Council Tax: practice notes
Source: gov.uk (2025-09-02)

The Valuation Office Agency's (VOA) technical manual for assessing domestic property for Council Tax.

Practice note 1: England only: definition of dwelling and basis of valuation for Council Tax

1. Introduction

The Local Government Finance Act (LGFA) 1992 requires the Commissioners of Inland Revenue (now HMRC) to carry out valuations of dwellings in England and Wales for the purposes of compiling and maintaining valuation lists (sections 20-23), and specifies bands within which dwellings are to be placed (Section 5). The Act also requires that a similar valuation exercise be carried out in Scotland by the Scottish Assessors, acting under the direction of the Commissioners.

The Council Tax (Situation and Valuation of Dwellings) Regulations 1992 as amended by The Council Tax (Situation and Valuation of Dwellings) (Amendment) Order 1994 (hereinafter referred to as “the regulations”) contain, inter alia, the basis of valuation to be adopted when banding for Council Tax purposes.

2. Definition of dwelling

It is Section 3 of the LGFA 1992 that defines what a “dwelling” is for CT and reads as follows:

This section has effect for determining what is a dwelling for the purposes of this Part.

Subject to the following provisions of this section, a dwelling is any property which -

a) by virtue of the definition of hereditament in section 115(1) of the General Rate Act 1967, would have been a hereditament for the purposes of that Act if that Act remained in force; and

b) is not for the time being shown or required to be shown in a local or a central non-domestic rating list in force at that time; and

c) is not for the time being exempt from local non-domestic rating for the purposes of Part III of the Local Government Finance 1988 Act (“the 1988 Act”);

and in applying paragraphs (b) and (c) above no account shall be taken of any rules as to Crown exemption.
- A hereditament which -
a) is a composite hereditament for the purposes of Part III of the 1988 Act; and b) would still be such a hereditament if paragraphs (b) to (d) of section 66(1) of that Act (domestic property) were omitted, is also, subject to subsection (6) below, a dwelling for the purposes of this Part.
- Subject to subsection (6) below, none of the following property, namely:
a) a yard, garden, outhouse or other appurtenance belonging to or enjoyed with property used wholly for the purposes of living accommodation; or

b) a private garage which either has a floor area of not more than 25 square metres or is used wholly or mainly for the accommodation of a private motor vehicle; or

c) private storage premises used wholly or mainly for the storage of articles of domestic use,

is a dwelling except in so far as it forms part of a larger property which is itself a dwelling by virtue of subsection (2) above.

(4A) Subject to subsection 6 below, domestic property falling within section 66(1A) of the 1988 Act is not a dwelling except in so far as it forms part of a larger property which is itself a dwelling by virtue of subsection (2) above.
- The Secretary of State may by order provide that in such cases as may be prescribed by or determined under the order -
a) anything which would (apart from the order) be one dwelling shall be treated as two or more dwellings; and

b) anything which would (apart from the order) be two or more dwellings shall be treated as one dwelling.
- The Secretary of State may by order amend any definition of “dwelling” which is for the time being effective for the purposes of this Part.”
2.1 Points to note:

In respect of the above definition, the following points are to be noted;

(i) Hereditament is defined in section 115(1) of the General Rate Act 1967 as being,

“property which is or may become liable to a rate, being a unit of such property which is, or would fall to be, shown as a separate item in the valuation list”. It is case law, however, that tells us what this means in practice.
- hereditament in relation to CT was examined in the case RGM properties v Speight LO 2011. In paragraphs 13-17 an analysis of the law was undertaken in relation to beneficial occupation. The authorities were examined and the practical definition linked to that expounded in Post Office v Nottingham City Council CA 1979 in the answer to the question “as a matter of fact and degree, is or will the building, as a building, be ready for occupation, or capable of occupation, for the purposes for which it is intended?”
- in both the RGM case and Wilson v Coll LO 2011, the need to separate the ‘hereditament test’ as to whether an existing property is capable of reasonable repair, and the valuation assumptions to be applied (see paragraph 3 below) once it was found that a hereditament existed, was emphasised
- in R v East Sussex Valuation Tribunal Ex p. Silverstone 1996 RVR 203, it was confirmed that where two separate dwellings are converted into a single unit, a new dwelling comes into existence
- the case of Baker (VO) v Citibank LT 2007 confirmed the principle that a change in the boundaries of a hereditament created a new hereditament. It follows from this that where a dwelling either acquires or disposes of land, to add or subtract from its boundaries (that is not merely de minimis in extent), a new dwelling will have been created in each case. In these circumstances a relevant transaction is not necessary to trigger a band review where material increases have taken place
- a dwelling which is removed from the list because it becomes non-domestic property will cease to be a dwelling. If subsequently it becomes domestic property again and qualifies as a dwelling, it will be treated as a new dwelling when brought back into a CT list. Any improvements which may have occurred will be taken into account as part of the new dwelling $LegislativeList
- i. Exemptions for the purposes of Part III of the LGFA 1988 are listed in its 5th Schedule.
- ii. Any property which satisfies the definition in Section 3 LGFA 1992 but is in the occupation of the Crown is nevertheless a dwelling for Council Tax purposes.
- iii. Any property which is a composite property as defined by Section 64(9) of the LGFA 1988 is a dwelling unless it forms such a hereditament by virtue of the fact that it contains only domestic property defined in paragraphs (b) to (d) of Section 66(1) of the 1988 Act.
iv. Any property included in those categories mentioned in S.3(4)(a) (b) and (c) LGFA 1992 will never constitute a dwelling in isolation. It will only ever be a dwelling to the extent that it forms part of a larger dwelling. Such property will only form part of a larger dwelling if, for the purposes of the General Rate Act 1967, it would have formed part of a hereditament as defined by S.115(1) e.g. a house and garage occupied together and situated within a single curtilage will together form a single dwelling. $EndLegislativeList
- a garage which is physically separated by a main road, from the dwelling house with which it is enjoyed, will not comprise a dwelling in its own right or be regarded as forming part of the dwelling. (It would have formed a separate hereditament for the purposes of the General Rate Act 1967). Similarly a garage situated within the curtilage of a block of flats will not comprise part of a dwelling if for the purposes of the 1967 Act it would have formed a separate hereditament. The value of any such garage should not be reflected directly in the value of the individual dwelling
- communal facilities such as car parking areas, gardens, communal lounges at a block of flats or sheltered housing development will not comprise a dwelling in their own right but the value of such facilities will fall to be reflected in the market values of the individual units
- in those instances where a facility is used by both owners of adjoining living accommodation, as a right of occupation of their respective hereditaments, and individuals living elsewhere (provided the latter use is not de minimis) it will have been treated as non-domestic property, e.g. leisure facilities at a luxury development. The right to use such facilities should be reflected in the market values of the individual dwellings
- i. The power conferred on the Secretary of State in subsection (5) has been exercised in the form of The Council Tax (Chargeable Dwellings) Order 1992 (SI No. 549) as amended by The Council Tax (Chargeable Dwellings, Exempt Dwellings and Discount Disregards) Amendment Order 1997 (SI No 656) and the Council Tax (Chargeable Dwellings, Exempt Dwellings and Discount Disregards)(Amendment) ( England) Oder 2003 SI 3121and the Health and Social Care Act 2008 (Consequential Amendments) (Council Tax) Order 2012. Articles 3 and 3A of the Order detail the circumstances where properties which would otherwise form single dwellings are to be treated as more than one. Article 4 gives the Listing Officer a discretion in prescribed circumstances to treat properties which would otherwise form multiple dwellings as single ones. For instructions on the disaggregation and aggregation of dwellings see CTM: PN5 and PN6 respectively.
- ii. From 1st April 2013 paragraph (4A) was added by the Non Domestic Rating and Council Tax (Definition of Domestic Property and Dwelling) (England) Order 2013. This is an amendment of Section 66 (1) LGFA 1988, which designates all small scale energy generation equipment, of sub 10 kilowatts capacity, as domestic property.
It should be noted that, for the purposes of the current lists, there is no evidence that such equipment (eg solar panels) which do form part of the dwelling where no 3rd party agreements exist, would have made any significant difference to property values under the valuation assumptions.

