Local Taxa)on Update. Jan Alexander IRRV (Hons) Professional Services Manager. Ins)tute of Revenues Ra)ng and Valua)on

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1 Local Taxa)on Update Jan Alexander IRRV (Hons) Professional Services Manager Ins)tute of Revenues Ra)ng and Valua)on

2 Avoidance.

3 Public Safety Charitable Trust (PSCT) v Milton Keynes and others - An appeal against the original magistrates court decisions was heard in the Royal Courts of Jus)ce on 1 st May. Milton Keynes Council were responding to an appeal by PSCT along with South Cambridgeshire DC. Chester West and Chester Council were appellants. Case related to whether the premises are wholly or mainly used for charitable purposes. Bluetooth transmiker in a large assessment.

4 Public Safety Charity Trust said they are the only use so it is wholly or mainly used for charitable purposes. High Court found in favour of the local authori)es.

5 The Charity Commission has now reissued an alert for chari)es about the risks when genng involved in arrangements to enter into tenancy agreements and take advantage of business rates relief. First issued warning to chari)es and trustees about the risks involved in these arrangements in December 2011.

6 Warn - Significant risk is posed to chari)es by landlords approaching them to enter into tenancy agreements that would relieve the landlord of the requirement to pay full business rates. Chari)es not making sufficient use of the premises for charitable purposes which would akract the business rate relief then it may be liable for the full business rate liability.

7 Head of InvesHgaHons and Enforcement at the Charity Commission said; Being able to lease proper)es at a low cost to use for charitable purposes helps chari)es keep their costs down. Where we have evidence that trustees are not exercising their duty of care and taking proper decisions, or systema)cally not using leased proper)es and allowing the good name of charity to be abused for the benefit of commercial companies we have and we will take firm regulatory ac)on. Chari)es are held in high esteem by the general public, and trustees must ensure they do not enter into agreements that could jeopardise that public trust.

8 The Commission has been engaging with a number of local authori)es who have raised concerns. Statutory Inquiries have been opened, the purpose of which is to examine regulatory concerns including whether the charity trustees have properly discharged their trustee du)es when making decisions to enter into tenancy agreements and occupy those proper)es to further their charitable purposes and whether any benefit to the landlord or other par)es is incidental to that.

9 Many issues relahng to avoidance Government response. Working groups set up to look at the issues.

10 Working groups now up and running. Issues to be looked at:- Repeated short periods of occupahon (Makro) Bluetooth broadcashng for 6 weeks (Sunderland) OccupaHon of vacant properhes e.g. retail warehouses or shops by charihes evidence of actual occupahon- minimal use of premises (Kenya Aid)

11 Vacant property being leased to a charity and it is proposed that when next in use the property will be wholly or mainly used for charitable purposes the charihes do not have clear plans for occupahon or intended use- remain zero rated LeNng vacant property to off the shelf companies which then immediately enter in to a members voluntary liquidahon

12 New Build Empty Property Technical ConsultaHon Government will exempt all newly built commercial property completed between 1 October 2013 and 30 September 2016 Purpose to s)mulate the construc)on industry Construc)on decisions take into account the risk of paying empty rates reducing the risk may incen)vise some commercial property projects to go ahead, helping to s)mulate the construc)on industry.

13 It is a temporary measure ExempHon is provided by reimbursing local authorihes that use their discrehonary relief powers under S.47 LGFA to grant relief in prescribed circumstances. It is for local government to decide when to grant the relief but government will fully reimburse local authorihes for the local share (within the rates retenhon system) of the discrehonary relief by way of a grant under S.31 LGA 2003.

14 ProperHes that will benefit: All unoccupied non domes)c hereditaments that are wholly or mainly comprised of qualifying new structures.

15 Structures means: A) founda)ons and/or B) permanent walls and /or C) permanent roofs New means: A) completed less than 18 months previously, and B) completed acer 1 October 2013 and before 30 September 2016

16 New structures are to be considered completed when ready for occupahon for the purpose it was constructed unless a complehon nohce has been served in respect of such a building or part of a building in which case it would be the date specified in that nohce.

17 Wholly or mainly comprised of qualifying new structures mainly is to mean more than half of the hereditament Scheme not intended to capture proper)es that have been refurbished but is intended to capture those that have been the subject of substanhal structural construchon, so for example those proper)es that are built on exis)ng founda)ons or built around a retained façade are likely to benefit from the relief.

