Council Tax Banding

Mark Spencer Excerpts

Tuesday 25th February 2014 Westminster Hall

[Mr Mark Spencer (Sherwood) (Con)]

I congratulate the Minister on his impeccable timing. I welcome this opportunity to set out my concerns about council tax banding. The topic may not fill the whole half hour, but it is too wide to explore in an oral question.

Sherwood is seeing an enormous amount of development, with new houses being built throughout the constituency. The new occupants are keen to see which band their house falls into when the local authority sends its council tax bill. They are usually fairly content with the band they are given, as long as it is consistent with those of their neighbours.

Council tax bandings are obviously subjective and are decided by the valuation office. Most people accept that they must pay council tax and accept the band they are put into, but when one of their neighbours in a similar or larger house is given a lower banding, that causes enormous frustration. That is happening to a great extent on a new estate in Hucknall in my constituency. Will the Minister tell us how the valuation office reaches its decisions and how we can obtain more consistency in the bandings so that my constituents understand the valuation office’s decisions?

There have been several successful and unsuccessful applications for changes to council tax bandings for properties on the housing estate just off Papplewick lane in Hucknall. Perhaps you will indulge me, Mr Walker, by allowing me to talk through some examples from my constituents. I have been contacted by Mr Paul Wennington of 11 Falcon way, Mr and Mrs Paine of 7 Falcon way and Mr Gary King of 8 Hobben crescent on the same estate.

Mr King’s case is particularly interesting because of several references to the locality of his property near social housing and whether that should or should not have an impact on the banding of a property. Mr King has come to a conclusion about that and there is a strong argument, which I will come back to, about social housing and its relevance. In the evidence, the valuation office was clear. It said that the listing officer’s representative contended that band E was correct for Mr King’s dwelling because it was in line

“with the established tone of value/band for such properties based on its size on the appeal property’s estate and the adjoining development built by Bellway Homes which also had social housing in the locality.”

There is nothing too controversial about that. The listing officer’s representative then said that in view of the evidence he

“considered that the tone for properties of the appeal property size supported band E notwithstanding the proximity of the social housing and asked the panel to dismiss the appeal”.

At that point the valuation office was clear that social housing in the locality of Mr King’s property did not have an effect on its value and the band it should be in.

Reference was later made to other properties on Peregrine road, where an appeal was allowed. The panel noted:

“Regarding the appeal property’s specific position on the estate…the views from the front of the property looked directly down Falcon Way and overlooked the social housing, which was only several houses away. The panel was of the opinion that this view disadvantaged the appeal property more than those which did not overlook it in a similar way. The panel also noted that all access to and from the social housing was past the appeal property”.

There seems to be some inconsistency: in one appeal, social housing next to someone’s property was considered to lower the value to band E, but on another occasion it was not. I am not here to discuss whether social housing in proximity to a property should or should not reduce council tax; there is an argument for saying that the landlord is irrelevant. What is relevant is how tenants conduct themselves, and I am sure that many owner-occupiers in very expensive properties could be considered to be antisocial neighbours. I am not sure whether having an antisocial neighbour is a consideration in deciding what band a property is in.

I am asking for clear guidance to the valuation office on the bands. I am aware that banding was set in 1991 and that it is difficult to compare various bands, but my constituent has gone to the trouble of researching properties with similar values back in 1991 in the Hucknall area and most of them come out with an average value of around £70,000, which instead of putting them in band E puts them nearer the top end of band C. One can imagine the frustration when my constituent’s bill and those of several of his neighbours arrived showing that their properties were in band E, particularly when some of his neighbours appealed against that decision and had their appeal granted, dropping to band D when other neighbours’ appeals were rejected and they were told that their banding would remain where it was.

When developers propose new properties, they come up with a plan and allocate names to the types of properties. A three-bedroom detached house will be given a style name and a value. A four-bedroom house will be given another style name and value. On the same estate, the developer built properties identical in every way, shape and form, including the design, type of bricks and type of tiles, yet some have been put into a different council tax band.

In summary, I want to draw the attention of the Department for Communities and Local Government to the frustration that my constituents feel at the council tax banding that the valuation office is implementing. If the Minister can do anything to give it more support and guidance so that its approach to banding is more consistent, that would be greatly appreciated. If that guidance were forthcoming, perhaps some of my constituents could re-appeal the decisions against their banding on a more level playing field.

--- Later in debate ---

[Brandon Lewis]

My hon. Friend makes a valid and fair point, particularly regarding transparency. It would be useful for me to set out how the system works, how bands are assigned—which will help deal with the direct point raised by my hon. Friend the Member for Sherwood—and what the taxpayer can do to challenge their banding.

In England, the main role of the Valuation Office Agency—or the VOA, as we all know it—is to provide the valuations and property advice required to support taxation and benefits. There are eight bands—A to H—and every single one of the 23 million properties in England that are subject to council tax is assigned one of those bands by the VOA. They are based on the open market value as of 1 April 1991, as my hon. Friend mentioned.

Each band has a range of values. For example, band D is for properties valued between £68,001 and £88,000 in 1991. That highlights that a property could have its value changed and still not change bands. It could be valued at £87,999 and be in band D, then it could be reassessed and revalued, and considered to be worth £70,000—more than a 10% change—but still stay in the same council tax band. That could be one reason why residents can see no change in band despite a review on value, but I shall come back to that.