Where generation equipment is installed on part of the dwelling subject to a separate licence or lease agreement in favour of a 3rd party (the provider and owner of the equipment), that part including the generators will not form part of the dwelling. However, because it is still designated domestic property, will not be liable to non-domestic rates either. Thus, solar panels on roofs which are subject to 3rd party agreements will fall into the same category as private garages and private stores outside the dwelling boundaries and not be subject to local taxation or affect the underlying dwelling Band.

Basis of Valuation- Valuation Assumptions

The basis of valuation for any dwelling is found in Reg 6(1), (2) and (3) of The Council Tax (Situation and Valuation of Dwellings) Regulations 1992 (SI No. 550) as amended by the Council Tax (Situation and Valuation of Dwellings) (Amendment) Order 1994. Reg 7 simply sets out an apportionment approach for the valuation of a composites dwelling but does not affect the basic assumptions. Reg 6 is as follows:-

Subject to Reg 7, for the purposes of valuations under Section 21 (valuations for purposes of lists) of the Act, the value of any dwelling shall be taken to be the amount which, on the assumptions mentioned in paragraphs (2) and (3) below, the dwelling might reasonably have been expected to realise if it had been sold in the open market by a willing vendor on 1 April 1991.

The assumptions are:

(a) that the sale was with vacant possession;

(b) that the interest sold was the freehold or, in the case of a flat, a lease for 99 years at a nominal rent;

(c) that the dwelling was sold free from any rent charge or other encumbrance;

(d) except in a case to which paragraph (3) or (3A) applies, that the size, layout and character of the dwelling, and the physical state of its locality, were the same as at the relevant date;

(e) that the dwelling was in a state of reasonable repair;

(f) in the case of a dwelling, the owner or occupier of which is entitled to use common parts, that those parts were in a like state of repair and the purchaser would be liable to contribute towards the cost of keeping them in such a state;

(g) in the case of a dwelling which contains fixtures to which this sub-paragraph applies, that the fixtures were not included in the dwelling;*

(h) that the use of the dwelling would be permanently restricted to use as a private dwelling; and

(i) that the dwelling had no development value other than value attributable to permitted development.

*Reg 6(2)(g) only applies to fixtures which are designed to make a dwelling suitable for use by a disabled person and which add to the dwelling’s value - this is covered in Reg 6(4) (see paragraphs 4.14 & 4.15 below)
- In the case of a valuation carried out for the purposes of an alteration of the valuation list resulting from a material reduction in the value of the dwelling, it shall be assumed that –
a. the physical state of the locality of the dwelling was the same as on the date from which the alteration of the list would have effect; and

b. the size, layout and character of the dwelling were the same

i. in the case of an alteration resulting from a change to the physical condition of the dwelling, as on the date from which the alteration in the list would have effect;

ii. in a case where there has been a previous alteration of the valuation list in relation to the dwelling, as on the date from which that alteration had effect;

iii. in a case where in relation to the dwelling, there has been a relevant transaction within the meaning of Section 24, not resulting in an alteration of the valuation list, as on the date of that transaction;

iv. in a case to which more than one of sub-paragraphs (i) to (iii) applies, as on whichever is the latest of the dates there mentioned; and

v. in any other case, as on 1 April 1993.
- In the case of a valuation carried out for the purposes of an alteration to correct an inaccuracy in a list which arose –
(a) in the course of making a previous alteration which resulted from a material reduction in the value of the dwelling, or

(b) since the date of such an alteration by reason of an alteration which was the next alteration to be made and was neither the result of a material reduction in the value of the dwelling nor the occurrence of any of the events described in paragraph (5B) below.

it shall be assumed that the physical state of the locality of the dwelling, and the size, layout and character of the dwelling are the same as on the dates which were applicable in respect of the previous alteration in accordance with paragraph (3) above”. (4)..etc

The valuation approach for any dwelling which is a composite hereditament or part of a single property which is a composite hereditament is contained in regulation 7(1) of The Council Tax (Situation and Valuation of Dwellings) Regulations 1992. For instructions on the valuation of such dwellings see CTM: PN 2.

Interpretation and application of basis of valuation

4.1 Open market value as at 1 April 1991

a. “Reasonably expected” and “open market”

“Reasonably expected” and “open market” are not defined in the regulations but may be taken as having the same meaning as when used in a similar context in S.272(1) of the Taxation of Chargeable Gains Act 1992 and S.160 of the Inheritance Tax Act 1984.

It is therefore necessary to assume that,

i. all preliminary arrangements have been made prior to disposal

ii. adequate publicity has been given to the sale

iii. the most appropriate method of sale has been chosen so as to maximise the proceeds of the sale.

(NB Lotting - selling in parts - cannot be assumed as this would be inconsistent with the concept of the hereditament from which the dwelling is derived).

Problems can arise when a covenant is entered into a conveyance of the freehold or long leasehold interest, restricting the value on re-sale of the interest, to a percentage of the open market value of the dwelling. This restriction must be ignored for Council Tax purposes. (See paragraph 4.11 Restrictive Covenants).

Open market value will be determined by having regard to all the evidence of sales of similar dwellings in the locality at the antecedent valuation date (1 April 1991). Prices paid for new properties purchased from a builder should be treated with caution, since they often reflect a “new build premium” which will not be payable in the second-hand market from where the bulk of sales evidence is drawn.

(b) “Willing Vendor”

The term “willing vendor” is not defined in the regulations but may be taken to have the same meaning as “willing seller” as contained in S.5 of the Land Compensation Act 1961 (Rule 2) ie. not a person selling without reserve but one who does it as a free agent as opposed to one who is forced to sell.

(c) Special Purchaser and Marriage Value

The definition of open market value does not specifically exclude either a special purchaser or marriage value. However, an increase in value which is attributable to a situation where either a special purchaser or marriage value is seen to exist will often be excluded by virtue of Reg 6(2)(h) and (i) (ie the requirement to assume a restriction on use and limited development value only).

Where the existence of a special purchaser is identified and the above regulations would not be offended, regard should only be had to any overbid if it can be established that such a bid would have been made if the dwelling had been marketed at 1 April 1991.