18 Split, mergers and changes Same principle to apply must be wholly or mainly comprised of new structures completed within the necessary )meframes to benefit from the exemp)on. Ratepayers do not benefit merely because the property has split or merged

19 Ratepayers must however have the ability to adapt their properhes without losing the relief. Complexity/confusion arises when structures that are wholly new merge with structures that are not new. Relief will only be funded where the new hereditament wholly or mainly comprises qualifying new structures.

20 Relief will run with the property so changes of ownership will not affect enhtlement. Developers will therefore be able to sell (or lease) the property with the benefit of the remaining term of the relief.

21 State Aid implicahons Financial support from a public or public funded body which has the poten)al to distort compe))on and affect trade between member states of the EU. Discre)onary relief is likely to be classed as state aid.

22 De- minimis rules state total amount of funding received must not exceed a prescribed limit currently 200,000 euros calculated over a three year period the calculahon of which is cumulahve. Government will not fund any relief over this level!

23 New build property exemphon will apply for 18 months aher complehon CompleHon must be aher 1 October 2013 but before 30 September months is to include the 3 or 6 month unoccupied exemphon period ProperHes will be permiied to switch between unoccupied and occupied

24 Example given: New shop inihally unoccupied for 8 months and becomes occupied for 4 months but becomes unoccupied again for 6 months will be as follows: 3 months no rates payable 5 months new build empty property relief 4 months property occupied rates payable 3 months no rates payable 3 months new build empty property relief

25 DCLG intend issuing a BRIL later this week giving more details. No regula)ons are required as this is a local discount. S)ll lots of ques)ons rela)ng to what criteria will be used to determine whether a property is wholly or mainly a new build structure. BRIL will define but is likely to state.

26 The criteria will be based on structures that is walls, floors, roofs and not structure as in a building. The test will be the composi)on of the structure. MaKers such as rateable value or use of parts of the property will not be relevant. Factors such as the area or volume of the structures will be relevant.

27 Interac)on with other reliefs is causing confusion. Hereditaments subject to appor)onment under sec)on 44A (partly occupied) the same principles will apply to the unoccupied por)on. 6 week rule will s)ll apply to 3/6 month exemp)on periods. More detail should be released this week.

28 ConsultaHon paper released in July: Property Owners & Business Improvement Districts formalising the role of property owners, who are not ratepayers, in Business Improvement District Schemes. Responses by 17 September BIDS introduced in 2004 as a tool to improve the local trading environment

29 Property owners can make voluntary contribuhons towards what currently is a ratepayer Business Improvement District. Landlords regarded as cri)cal long term stakeholders Landlords should become high street investors by contribu)ng currently they can but no vohng rights. Government acknowledge that providing for owner schemes is not straighoorward and is therefore canvasing for views.

30 Supplements Act 2009 leaves much of the detail applicable to property owner BID arrangements to be set out in regula)ons. Legisla)on allows for regula)ons to be made which would provide for combined ratepayer and property owner ballots on a single proposal or they could ensure that property owner scheme must be balloted on separately (subject to a ratepayer scheme being in place at the same )me).

31 Combined ballot of ratepayers and owners would be complex how you appor)on the RV. Single scheme as opposed to two schemes, or alterna)vely, a separate owner and ratepayer scheme. Government are proposing to take the simpler op)on of separate ballots

32 Consulta)on asks ques)ons rela)ng to the defini)on of an owner i.e freeholder or leaseholder or persons with common hold interest. Some ratepayers will also be owners therefore liable for both schemes Iden)fying the correct owner will be vital to the success of an owner scheme Most other arrangements government propose to mirror the ratepayer scheme arrangements.

33 Council Tax NaHonal council tax discount for annexes consultahon Responses by 8 th October Extended families living together are becoming increasingly common within our society children living with parents and elderly rela)ves living with family. Families benefit from living in annexes

34 Council Tax Parts of a hereditament constructed or adapted for separate occupa)on must be separately banded for council tax. Annexes no longer occupied as a separate unit of accommoda)on will con)nue to be separately banded for council tax unless the physical adapta)ons are undone. Currently two exemp)ons for annexes Class T and Class W. Where neither of these apply council tax will be chargeable leading to double taxa)on for the owner of a property with an annexe.

35 Council Tax Reducing or removing the council tax from all annexes used by the main occupier or their family, (not just dependant rela)ves), will support the government s objec)ves around housing supply and affordability. The new discount would be in addi)on to any discount applicable under sec)ons 11 and 11a including the exis)ng single person discount which already applies to standalone dwellings occupied by single adults.

