Councils can be rather vague regarding the "discounts" and "exemptions" that are available to the homeowner. In fact, when it comes to working out how much council tax is due some offer a 25% discount, providing there is only one occupant. Paradoxically, if the same property is empty then the discount is reduced by 10% only - leaving the council to claim a whopping 90% tax....but on an empty property.
The discount is offered on a 'furnished dwelling not used as a sole or main residence’ - a second home for example - and is curiously 'lower' when a property is empty. Why we haven't a clue... and TheBigRetort would have liked to have posed that question to that august body known as London Councils, previously known as the ALG. Unfortunately as the only representative for the thirty-two London authorities it does not - we were informed, on more than one occasion - 'speak to freelancers'. And so we, alongside council tax payers and buy-to-let landlords in particular, must remain forever in the dark - which is just the way 'they' like it. In this post, TheBigRetort lifts the lid on the council tax scam that may be costing property owners millions. But first, a little bit of taxing history....
Council Tax and the Landlord
The Local Government Act 2003 gave local councils 'discretion' in the level of discounts offered to council tax payers, enabling them to reduce the discounts on furnished properties. 'Second home' tax savings were reduced from 50% to 10%. [Defined in the Council Tax (Prescribed Classes of Dwellings) (England) Regulations 2003 and prescribed by the Secretary of State under the provisions of Section 11A of the Local Government Finance Act 1992.]
But we discovered that the councils make various ‘assumptions’ in order to ‘steer’ any homeowner with an empty property towards the '2nd home' discounted schemes - where tax is always due. In fact, many if not all landlords should be awarded an “exemption” - thereby paying zilch. The “discretion” reveals that there is a lack of co-ordination by the authorities in London, and that their lobby body London Councils does not have a tight grip on the reigns, as usual. This can be very costly to the not so savvy landlord with an empty property. "An empty property gets charged at a higher rate than a property with a single occupant." Make sense? It does for the councils... because it’s the law of increasing tax returns.
However, novice landlords may be unaware (because councils like it that way) but they are being 'guided' toward discounted schemes - both on websites and over the telephone - to get them to pay tax that they do not in fact owe . It's a scam. A slight of hand that would in any other case be classed as out-and-out deception. And, what's more, it's happening nationally...
Landlords who not only face voids in their property also face crippling and unnecessary council tax payments - unless they wise up to this not-so-neat little tax trick. Or until London Councils reigns in its members and halts the practice. But don't hold your breath.
And then, there are ways to avoid the tax altogether.
TheBigRetort's step-by-step guide to avoiding council tax on an empty buy-to-let property. And it's legal.
Take the furniture out.
A “Class C” exemption applies if a ‘property is vacant and substantially unfurnished’ for up to six months. And rightly speaking no tax is due.
Following an initial phone query in Brent, we reveal that the exemption for empty properties is kept in the background. “The discount for properties that are empty but furnished (including second homes) is ten per cent” many councils claim up front. But more often than not we had to dig to find the exempt categories, where they were found, in many instances, the burden of proof was weighted against the landlord with the empty property - which obviously makes it difficult (if not impossible) to pursue the exemption. Which is the way that many of these councils want it.
Wandsworth Council states on its website that landlords are ‘required to notify us' when there is a change of occupancy. Are they really? Additional requests include forwarding addresses of any tenant who moves out of the property and other ‘relevant’ information. Landlords could easily find themselves on the wrong side of the Data Protection’s Act, or harassment laws. But the motivation behind such demands is obvious....
“You must also note that for any period between tenancies, you will be made responsible for Council Tax payments.” Wandsworth goes on to say, "If the property remains furnished during this period, you may be eligible for a 25% discount from your Council Tax."
But there is no 'may' about it, you are entitled to the exemption, and to the buy-to-let landlord facing a dreaded rental void that may mean the difference between retention or repossession.
Lambeth Council claims, “Even if they do not live there, the owner of the property will have to pay the Council Tax if: (i) the property is no one's main home." In fact if a landlord has a - partly or totally unfurnished - empty property due to a void or refurbishment circumstances then s/he will find that the same exemption applies – and no tax is due.
A property counts as a main home if you live there for the majority of the time and most of your possessions are kept there. However what Lambeth then goes on to claim is both puzzlingly and contradictory, “There is no discount for unfurnished empty properties.” [Lambeth’s emphasis.] It is only when we read on that we discover that the council speaks with forked tongue…. "Such properties may be exempt from Council Tax for up to six months but after that time, there is now no discount.’"
Misleading, or what? In a very roundabout bureaucratic way, Lambeth Council tells us that there is no discount for unfurnished properties: which is true, because it’s - wait for it - an exemption. [Lambeth just hopes that you landlords don't log on to TheBigRetort and discover how misleading.]