(d) Number of properties assumed to be on the market as at 1 April 1991

No reduction should be made on account of a theoretical “flooding of the market” on 1 April 1991.

Regs 6 and 7 refer to the valuation of any one property as at the date of valuation and does not permit the assumption that all dwellings are placed on the market at the same time. In other words the valuer should consider that the equilibrium of the market place is maintained in the state which actually existed on 1 April 1991. Accordingly the valuation of any dwelling is to be approached as if it were simply one additional dwelling coming on to the existing market as at 1 April 1991.

(e) Unlawful use of property

Reg 6(2) does not require an unlawful use of a property to be disregarded.

The banding of any property where any unlawful use is apparent should therefore take into account the value which the market would have placed on that use as at 1 April 1991, for example, a dwelling which has been built without permission should be banded having regard to how the market would have viewed it as at 1 April 1991, as compared to others for which planning approval had been obtained.

4.2 Vacant possession

The assumption as to vacant possession serves to ensure that any statutory provision or other circumstance which has an effect on value either by way of affording protection to an occupier or by allowing that person to purchase at a reduced figure, for example under the Right to Buy provisions of the Housing Act 1985, is to be disregarded.

It should be noted that the assumption is only to be made in respect of the actual dwelling being banded as at 1 April 1991. For example, if the dwelling to be banded is a tenanted local authority owned flat situated within a block of similar units or a tenanted cottage on a large rural estate, regard must be had to the actual nature of the occupation of the surrounding premises as at 1 April 1991 and any consequential effect on the vacant possession value of the subject dwelling.

4.3 Tenure

All premises, excluding only those which may be defined as flats, are to be valued on the basis that it is a freehold interest which is for sale.

Flats, irrespective of the actual length of the remaining term or rent paid, are to be valued on the basis that there is the benefit of a lease for 99 years at a nominal rent. Consequently there will sometimes be instances where there is a substantial difference between the price a dwelling might have been expected to achieve if marketed as at the antecedent valuation date of 1 April 1991 and the valuation arrived at in accordance with the regulations.

Reg 6(5) defines “flat” as having the same meaning as in Part V of the Housing Act 1985. S.83 of that Act provides:

(2) A dwelling-house is a house if, and only if, it (or so much of it as does not consist of land included by virtue of S.184) is a structure reasonably so called; so that -

(a) where a building is divided horizontally, the flats or other units into which it is divided are not houses;

(b) where a building is divided vertically, the units into which it is divided may be houses;

(c) where a building is not structurally detached, it is not a house if a material part of it lies above or below the remainder of the structure.

(3) A dwelling-house which is not a house is a flat.

Thus any dwelling, irrespective of its actual description and tenure, should be regarded as a flat if it satisfies the above definition. In essence, a property which forms part of a building will be a flat unless it is divided vertically from the rest of the building and no material part of it lies above another part of the structure.

4.4 Repair

NB CTM: PN4 deals with Repair in more detail

It is required to be assumed that the dwelling was in a “state of reasonable repair”. Regulation 6(6) states,

“In determining what is “reasonable repair” in relation to a dwelling for the purposes of paragraph (2), the age and character of the dwelling and its locality shall be taken into account.”

Age

The “age” of a dwelling will naturally affect the standard of repair which could reasonably be expected by a prospective purchaser but it is necessary to consider this factor in the context of the other two mentioned in the regulation. For example, the mere fact that a property is modern does not necessarily mean that it can be assumed to be in good repair. Due to a particular design, or the fact that properties in a locality have generally been allowed to deteriorate, the state of repair which might reasonably be expected may be lower than that attaching to similar properties outside the locality.

Locality

“Locality” as used in Reg 6(6) may be taken to be any area or district which is generally recognised and described as such, not necessarily only by reference to the housing stock, but also by reference to the district’s associated infrastructure and the level of amenities it is seen to enjoy.

Character

The “character” of a dwelling may be seen to consist of all those characteristics which are peculiar to it (as opposed to its locality) including any advantages or disabilities which exist.

Often the character of any given dwelling will be the same as that exhibited by neighbouring dwellings of a similar age and design and there will be little problem in arriving at the state of repair to be assumed. For example, if one dwelling on an estate of identical houses has been allowed to deteriorate, its basic character would nevertheless be the same as that of the neighbouring property and the inferior state of repair existing would not be reflected in its valuation banding. Conversely, if one was valuing a dwelling in a row of Georgian town-houses, all of which have minor structural defects (which would never be remedied due to the expense involved), the state of repair assumed would be that which actually exists. Similarly when valuing any dwelling which has been designated defective under the Housing Defects Act 1984 regard must be had to the state of repair which actually attaches to that type of property in the locality.

There will, however, be instances where despite the fact that a property might be of a similar age and design its character will vary from that of its neighbours, for example a Victorian terrace might comprise various properties whose character is seen to vary considerably either due to general neglect or because substantial improvements have occurred. The role that the character of a given property will have in determining what is “reasonable repair” in any instance will depend upon the extent to which this character is seen to vary from that attaching to the majority of properties within the locality.

If it is considered that the character of any dwelling is so different from that of the majority of other dwellings within the locality, then it will generally be inappropriate to assume that the same state of repair exists. For example, in the case of a property which is in an inferior condition, if the works required to be carried out to achieve the same state of repair as that which attaches to the majority of other dwellings, would result in the creation of a dwelling which was wholly different in character in its repaired state from that presently existing, then a similar state of repair should not be assumed to exist. Such works would not constitute repair simply to make good the ravages of time, but rather renewal or improvement, and it cannot be assumed that they would be carried out. However, it may be assumed that repairs would be carried out to such an extent to bring the property up to the average state of repair of its peer group. Similarly, if a dwelling has been so substantially improved and extended, so as to become wholly different in character from those around it, the state of repair which it is appropriate to assume may well differ from that state which attaches to its previously similar neighbours.

Where a dwelling is identified as being of a different character to that of its neighbours, it should be valued having regard to the state of repair which is seen to attach to dwellings which exhibit the same characteristics as those which exist in the subject dwelling. In such circumstances it may be appropriate to assume a state of repair exhibited by more comparable dwellings elsewhere than in the immediate vicinity.

Hereditaments and the repair assumptions: A useful summary of case law relating to a state of reasonable repair as it applied in the domestic Rating context is contained in Benjamin (VO) v Anston Properties Ltd (1998), in particular Wexler v Playle (VO) (1960) and Saunders v Maltby (VO) (1976). More recent cases, however, in relation to repair for CT are the High Court appeals in Burke v Broomhead (LO for Camden) 2009, RGM Properties v Speight LO 2011 and Wilson v Coll LO 2011.

In the Burke case, it was confirmed that if a hereditament existed, the repair assumption must be assumed and it was not possible to reduce a valuation on account of a necessary repair, in this case, the necessity of a new roof. A calculation as to whether it was an economic repair was unnecessary.

