150% Council Tax Rate Removed for New Owner??

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It will be very interesting to hear more about this

Basic principles come into play, don't they, and what is fact and what is interpretation. Let's start with:

seeking to apply the premium to a current owner’s liability, because the property is regarded as a long-term empty is incorrect

Whether or not a property is a long-term empty is a matter of fact, which relates to whether it has been occupied and is substantially unfurnished, not of how you 'regard' it.  So the criterion about whether the home has been empty for 2 years hinges entirely on a matter of fact.

I challenge anyone to find any wording at all in the legislation or guidance that supports the view that the duration that a Class C has been empty can be reset to zero when it is changes hands, a situation that occurred for many years when the old Class C exemption applied.

Thus if the view is that EHP should not be applied, it needs to rest on other grounds, not on whether the property is 'regarded' as having been empty for 2 years or not. Whereas the council may have discretion about circumstances it takes into account in levying EHP, it does not have discretion about how it wants to 'regard' which council tax class the home falls into (eg Class 'C') and how long it has been in that class.

The principle of paying the right amount of tax:

Paying the applicable amount of tax is not a punishment. In the above extract, it sounds as though legal 'liability' is being confused with 'responsibility for the situation'.  The government's non-binding guidance doesn't help. It says:

The government’s intention behind the decision to provide billing authorities with the power to charge a premium was not to penalise owners of property that is genuinely on the housing market for sale or rent.

But people paying the democratically-agreed amount of tax on a property that has been empty for over two years are not being 'penalised'. That's why it is not called the 'Empty Homes Penalty'. They are paying an amount of tax which contributes to the welfare of the community and which has been set at a higher level to encourage behavioural outcomes i.e. in this case, to encourage owners to get properties occupied rather than leaving them vacant. The new owner has that same encouragement as the old one precisely because the property has still  been empty for two years. We don't charge different people different rates on cigarettes according to how addicted they are.

I can only see the selected bit of text provided by Scott and no doubt there is more. But it refers to the Guidance and the Guidance is specifically about properties that are for sale or rent and the context in which they are for sale or rent, i.e. the housing market not to the circumstances of individual people. So the government's response to the Consultation on the premium concludes:

However, the Government still believes that properties genuinely on the market for sale or letting should not be liable for the Premium and will instead issue guidance to help authorities reflect the state of the local housing market in their decision making process for administering the Premium.

It is fundamental, then, if any appeal at all were to be made to this Guidance, whether the property is currently for sale or rent.  That isn't clear from the original post, but it doesn't seem to have received any attention from the legal people.

However, appealing to Guidance ought not to be on the cards. The Government can 'believe' what it wants (how feeble is that) but it has made it clear that it is local authorities that have discretion over their schemes and it has declined to do more than issue non-binding Guidance. It has not incorporated the exception into the regulations (unlike Scotland), and that is because it has deferred to the local authorities' responses to the consultation (for a change). It would seem odd for a local authority to carry on as though the goverment has made something mandatory which it specifically has chosen not to.

Will the new owner now be told by hmrc that the s/he has to pay 20% VAT on refurbishment works because s/he has not owned the property for two years? Or can s/he benefit from the 5% tax relief but doesn't have to pay the empty homes premium? Why should these two aspects of taxation be treated differently?

The way this principle works out in practice is as follows: if you acquire a property with a 150% council tax charge attached to it, make sure you allow for that liability in the purchase price. If a purchaser does take the liability into account, then they won't be out of pocket and can have no grounds for complaint. Don't make the community responsible for your failure to negotiate an appropriate purchase price that takes account of the various liabilities attached to the property. 

It may be relevant here how the the new owner comes to acquire the property.  We are encouraged (in Scotland it is a mandatory exemption I think) not to apply the premium where a property is genuinely for sale.  I don't agree with that and I am not clear that local authorities are making exemptions. But if a local authority does want to apply such an exemption it is difficult to see how a home could have been sold if it was not genuinely for sale - in which case it was the previous owner who has grounds for complaint not the new one.

Fundamentally, we have to stop seeing taxation as a 'penalty' or punishment. A tax is just a tax and in this case it is a liability attached to the property, in the same way as the VAT concessions are.

 

This is something i looked into a while ago when e new owner was complaining about the Premium and why they still had to pay it. To try and understand this I looked at a couple of Valuation Tribunal Premium Charge cases. What is evident in all appeals dismissed (similar to this one) is that the appeal panel "...acknowledged that the legislation did not take account of a change in ownership and the appeal property had to be regarded as being continuously vacant since..." which again supports the point that the premium is not a punishment/penalty on the owner but the liability attached to te property as David said.

However, I do empathise with the new owners as they can research e.g. what band a property is in but they do not get to know about the premium until after the purchase - and mayne thats the difficulty as it can be challenging for them to negotiate an offer with the premum in mind, unaware there is a premium? Unless if anyone knows how potential buyers can find out this information?

You can have a look at the empty property premium appeals here.

A good point about whether or not purchasers know about the premium. Policy asks would be one or another of the following:

  • for the length of time a property has been empty to be reveated as part of the local land search
  • the owner to be required to answer a question about how long a property has been empty when replying to solicitor's queries and its status in coucncil tax terms i.e. second home or vacant home (bearing mind that the reality and the council tax records don't necessarily coincide, so there might be some room for doubt based on an inspection of the property).

The first is more reliable, the second perhaps easier to implement.. 

Estate agents report the banding, so it might be that they could also be asked to report some of this information too.