36 Council Tax Government suggests discount level may be 10, 25, 50 or 100 per cent. Preferred op)on is for 50 per cent as this would reflect the level of council tax that would be due on a property and annexe if it were banded as one property. Owners of proper)es with annexes should pay more than owners of a property without an annexe.

37 Example : Council Tax Band D property with band A annexe on average would pay 1,456 plus 971 for the annexe total liability 2,427. A 50% discount would reduce liability to 485 for the annexe. Government suggest that 50% reflects the level of council tax that would be due on a property and annexe if it were banded as one property.

38 Council Tax Document discusses new burden funding but suggests they do not believe there will be significant implementa)on costs arising from this change.

39 Council Tax Council Tax Support DCLG held a Local Authority event on 22 August Share experiences from Year 1 Hear ideas for Year 2

40 Council Tax Presenta)on by South Gloucestershire Council currently consul)ng on year 2 scheme. Cannot sustain funding gap Three op)ons:-

41 Council Tax OpHon 1 Standard percentage Current scheme rules would remain the same All recipients would have their en)tlement reduced by a percentage to produce the savings necessary.

42 Council Tax OpHon 2 income bands New rules A person s net income (combined with that of their partner) would determine en)tlement Income ranges fall in to one of 9 bands Band would determine percentage en)tlement to council tax reduc)on.

43 Council Tax OpHon 3 changes to exishng scheme rules Combina)on of changes Amending current rules Introducing en)tlement limits Increasing non dependant deduc)on Removing disregards and premiums rela)ng to families Changing maximum amount of savings or investments Not gran)ng a reduc)on acer 13 weeks to those in receipt of JSA (IB) Gran)ng en)tlement to council tax reduc)on where certain benefits awarded Not gran)ng en)tlement to council tax reduc)on where certain benefits awarded Minimum limit and/or maximum limit

44 Council Tax Council Tax Partnership Forum Looked at collec)on issues District Council survey results showed collec)on rates slightly down but not as much as expected. Others reported collec)on rates holding up for the first couple of months but falling behind now distorted by people paying up front.

45 Year 2 schemes Council Tax District Council Survey results indicated 67 will be delivering same scheme as Year 1 and will change the following year (100 responses received). DCLG any change to year 1 scheme must consult

46 Council Tax DCLG looking at the DistribuHon of the Council Tax Support AdministraHon Subsidy for For , 20 per cent of the administra)ve subsidy, which relates to Council Tax Support only claims will be transferred from DWP to DCLG (in respect of England) and the devolved administra)ons. DWP will con)nue to distribute the other 80 per cent.

47 Council Tax DCLG need to develop a methodology that will distribute the 20 per cent administrahve subsidy to local authori)es for council tax support in England for To- date four possible ophons put forward:

48 Council Tax OpHon 1 use Council Tax benefit caseload data OpHon 2 use caseload data plus accommoda)on and labour costs factors OpHon 3 use caseload data plus accommoda)on and labour costs factors and split the caseload by pensioner and working age OpHon 4 use caseload data plus accommoda)on and labour costs factors and split the caseload by pensioner and working age, and separate pension- age by passported and means- tested

49 Council Tax No decision as yet but op)ons 3 and 4 are the most likely with op)on 4 being the closest to what we do now. Op)on 1 is regarded as being the furthest from current distribu)on and would affect London badly. None of the ophons take account of the Local Schemes in place. Most LAs will want the 20% as it comes across now - if not there will end up being winners or losers.

50 Enforcement Reforms Ministry of JusHce The commencement order which allows MOJ to make regula)ons as set out in the Tribunals, Courts and Enforcement Act 2007 came into force on 15 th July. The first of three statutory instruments which will underpin the government s package of reforms to bailiff law Taking Control of Goods Regula)ons were laid in Parliament on 30 th July. The Taking Control of Goods Regula)ons will be implemented in April 2014

51 Enforcement Reforms Addi)onal regula)ons will be laid in the autumn specifying the fees an enforcement agent is allowed to charge as well as a further instrument which will set out the requirements an individual must meet, including cerhficahon and training, before they can work as an enforcement agent. The laker instrument will also include details of the complaints processes which will be available. Both instruments will be implemented alongside the Taking Control of Goods regs in April 2014.

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