In RGM Properties v Speight this principle was spelt out in paragraph 35, “The assumption as to a reasonable state of repair, applies…only if a building is already accepted as a hereditament …..It is not relevant to determining that a property which is plainly uninhabitable but could be made habitable by reasonable repair is in some magical way capable of occupation so as to be a hereditament. The proposition is obvious: a barn without a roof which might be converted into a dwelling is not capable of occupation for the purposes of a dwelling, merely because it could be repaired to reach that state. Once it is however put into position as being capable of being a dwelling, the fact that elements of disrepair about and around it do not affect the banding….”

In Wilson V Coll, a landlord argued that a hereditament did not exist because it made no made no economic sense for him to do so. The Judgement confirmed that whether a repair was economic or not was not a relevant consideration in council tax, as it was in Non-Domestic Rating. If a vacant property was capable of normal repair, without major reconstruction or character changing work, then it would still qualify as a hereditament and thus a dwelling. It was also emphasized that the initial hereditament question is entirely separate from the subsequent repair assumption with regard to reasonable repair of a dwelling. Only if a hereditament exists, can the repair assumption be invoked, and the two ‘repair’ issues should not be confused.

Dwellings subject to major repair work or structural alterations

With effect from 1 April 2000 article 2 of the Council Tax (Exempt Dwellings) (Amendment) (England) Order 2000 (SI 424) amends Class A of the 1992 Order SI 558 to limit the exemption from Council Tax for a vacant dwelling subject to structural alteration or requiring or subject to major repair work, to a maximum of 12 months. “Major repair work” includes structural repair work. This order revokes SI 1999/1522.

Empty houses or flats awaiting demolition should be treated in accordance with advice given in CTM PN4 para (6) where Local Government Act 1988 S66 (5) may come into play.

Summary

It is necessary to judge each case of repair on its own merits within the meaning of “state of reasonable repair.” In the vast majority of cases the state which might reasonably be expected will be readily apparent as evidenced by the standard of repair attaching to the majority of similar dwellings (in terms of age, character and location) and it is this state which is to be assumed when banding. Only in those cases where the character of a dwelling is wholly different from the majority of its neighbours should one vary from the general level being adopted, at which time it will be necessary to have regard to the state of repair attaching to similar dwellings elsewhere.

4.5 Derelict properties

No property will constitute a dwelling unless it would have been a hereditament for the purposes of S.115(1) of the General Rate Act 1967 (S.3(2) of the LGFA 1992). Accordingly, where a domestic property is derelict or undergoing structural alterations to the extent that it is not ready for, nor capable of, beneficial occupation, it will not constitute a dwelling for the purposes of S.3 of the LGFA 1992. (See CTM: PN 4).

4.6 Size, layout and character of the dwelling and the physical state of the locality

Regs 6(2)(d) and 6(3) refer to the assumptions to be made in respect of the size, layout and character of the dwelling and the physical state of its locality. For valuation purposes, the regulations require it to be assumed that these variables were the same as at the AVD of 1 April 1991 as those actually existing at later dates. The variables are taken back to AVD for the purposes of valuation. The date(s) at which each variable needs to be considered whilst having regard to the level of values existing at the AVD will depend upon the occasion giving rise to the alteration of the list. (See CTM: PN3).

This section considers those matters which may be reflected under:

(a) Size and Layout

(b) Character

(c) Physical state of the locality

a) Size and layout

A change in the size and layout of a dwelling will usually arise through structural alterations being carried out which reduce or increase the size of the property and/or alters its floor plan.

If structural alterations causing a reduction in value occur, the definition of “Material reduction” will usually be satisfied and, if appropriate, an alteration of the list may be made. If however, structural alterations increase the value of the property an alteration to the list cannot be made to reflect this “material increase” until there has been a “relevant transaction” (CTM: PN3).

b) Character

Any matter which can be considered to have a direct effect on the character of any dwelling (as opposed to its locality), and is not otherwise excluded by any of the assumptions contained in Reg 6(2), will generally fall to be reflected as it existed at a date other than the AVD.

However the word “character” does not allow a planning restriction or restrictive covenant, not otherwise made irrelevant by virtue of Reg 6(2)(h) or (i), to be reflected as it existed at a date other than the AVD. (For the treatment of planning restrictions and restrictive covenants which attach to properties see sections 4.10 and 4.11 below).

c) Physical state of the locality

“Physical state of locality” may be taken to mean that which is readily apparent to anyone viewing that locality, without knowing or being made aware of any economic, social, legal or other non-physical factors affecting the locality.

This definition does not allow it to be argued that factors such as unemployment, the prospect of development, or the designation of a conservation area were any different from those actually existing at 1 April 1991. These factors may be reflected in the banding of a property only insofar as they may have affected its value at 1 April 1991, assuming they do not otherwise affect the physical state of the locality.

4.7 Use as a “private dwelling”

Reg 6(2)(h) requires it be assumed that,

“the use of the dwelling would be permanently restricted to use as a private dwelling”.

“Private dwelling” in the above context should be taken to mean a dwelling which is used primarily for private or domestic (as opposed to commercial or public) purposes. The definition does not exclude any partial non-private use so long as it does not stop the dwelling from being considered to be private.

The extent to which non-private uses may exist before they offend the definition of a private dwelling will be a matter of fact and degree in each case. Only if a use prevents a dwelling from being regarded as private should the effect of that use on its value be disregarded for banding purposes. For the purpose of clarification, those small guesthouses and holiday homes which are used for minor commercial purposes and defined as being wholly domestic by virtue of S.66(2A) and (2B) LGFA 1988 as amended respectively, are to be treated as being private dwellings for the purposes of Council Tax.

Situations where it is appropriate to adjust the market value to accord with the statutory assumption will be seen to be extremely rare. In most cases any substantial non-private use of any dwelling will result in the dwelling becoming a composite hereditament when Reg 6(2)(h) will not be applicable (CTM: PN6).

4.8 “Permitted development”

It is to be assumed that the dwelling under consideration had no development value other than that attributable to “permitted development”. Permitted development is defined in Reg 6(5) as being development:-

“for which under the Town and Country Planning Act 1990 planning permission is not required, or for which no application for planning permission is required”

reflecting the differing situations which exist under Sections 57 (planning permission required for development) and 59 (development orders; general) respectively of the Town and Country Planning Act 1990.

Consequently, regard is to be had to both the Use Classes Order 1987 and the General Development Order 1988 along with any additional value they are seen to attach to a particular premises.

For example, any increases in value by virtue of there being a strong demand for holiday homes in a locality (a use permitted by class C3), or a plot being of sufficient size to allow development which would be granted permission by the General Development Order, should be correctly reflected in any valuation for banding purposes.

Conversely, any “hope” of obtaining planning permission in respect of a dwelling as at the AVD, which would have had the effect of increasing its value, should be disregarded as this would offend the definition of permitted development as contained in Reg 6(5). For example, a dwelling in, or on the verge of, an area where a substantial number have been converted into offices might well have had a market value in excess of similar dwellings in the immediate neighbourhood, but its banding will be the same.

It is to be noted that whilst there may be no difficulty in adequately reflecting any value which is attributable to “permitted development” (as such value is generally inherent in the open market sale price of a property), special attention should be paid to those factors which, though not always readily identifiable, are clearly outside its definition and must not be taken into account.

