and maintaining the Council Tax List and Rating List Executive Agency of HMRC 85 offices with 4,300 staff (including Scotland) Undertakes residential capital valuations and non-residential rental valuations Required to assist administration of other property-related taxes including Stamp Duty Land Tax (transfer tax), CGT and IHT Offers consultancy services, mainly to other government departments and agencies

Council Tax 23.2 million dwellings Introduced in a rush after the poll tax failed Set by local authorities but uses relative value of dwellings to determine each household’s contribution VOA places each dwelling in one of 8 value bands based on its value at 1 st April 1991 Liabilities range from £1,000 to £3,000 and average Band D tax is approx. £1,400 Exemptions and discounts –25% if one resident –Certain exemptions for empty dwellings –Exemptions for certain types of resident (e.g. students) Yielded £22bn in , £25bn in

Council Tax Council Tax List is kept up to date by –Receiving information from local authorities when dwellings are altered –Sending questionnaires to residents –Visiting dwellings –Accessing transaction data from Rightmove Information collected includes –Age –Type of dwelling –Size –Situation of property –Features of the locality Data are stored electronically in same database as Business Rates

Council Tax BAs set band D and others are set by formula Banding blunts valuation process but makes tax easier to administer Can only alter band if dwelling improved at time of sale, band can be altered for improvement in locality but only upwards, physical / material changes to property can lead to a drop in band 6

Business Rates Levied annually on individually occupied non-domestic premises Amount of tax due from each occupier is based on an assessment of the annual ‘rateable’ value of the hereditament occupied, which is multiplied by the appropriate national Uniform Business Rate (UBR) multiplier set by the Government on 1 April each year Payments are collected by local authorities The Valuation Office Agency (VOA) is the Government agency charged with producing and maintaining the Rating List Rateable values in the Rating List are reassessed every five years A hereditament is valued on an antecedent valuation date, two years before each rating list comes into force Rateable values are based on rental valuations (as opposed to capital valuations) Yielded £18.4bn in , £24bn in Account for around 3% turnover

Business Rates Market transactions provide evidence of rents Rateable hereditaments include –shops, offices, factories, warehouses, workshops, schools, hospitals, universities –places of entertainment, hotels, pubs, town halls, sewage farms, swimming pools, etc. –there might be rating relief for certain occupiers such as charities A central list deals with hereditaments which, generally, are in the form of a network throughout the country Some properties are used for both domestic and non-domestic used and these ‘composite’ hereditaments require an apportionment of tax liability between business rates and council tax Certain premises are exempt from business rates, e.g. agricultural premises, fish farms and fisheries, places of religious worship, parks and property used for the disabled

Business Rates 1.8m premises –1.267m bulk classes 543k shops 287k offices 437k ind/whouses –533k other (e.g. 66k licensed premises, etc.) Valuation methods –Comp –Contractors Health, education and MoD = 3.33%, 5% for the rest –Profits –(Investment method as a check) 9

Number of local units by broad industry group, 2005 ActivityNumber of local units in UK Agriculture 138,850 Production 159,850 Construction 198,125 Motor Trades 78,410 Wholesale 125,235 Retail 279,625 Hotels & Catering 152,455 Transport 74,305 Post and Telecom 22,490 Finance 35,180 Property & Business Services 533,010 Education 47,560 Health 37,215 Public Admin & Other Services 185,620 TOTAL 2,067,580 (Source: Office for National Statistics)

Business Rates The VOA has the legal right to inspect premises and gather occupation details It can issue notices to all business occupiers requiring information for rating purposes This information includes –description of accommodation –details of any rent paid –whether outgoings are included in the rent –whether the rent includes other items such as fixtures, fittings and services –details of rent review provisions and so on Publication of a new list triggers the ratepayer’s right of appeal, should he or she disagree with either entry of the hereditament in the list, the extent of the hereditament assessed, the description of the hereditament or more particularly, the value ascribed to it

Business Rates Local authorities inform the VOA of any changes occurring in their areas which require an amendment of the Rating List, e.g. –construction or alteration of property –change of use of property In fact those changes which would normally be apparent from the granting of planning permissions or the approval of work by Building Control Officers A new or altered property becomes rateable after the local authority serves a ‘completion notice’ and this can be served up to three months before the expected completion date UBR is adjusted to make revenue roughly the same, adjusted for inflation but relativities change –UBR in 2009/ p, lower in 2010/11