Southwark Council also goes boldly where Lambeth has gone before when it states, “There is only one council tax bill per household whether it is owned, rented or empty.” Which is true…. owned, rented, or empty, there is only one council tax bill. But what if the property is partly furnished and empty? Well.... no council tax is due.
Landlords in Southwark should watch out for this council tax jiggery-smokery. The council lists the answer(s) under separate categories marked “Discounts” and “Exemptions”. Under the first it duly reveals that there are circumstances when a discount can be awarded, “If there is only one adult we could reduce your Council Tax bill by 25% (one quarter). If there are no adults we could reduce your Council Tax bill by 50% (one half).” [Other councils only - curiously - reduce the discount by 10% on an empty property.] So what if a property is empty and (partly) unfurnished? The fallback answer is found under the heading "Empty Properties and Second Homes", but novice landlords ignore the “2nd Home” ten percent discount - that's just the red herring - it's the exemption you need.
Reducing a council tax bill to zero
There are a number of ways that a homeowner can reduce a council tax bill to zero….and it is with the help of that Great Landlord in the Sky.
Religious Community status is a must for those choosing to avoid council tax... The only requirement is a written confirmation of the number of adults resident in the property and the name and details of the religious community and details of any income. Seem fair? Why should non-believers pay tax on behalf of those who believe in a greater being? Can an atheist classify a ‘faith’ in non-existence and thereby escape the tax? What is ‘belief’ and - more importantly - why should it be totally exempt from council tax anyway? Surely the believers amongst us go to a tax-free haven in the sky and get the best of both worlds. [But don't ask us, ask London Councils.]
Class C Exemption
In tower Hamlets a ‘Second Home’ (in other words not the main home but a furnished one), sees the council tax bill reduced by 10%. As with other councils prior to 1st April 2004 the discount was 50%, which is still applicable where it is ‘job related’ and the occupier is liable to pay council tax for another dwelling by an employer. [How much does an MP pay?] In fact, it is only when we looked under the Exempt Homes category that we discovered a transparent explanation: “Vacant properties are exempt when they are ‘unfurnished’ (exempt for up to six months).”
Camden Council gave a full and forward and open account on its website of the exemption: “Section 75, of the Local Government Finance Act 2003, gave local councils' the discretion to amend the council tax discounts; that they give to the owners of unoccupied domestic properties, with effect from 01 April 2004. Regulations made by the Secretary of State namely, The Council Tax (Prescribed Classes of Dwellings) (England) Regulations SI 2003: 3011, specified the classes of domestic property for which the discounts could be reduced as follows: A Class C exemption applies if the property is unfurnished and unoccupied. By unoccupied, we mean that a property is not anyone's main home.”
All great stuff... Unfortunately the council then goes on to argue, “In the case of Class C, the discount can be removed altogether so that the full council tax bill is payable.”
The policy is discretionary. Local authorities' throughout England follow different strategies. Indeed, just within the Greater London area alone there are great differences. However, and here’s the rub… An exemption will still apply for the first six months, where a property becomes substantially unfurnished. [In the case of uninhabitable properties, this period increases to 12 months. Lewisham Council is very helpful in this regard.]
And that leaves us with the council that misled the most...
Brent Council initially claimed that council tax was due on an empty property - even though it was ‘unfurnished’. It claimed, wrongly, that the exemption only applied if the property was being ‘refurbished’, which is not true. Nevertheless Brent ignored this and demanded more than £200 for the months the unfurnished property was empty. [Brent Council's press office was very helpful when we queried this and other behaviour but did not get back to us at the point of writing with any answers, so we may never learn what has gone on there. Firstly why is it more expensive for tax on a discounted empty property? And, secondly, why is the council directing landlords away from the all-important no-tax exemptions?]
So landlords in Brent do not be cowed. If your empty property is partly furnished, or unfurnished, then no council tax is owed, and anyone who claims otherwise is ignorant of the regulations, or a thief. But then, to a council, a ten percent discount sounds much better than a zero exemption.
Ealing Council stated on its website - and of the 'Thirty-Two' it wasn't alone - “If only one adult lives in the property the council tax will be reduced by 25%. Properties which are unoccupied and furnished will get a 10% discount."
Ealing's landlords are supposed to see this and go, Oh my property’s empty, why don’t I just say it’s got one person in it and avoid a further 15% tax! Don’t bother… It’s a scam. You don’t owe the council grifters a penny. Seek out the all-important “exemptions” column.
So, if you’re a landlord with an empty (partly) unfurnished property... just say No to Council Tax.