4.9 Rentcharges and incumbrances

It is to be assumed that no “rentcharge or other incumbrance” attaches to any dwelling. (Reg 6(2)(c)).

Reg 6(5) defines rentcharge as having the same meaning as in the Rentcharges Act 1977 which states (in section 1),

“For the purpose of this Act, “rentcharge” means any annual or other periodic sum charged on or issuing out of land, except –

(a) rent reserved by a lease or tenancy, or

(b) any sum payable by way of interest”.

The phase “or other incumbrance” should be interpreted in a restrictive sense namely something which it is in the power of the vendor to remove by his own unilateral action. Effectively that is limited to financial restrictions such as a mortgage on the dwelling. Thus there is a statutory right to redeem a rent charge in Sections 8-10 of the Rent Charges Act 1979; mortgages and other financial changes can be similarly redeemed as can a judgement against the land by paying the amount of the judgement.

Easements, rights of way , restricted covenants and planning restrictions are all ‘incumbrances’ in the widest sense of the word, but cannot be lifted by the unilateral action of the vendor. They therefore fall outside this valuation assumption that the dwelling is sold free from any such incumbrances as existed at the relevant date, with the result that such restrictions CAN be reflected in the valuation. Rentcharges, mortgages liens and the like must NOT be reflected in the valuation.

Support for this argument may also be gained by considering the order of the assumptions in regulation 6(2) of 1992 SI No 550. Assumptions (a) to (c) relate to the interest being valued, (d) to (g) to physical matters concerning the dwelling and its locality, and planning matters are referred to in (h) and (i). A planning restriction would therefore not fall within 6(2)(c) as an ‘incumbrance’.

4.10 Planning restrictions

Regard should only be had to a planning restriction which was, or may be deemed to have been, attached to a property as at 1 April 1991.

Only if a value significant restriction was either

(i) actually attached to a property as at 1 April 1991

or

(ii) attached to a property constructed after 1 April 1991 and prior to its inclusion in the valuation list, should it be taken into account for banding purposes.

Any planning restriction imposed on an existing dwelling or removed from a dwelling during the life of a list is a non physical change and should be ignored.

Relevant case law: The relevance of a planning restriction was considered by the Court of Session in Scotland in Re the Appeal of Grampian Valuation Joint Board Assessor 2003 RA167. It rejected an appeal made by the assessor against the decision of the Valuation Appeal Committee that in valuing a dwelling for the purposes of council tax, an agricultural occupancy condition in the planning permission for its construction was not to be ignored. There was nothing in the Council Tax (Valuation of Dwellings) (Scotland) Regulations 1992 which stated or implied that a planning restriction that affected the value of the dwelling should be ignored, and although under the regulations development value was to be ignored, the assessor was not required to ignore any depreciation in value that was due to a planning restriction. The contention that the planning condition fell to be ignored involved a departure from reality that was required neither by the assumption of a sale on the open market or by any of the specific valuation assumptions. Although the regulations in Scotland differ slightly from the wording of the equivalent regulations in England and Wales, the decision is equally applicable and should be followed.

Weight to be given: Where a planning restriction is correctly to be taken into account the likelihood of getting the restriction lifted at the AVD should be reflected in arriving at the valuation. Regard should be had to the local authority’s general policy on such matters and how they were seen to treat applications to have similar restrictions lifted as at AVD.

Agricultural occupancy restriction: If the restriction was attached to a property on or before 1 April 1991, or imposed on anew dwelling during the life of a list any reduction in value caused by its existence should be reflected. Imposition or removal of planning restrictions to existing dwellings should be ignored as these are non-physical factors, unless associated with changes to the curtilage.

Thus the removal of an agricultural restriction should be ignored unless it is carved out from the main farm holding, in which case it will be a split from the main hereditament and be treated as a new dwelling with different boundaries.

Key worker restrictions: Planning agreements made under Section 106 of the Town & Country Planning Act 1990 often include references to low cost housing and restricted to key workers, eg nurses, teachers, police etc. The restriction on occupation may be reflected, where that is judged to affect value, but specific restrictions on price reflected in leases is to be disregarded as explained below.

4.11 Restrictive covenants

Restrictive covenants in a freehold or long leasehold interest which are not in the nature of a “rent charge or incumbrance” should be taken into account for Council Tax purposes and assumed to coexist with the hypothetical sale on the grounds that the dwelling must be valued on the assumption of a hypothetical sale of the freehold, or 99 year lease in the case of a flat. Coll v Walters 2016 EWHC 831 (Admin), a High Court case, examined whether a restrictive covenant benefiting neighbouring land should be taken into account. The restrictive covenant, benefiting the neighbouring land, provided that the house and an annexe in the garden, together the subject property, should not be occupied separately. The judge held that a restrictive covenant of this nature fell outside the definition of Reg 6 (2) ( c) “ free from any rent charge or other incumbrance” and, as such, had to be taken into account in the banding. The freehold was encumbered by the restriction and it is the freehold that has to be valued in the case of a house. It is considered the same answer would result with a flat notwithstanding the assumption of a 99 year lease rather than the actual lease. This is because the restrictive covenant would have an existence outside the actual dwelling being considered, as it benefitted other land.

By way of contrast , a restrictive covenant that provided a mechanism to create a discounted sale price should be ignored because it is in the nature of a “rent charge or incumbrance” . An appeal was made to the High Court by the Listing Officer in 1994 against the decision of the Birmingham Valuation Tribunal, that 52 dwellings in a sheltered housing development in Selly Park Birmingham, owned by the Sanctuary Housing Association, should be valued by reference to the restricted re-sale value of the leasehold interest under the terms of the lease i.e. 70% of the open market. This restriction was imposed because of the original funding of the development by way of 30% grant aid.

Legal advice was that Regulation 6(1) requires value to be ascertained for a hypothetical sale of the dwelling in question, not the particular interest which is held by the occupier. In the case of a flat that is a 99 year lease, and in the case of other properties a sale of the freehold is to be assumed. In neither case is the actual interest relevant, nor can price restrictions within that lease be taken into account.

The case was settled on this basis with solicitors acting for all parties by means of a Consent Order of the High Court and the original bands were restored. Listing officers should not, therefore, reflect price restrictions in bands.

4.12 Use of common parts

“Common parts” are defined in Reg 6(5) as being, in relation to a dwelling,

“any part of a building containing the dwelling and any land or premises which the owner or occupier of the dwelling is entitled to use in common with the owners or occupiers of other premises in the immediate locality”.

Where an owner or occupier is entitled to use “common parts”, it is to be assumed that those parts are not only in a state of reasonable repair, as defined above, but that the purchaser would be liable to contribute towards the cost of keeping them in this state. (Reg 6(2)(f)).

Even if, in practice, no contribution is actually required to be made for the upkeep of common parts, the valuation for banding purposes is to assume such an outgoing if the owner or occupier is entitled to their use. In such instances the amount of expenditure to be incurred should be estimated by having regard to how such a cost would be apportioned if actually demanded.

