Taxing Times Ahead

May be it’s the looming thought of new council tax bills next month, but I’ve had three enquiries this week about council tax discounts.

Three years ago the government gave local authorities the freedom to reduce or remove council tax discounts on empty homes. Previously the rules had dictated that an owner was exempt from council tax for the first 6 months that a property was empty. After that the owner would be given a 50% discount on the standard council tax.

Several organisations including the Empty Homes Agency pointed out that this created a perverse incentive to keep a property empty. The government listened and made the change. Some local authorities steamed right in and removed discounts straight away, some bided their time and made a decision later, others are still thinking about it.

The three councils I have been in touch with this week are all considering reducing their discount from 50% and in one case removing it altogether. Not surprisingly all have faced local opposition from owners of empty properties. Their objections are not unfounded and deserve some consideration. A summary of the issues they raise is as follows:

The property is empty so I make no use of local services. So why should I pay for them?

The owner has died and probate takes longer than 6 months to complete

The property s up for sale I’ll have to reduce the sale price if I’m going to sell it before the council tax exemption ends.

I am trying to renovate the property extra council tax will mean it will take me longer to finish.

As discussed in earlier posts tax raises money for public services but it also influences behaviour. In this case, from the local authorities point of view, only the behaviour change issue is important, the extra money raised goes to the Treasury.

Of the issues raised here by objectors all except the last would probably influence the owner into returning the property to use faster than if the discount was kept. And all except the first are objections that could equally be made by an owner of an occupied house who receives no discount at all. If anything the objections reinforce my view that reducing discounts is a good idea. But what do you say to the objectors?

To the first you might very well point out that local services have to be paid for anyway and why should other people subsidise you to keep your property empty?

To the last you may want to suggest that if the property is uninhabitable the owner has the right to apply for a further 6 months exemption. If its not uninhabitable why on earth can’t it be fixed up within 6 months?

To everybody you might want to point out that the greatest benefit to the community is achieved by having as many properties in occupation as possible. Experience from across the country has shown that offering a subsidy to owners whose properties are empty is not the best way of achieving this. You recognise that the getting a an empty property back into use can be a difficult process and so the council is retaining the exemption period of 6 months where owners pay no council tax at all. This should be sufficient time to return an empty property into use. But in cases where the process takes longer you and are retaining a small discount.