The common valuation date of 1991 means that all properties, including newly built properties, are valued on a fair and consistent basis. That applies equally to all homes, regardless of general fluctuations in the property market since then. The banding system provides a link between the value of a dwelling and the level of council tax. Homes will vary according to a range of factors; some are obvious and some not so. If we think about the value of a property that any one of us may own, its age and size will all have an effect on the value, as might the level of modernisation and improvement. That can again lead to a variation in valuation between two properties that, at first glance, may look very similar— or, indeed, the same.

The VOA looks at the property details for a property, and then looks at sales that took place on or around the valuation date of 1991. Sales from around that time on comparable properties are the strongest indicator of value. As the bands cover a range of values, many different types and styles of property can fall in the same band. Equally, fairly similar properties can fall into different bands, depending on their value in 1991. For example, if the band level is £68,001, the property could be in a different band for the sake of being £10 or £15 apart in value, in theory.

When council tax was introduced in 1993, the Government of the day did not want to discourage people from improving their properties for fear of incurring additional council tax liability. Council tax is not, and should not be, a tax on home improvement or extensions, but such changes are taken into account when a property is sold. That is intentional and there are no plans to change it.

[Mr Spencer]

I am grateful for the Minister’s time and for his explanation. I hope that he recognises that I am talking about brand new properties on the same housing estate, built to the same set of drawings, using the same bricks and the same tiles—they are identical apart from the fact that they are 100 yards apart—that are in a different band. That is what is causing the frustration.

[Brandon Lewis]

I understand my hon. Friend’s point and I will turn to that specifically in a moment. Having said that, in various parts of the country, literally being a few yards apart on opposite sides of the road can make a difference in valuation, even for the same properties. I appreciate that that can be frustrating for residents, but it can have an impact—it is about the valuation. It is important to be clear about how the system works, as that will feed through to give a better understanding, enabling me to give a clearer answer to where we are and what my hon. Friend’s residents can do.

As my hon. Friend rightly pointed out, there can be inconsistencies. Taxpayers can at times find themselves living in properties, new or old, that seem identical or even smaller than a neighbour’s that is in a lower band. The property has a different band level because improvements have been made to it, or there are changes that are not clear at first. Even if it is only because it is on the other side of the road, there can be a difference in valuation.

It is clear from my hon. Friend’s comments that he has called today’s debate because there is a specific issue around new-build properties for his constituents, who find themselves in a situation in which the bandings are different for similar or, as he outlined, effectively identical properties nearby. I can understand why that would be frustrating not only for them, but for him in his work to represent them.

If council tax payers believe that their band is incorrect, they can contact the VOA with their concerns—I appreciate that there is an issue with that, which I shall come to—and the VOA will review a property’s banding and amend it if the evidence suggests it is incorrect. While I am here on the record—this is not so much for my hon. Friend’s benefit—I want to be clear that council tax bandings can be challenged in two ways. First, the council tax payer has formal challenge rights in the first six months of either becoming the taxpayer of a property, or against a change made by the VOA, or where a material reduction in the value of the property or locality has happened since council tax was introduced.

When council tax payers do not have those formal rights, taxpayers can have their band reviewed by the VOA for free, if there is something to suggest that the banding might not be right. The VOA uses its statutory duty to maintain fair and accurate bandings as the means to provide a free banding review service, which applies to all occupiers, whether or not they have proposals rights.

I make that point clear because I know that some agencies out there—an increasing number of companies acting as agents—are promising council tax payers that they can get their bands reduced. I want to be clear: although some of those are charging up-front fees, I am keen for taxpayers to know that they can approach the VOA directly to challenge their banding. Full details are on the VOA’s website.

There is also the ability to have the case appealed to the valuation tribunal when the taxpayer and the VOA cannot agree. It seems to me, from the comments made by my hon. Friend the Member for Sherwood, that that is where the crux of the issue in his area may lie. The valuation tribunal is independent from the VOA and will hear evidence from both sides before making a final decision. That can then be appealed to the High Court on a question of law, but that does not necessarily help the residents.

I say to my hon. Friend that after listening to what he said, he has outlined a potentially apparent inconsistency in the valuation tribunal decisions, rather than in relation to the VOA. I would like to invite him to come and see me, and I will arrange for him to have a meeting on behalf of his residents to look at that specific issue.

If there is an inconsistency, we want to make sure that that is driven out; if there is not, we want the residents to have a good understanding of why they have been banded differently. It may be for some of the reasons that I outlined in the past few minutes, about differences that are not necessarily apparent at first between properties. If there is an inconsistency, we can make sure we drive to the bottom of that and deal with it for my hon. Friend’s residents. I have also written to all billing authorities to remind them of their statutory duty to include the VOA contact details on council tax bills.

This is a complex system. It can be daunting and frustrating, as we have heard this afternoon. However, it is also very important. That is why I am so determined that we will ensure that it is as open and transparent as possible and why I very much welcome today’s debate and look forward to my hon. Friend coming and having a conversation with us about the specifics of his case.

Question put and agreed to.