4.13 Service charges

Service charges are not specifically referred to in the regulations and accordingly regard should generally be had to those which were actually payable (or were deemed to be payable in the case of new property) as at 1 April 1991, and the extent to which they were seen to affect value.

However, it should be noted that where a service charge includes an amount to reflect the cost of repairing a property whose state of repair is not consistent with the assumptions contained in Reg 6(2)(e) and (f), then the valuation is to have regard to the assumed additional or reduced charge that would be required as opposed to the actual charge which was passing at 1 April 1991.

4.14 Disabled persons provisions

There is a specific provision contained in the regulations concerning a dwelling which has been made suitable for use by a physically disabled person.

Reg 6(2)(g) states that if a dwelling contains fixtures to which the sub-paragraph applies, then such fixtures are to be assumed not to be included in the dwelling. Reg 6(4) identifies these fixtures as follows;

“Sub-paragraph (g) of paragraph (2) applies to any fixtures which –

(a) are designed to make the dwelling suitable for use by a physically disabled person; and

(b) add to the value of the dwelling”.

Consequently any fixtures which satisfy the criteria laid down in Reg 6(4) should be assumed not to be included in the dwelling, (all fittings are already excluded under the general basis of valuation to be applied, see 4:15). Fixtures which are designed to make a dwelling more suitable for use by a physically disabled person will be extremely varied but will include ramps, some sanitary appliances, rails, chair lifts etc. It is to be noted that the actual use to which such features are put is irrelevant when considering whether they are appropriate for exclusion.

Where any fixture which has been designed to make a dwelling suitable for use by a physically disabled person does not add value to the property, it will not satisfy Reg 6(4) and must not be treated as a relevant fixture for the purposes of Reg 6(2)(g). Consequently, regard is to be had to the existence of the fixture and any reduction which it may cause when considering the appropriate band which should be ascribed to the property.

It should be noted that The Council Tax (Reductions for Disabilities) Regulations 1992 (SI No. 554) provide that the Council Tax bill of a person to whom the regulations apply (“the eligible person”) will, except in the case where a dwelling has been ascribed a band A, be calculated as if the dwelling was in a lower valuation band than is in fact the case. This is a charging provision and not one of valuation. Offices must not, therefore, become involved in discussions as to whether an individual qualifies as an “eligible person”. Taxpayers may be advised of the regulations’ existence but informed that it is a matter for the Billing Authority to determine.

4.15 Fixtures and fittings

When considering the value of any dwelling the effect of any fittings is to be ignored. Only items which may be considered to be fixtures are to be reflected unless, in relation to physically disabled persons, they are excluded by virtue of Reg 6(2)(g) (see 4:14).

The mere fact that an item may be fixed does not automatically mean that it is to be regarded as a fixture. Similarly, simply because any item is not actually fixed does not necessarily mean that it is a fitting.

Regard is to be had not only to the degree of fixing but also the actual purpose of the fixing. If the main purpose of the fixing is in order to allow the better enjoyment of an item, as opposed to trying to effect an improvement in the dwelling, the item is to be regarded as a fitting. Conversely, if an item which is not fixed is placed to effect an improvement to the dwelling it is to be regarded as a fixture.

Fittings: Carpets and Curtains

Fixtures: Bathroom Suites, Kitchen Units, Secondary Glazing, Central Heating.

4.16 The concept of ‘tone of the list’

In the High Court decision of Domblides v Listing Officer 2008, Counsel for the LO had introduced into her argument the concept of ‘tone of the list’. This is a familiar concept to Rating, but not until that time for Council Tax. This decision showed that evidence for banding can be gleaned, not from primary sales evidence, but (in that case) from decided cases. Hence the need for primary sales evidence is not always necessary to prove a band in a list that has been established over time. In his decision the Judge said:

“Secondly, it is the case that over time valuation tribunals’ decisions will shift from a consideration of individual sale prices, as they were in 1991, and will develop a body of case law which establishes that certain types of properties fall within bands. Thus, in relying on the later decisions, the tribunal is not relying on specific valuations; though it was specific valuations that underlay the subsequent decisions of the tribunal. This resembles the accepted method of valuation known as relying on the, “tone of the list” and this is an appropriate valuation method that is supported by a reference to Ryde on Rating”.

He continued:

“It is very important to note that the further away one gets from the 1991 list the more appropriate it becomes for the valuation tribunal or the listing officer to have regard, particularly in the interests of consistency, to the decisions of the tribunal….”

5. Valuation bands

All dwellings are to be ascribed valuation bands for the purpose of S.23(2) of the Local Government Finance Act 1992, in accordance with those set out in S.5(2) and (3) of the Act, namely,

In England

Valuation band

Range of values

Not exceeding £40,000

And, in Wales

Valuation band

Range of values

A

Not exceeding £30,000

B

Exceeding £30,000 but not exceeding £39,000

C

Exceeding £39,000 but not exceeding £51,000

D

Exceeding £51,000 but not exceeding £66,000

E

Exceeding £66,000 but not exceeding £90,000

F

Exceeding £90,000 but not exceeding £120,000

G

Exceeding £120,000 but not exceeding £240,000

H

Exceeding £240,000

Practice note 1: Wales 2005 list only: Definition of dwelling and basis of valuation for Council Tax

1.0 Introduction

The Local Government Finance Act (LGFA)1992 requires the Commissioners of Inland Revenue (now HMRC) to carry out valuations of dwellings in England and Wales for the purposes of compiling and maintaining valuation lists (sections 20-23), and specifies bands within which dwellings are to be placed (Section 5). The Act also requires that a similar valuation exercise be carried out in Scotland by the Scottish Assessors, acting under the direction of the Commissioners.

The Council Tax (Situation and Valuation of Dwellings) Regulations 1992 as amended by The Council Tax (Situation and Valuation of Dwellings) (Amendment) Order 1994 (hereinafter referred to as “the regulations”) contain, inter alia, the basis of valuation to be adopted when banding for Council Tax purposes.

2.0 Definition of dwelling

It is Section 3 of the LGFA 1992 that defines what a “dwelling” is for CT and reads as follows:

(1) This section has effect for determining what is a dwelling for the purposes of this Part.

(2) Subject to the following provisions of this section, a dwelling is any property which - a) by virtue of the definition of hereditament in section 115(1) of the General Rate Act 1967, would have been a hereditament for the purposes of that Act if that Act remained in force; and b) is not for the time being shown or required to be shown in a local or a central non-domestic rating list in force at that time; and c) is not for the time being exempt from local non-domestic rating for the purposes of Part III of the Local Government Finance 1988 Act (“the 1988 Act”); and in applying paragraphs (b) and (c) above no account shall be taken of any rules as to Crown exemption.

(3) A hereditament which - a) is a composite hereditament for the purposes of Part III of the 1988 Act; and b) would still be such a hereditament if paragraphs (b) to (d) of Section 66(1) of that Act (domestic property) were omitted, is also, subject to subsection (6) below, a dwelling for the purposes of this Part.

(4) Subject to subsection (6) below, none of the following property, namely - a) a yard, garden, outhouse or other appurtenance belonging to or enjoyed with property used wholly for the purposes of living accommodation; or b) a private garage which either has a floor area of not more than 25 square metres or is used wholly or mainly for the accommodation of a private motor vehicle; or c) private storage premises used wholly or mainly for the storage of articles of domestic use, is a dwelling except in so far as it forms part of a larger property which is itself a dwelling by virtue of subsection (2) above.

(5) The Secretary of State may by order provide that in such cases as may be prescribed by or determined under the order - a) anything which would (apart from the order) be one dwelling shall be treated as two or more dwellings; and b) anything which would (apart from the order) be two or more dwellings shall be treated as one dwelling.

(6) The Secretary of State may by order amend any definition of “dwelling” which is for the time being effective for the purposes of this Part.”

2.1 Points to note:

In respect of the above definition, the following points are to be noted;

(i) Hereditament is defined in Section 115(1) of the General Rate Act 1967 as being, “property which is or may become liable to a rate, being a unit of such property which is, or would fall to be, shown as a separate item in the valuation list”. It is case law, however, which tells us what this means in practice.

Hereditament in relation to CT was examined in the case RGM properties v Speight LO 2011. In paragraphs 13-17, an analysis of the law was undertaken in relation to beneficial occupation. The authorities were examined and the practical definition linked to that expounded in Post Office v Nottingham City Council CA 1979 in the answer to the question “as a matter of fact and degree, is or will the building, as a building, be ready for occupation, or capable of occupation, for the purposes for which it is intended?”

In both the RGM case and Wilson v Coll LO 2011, the need to separate the ‘hereditament test’ as to whether an existing property is capable of reasonable repair, and the valuation assumptions to be applied (see paragraph 3 below) once it was found that a hereditament existed, was emphasised.

In R v East Sussex Valuation Tribunal Ex p. Silverstone 1996 RVR 203, it was confirmed that where two separate dwellings are converted into a single unit, a new dwelling comes into existence.

The case of Baker (VO) v Citibank LT 2007 confirmed the principle that a change in the boundaries of a hereditament created a new hereditament. It follows from this that where a dwelling either acquires or disposes of land, to add or subtract from its boundaries (that is not merely de minimis in extent), a new dwelling will have been created in each case. In these circumstances a relevant transaction is not necessary to trigger a band review where material increases have taken place.

A dwelling which is removed from the list because it becomes non-domestic property will cease to be a dwelling. If subsequently it becomes domestic property again and qualifies as a dwelling it will be treated as a new dwelling when brought back into a CT list. Any improvements which may have occurred will be taken into account as part of the new dwelling.

(ii) Exemptions for the purposes of Part III of the LGFA 1988 are listed in its 5th Schedule.

(iii) Any property which satisfies the definition in Section 3 LGFA 1992 but is in the occupation of the Crown is nevertheless a dwelling for Council Tax purposes.

(iv) Any property which is a composite property as defined by Section 64(9) of the LGFA 1988 is a dwelling unless it forms such a hereditament by virtue of the fact that it contains only domestic property defined in paragraphs (b) to (d) of Section 66(1) of the 1988 Act.

(v) Any property included in those categories mentioned in S.3(4)(a) (b) and (c) LGFA 1992 will never constitute a dwelling in isolation. It will only ever be a dwelling to the extent that it forms part of a larger dwelling. Such property will only form part of a larger dwelling if, for the purposes of the General Rate Act 1967, it would have formed part of a hereditament as defined by S.115(1) e.g. a house and garage occupied together and situated within a single curtilage will together form a single dwelling.

A garage which is physically separated by a main road, from the dwelling house with which it is enjoyed, will not comprise a dwelling in its own right or be regarded as forming part of the dwelling. (It would have formed a separate hereditament for the purposes of the General Rate Act 1967). Similarly a garage situated within the curtilage of a block of flats will not comprise part of a dwelling if, for the purposes of the 1967 Act, it would have formed a separate hereditament. The value of any such garage should not be reflected directly in the value of the individual dwelling.

Communal facilities such as car parking areas, gardens, communal lounges at a block of flats or sheltered housing development will not generally comprise a dwelling in their own right but the value of such facilities will fall to be reflected in the market values of the individual units.

In those instances where a facility is used by both owners of adjoining living accommodation, as a right of occupation of their respective hereditaments and individuals living elsewhere (provided the latter use is not de minimis) it will have been treated as non-domestic property, e.g. leisure facilities at a luxury development. The right to use such facilities should be reflected in the market values of the individual dwellings.

(vi) The power conferred on the Secretary of State in subsection (5) has been exercised in the form of The Council Tax (Chargeable Dwellings) Order 1992 (SI No. 549) as amended by The Council Tax (Chargeable Dwellings, Exempt Dwellings and Discount Disregards) Amendment Order 1997 (SI No 656) and the Council Tax (Chargeable Dwellings, Exempt Dwellings and Discount Disregards)(Amendment) (England) Order 2003 SI 3121 . Articles 3 and 3A of the Order detail the circumstances where properties which would otherwise form single dwellings are to be treated as more than one. Article 4 gives the listing officer a discretion in prescribed circumstances to treat properties which would otherwise form multiple dwellings as single ones. For instructions on the disaggregation and aggregation of dwellings see CTM: PN5 and PN6 respectively.

3. Basis of valuation – valuation assumptions

The basis of valuation for any dwelling is found in Regulation 6(1), (2) and (3) of The Council Tax (Situation and Valuation of Dwellings) Regulations 1992 (SI No. 550) as amended by the Council Tax (Situation and Valuation of Dwellings) (Amendment) Orders 1994 and 2005. Reg 7 simply sets out an apportionment approach for the valuation of a composite dwelling but does not affect the basic assumptions. Reg 6 is as follows:-

(1) Subject to Reg 7, for the purposes of valuations under Section 21 (valuations for purposes of lists) of the Act, the value of any dwelling shall be taken to be the amount which, on the assumptions mentioned in paragraphs (2) and (3) below, the dwelling might reasonably have been expected to realise if it had been sold in the open market by a willing vendor on 1 April 2003.

(2) The assumptions are:-

(a) that the sale was with vacant possession;

(b) that the interest sold was the freehold or, in the case of a flat, a lease for 99 years at a nominal rent;

(c) that the dwelling was sold free from any rent charge or other encumbrance;

(d) except in a case to which paragraph (3) or (3A) applies, that the size, layout and character of the dwelling, and the physical state of its locality, were the same as at the relevant date;

(e) that the dwelling was in a state of reasonable repair;

(f) in the case of a dwelling, the owner or occupier of which is entitled to use common parts, that those parts were in a like state of repair and the purchaser would be liable to contribute towards the cost of keeping them in such a state;

(g) in the case of a dwelling which contains fixtures to which this sub-paragraph applies, that the fixtures were not included in the dwelling;*

(h) that the use of the dwelling would be permanently restricted to use as a private dwelling; and

(i) that the dwelling had no development value other than value attributable to permitted development.

*Reg 6(2)(g) only applies to fixtures which are designed to make a dwelling suitable for use by a disabled person and which add to the dwelling’s value - this is covered in Reg 6(4) *(see 4.14 & 4.15 below).

(3) In the case of a valuation carried out for the purposes of an alteration of the valuation list resulting from a material reduction in the value of the dwelling, it shall be assumed that -

(a) the physical state of the locality of the dwelling was the same as on the date from which the alteration of the list would have effect; and

(b) the size, layout and character of the dwelling were the same

(i) in the case of an alteration resulting from a change to the physical condition of the dwelling, as on the date from which the alteration in the list would have effect;

(ii) in a case where there has been a previous alteration of the valuation list in relation to the dwelling, as on the date from which that alteration had effect;

(iii) in a case where in relation to the dwelling, there has been a relevant transaction within the meaning of Section 24, not resulting in an alteration of the valuation list, as on the date of that transaction;

(iv) in a case to which more than one of sub-paragraphs (i) to (iii) applies, as on whichever is the latest of the dates there mentioned; and

(v) in any other case, as on 1 April 2005.

(4) In the case of a valuation carried out for the purposes of an alteration to correct an inaccuracy in a list which arose -

(a) in the course of making a previous alteration which resulted from a material reduction in the value of the dwelling, or

(b) since the date of such an alteration by reason of an alteration which was the next alteration to be made and was neither the result of a material reduction in the value of the dwelling nor the occurrence of any of the events described in paragraph (5B) below,*

it shall be assumed that the physical state of the locality of the dwelling, and the size, layout and character of the dwelling are the same as on the dates which were applicable in respect of the previous alteration in accordance with paragraph (3) above.

-End of extract-

The basis of valuation for any dwelling which is a composite hereditament or part of a single property which is a composite hereditament is contained in Reg 7(1) of The Council Tax (Situation and Valuation of Dwellings) Regulations 1992. For instructions on the valuation of such dwellings see CTM: PN 2.

4.0 Interpretation and application of basis of valuation

4.1 Open market value as at 1 April 2003

(a) “Reasonably expected” and “open market”

“Reasonably expected” and “open market” are not defined in the regulations but may be taken as having the same meaning as when used in a similar context in S.272(1) of the Taxation of Chargeable Gains Act 1992 and S.160 of the Inheritance Tax Act 1984.

It is therefore necessary to assume that

(i) all preliminary arrangements have been made prior to disposal

(ii) adequate publicity has been given to the sale

(iii) the most appropriate method of sale has been chosen so as to maximise the proceeds of the sale.

(NB Lotting – selling in parts - cannot be assumed as this would be inconsistent with the concept of the hereditament from which the dwelling is derived).

Problems can arise when a covenant is entered into a conveyance of the freehold or long leasehold interest, restricting the value on re-sale of the interest, to a percentage of the open market value of the dwelling. This restriction must be ignored for Council Tax purposes. (See paragraph 4.11 Restrictive Covenants).

Open market value will be determined by having regard to all the evidence of sales of similar dwellings in the locality at the antecedent valuation date (1 April 2003). Prices paid for new properties purchased from a builder should be treated with caution, since they often reflect a “new build premium” which will not be payable in the second-hand market from where the bulk of sales evidence is drawn.

(b) “Willing Vendor”

The term “willing vendor” is not defined in the regulations but may be taken to have the same meaning as “willing seller” as contained in S.5 of the Land Compensation Act 1961 (Rule 2) ie. not a person selling without reserve but one who does it as a free agent as opposed to one who is forced to sell.

(c) Special Purchaser and Marriage Value

The definition of open market value does not specifically exclude either a special purchaser or marriage value. However, an increase in value which is attributable to a situation where either a special purchaser or marriage value is seen to exist will often be excluded by virtue of Reg 6(2)(h) and (i) (ie the requirement to assume a restriction on use and limited development value only).

Where the existence of a special purchaser is identified and the above regulations would not be offended, regard should only be had to any overbid if it can be established that such a bid would have been made if the dwelling had been marketed at 1 April 2003.

(d) Number of properties assumed to be on the market as at 1 April 2003

No reduction should be made on account of a theoretical “flooding of the market” on 1 April 2003.

Regs 6 and 7 refer to the valuation of any one property as at the date of valuation and does not permit the assumption that all dwellings are placed on the market at the same time. In other words the valuer should consider that the equilibrium of the market place is maintained in the state which actually existed on 1 April 2003.

Accordingly the valuation of any dwelling is to be approached as if it were simply one additional dwelling coming on to the existing market as at 1 April 2003.

(e) Unlawful use of property

Reg 6(2) does not require an unlawful use of a property to be disregarded.

The banding of any property where any unlawful use is apparent should therefore take into account the value which the market would have placed on that use as at 1 April 2003, e.g. a dwelling which has been built without permission should be banded having regard to how the market would have viewed it as at 1 April 2003, as compared to others for which planning approval had been obtained.

4.2 Vacant Possession

The assumption as to vacant possession serves to ensure that any statutory provision or other circumstance which has an effect on value either by way of affording protection to an occupier or by allowing that person to purchase at a reduced figure, for example under the Right to Buy provisions of the Housing Act 1985, is to be disregarded.

It should be noted that the assumption is only to be made in respect of the actual dwelling being banded as at 1 April 2003. For example, if the dwelling to be banded is a tenanted, local authority owned flat situated within a block of similar units or a tenanted cottage on a large rural estate, regard must be had to the actual nature of the occupation of the surrounding premises as at 1 April 2003 and any consequential effect on the vacant possession value of the subject dwelling.

4.3 Tenure

All premises, excluding only those which may be defined as flats, are to be valued on the basis that it is a freehold interest which is for sale.

Flats, irrespective of the actual length of the remaining term or rent paid, are to be valued on the basis that there is the benefit of a lease for 99 years at a nominal rent. Consequently there will sometimes be instances where there is a substantial difference between the price a dwelling might have been expected to achieve if marketed as at the antecedent valuation date of 1 April 2003 and the valuation arrived at in accordance with the regulations.

Reg 6(5) defines “flat” as having the same meaning as in Part V of the Housing Act 1985. S.83 of that Act provides:

(2) A dwelling-house is a house if, and only if, it (or so much of it as does not consist of land included by virtue of S.184) is a structure reasonably so called; so that –

(a) where a building is divided horizontally, the flats or other units into which it is divided are not houses;

(b) where a building is divided vertically, the units into which it is divided may be houses;

(c) where a building is not structurally detached, it is not a house if a material part of it lies above or below the remainder of the structure.

(3) A dwelling-house which is not a house is a flat.”

Any dwelling, irrespective of its actual description and tenure, should be regarded as a flat if it satisfies the above definition. In essence, a property which forms part of a building will be a flat unless it is divided vertically from the rest of the building and no material part of it lies above another part of the structure.

4.4 Repair

NB CTM: PN4 deals with Repair in more detail.

It is required to be assumed that the dwelling was in a “state of reasonable repair”.

Reg 6(6) states,

“In determining what is “reasonable repair” in relation to a dwelling for the purposes of paragraph (2), the age and character of the dwelling and its locality shall be taken into account.”

Age The “age” of a dwelling will naturally affect the standard of repair which could reasonably be expected by a prospective purchaser but it is necessary to consider this factor in the context of the other two mentioned in the regulation. For example, the mere fact that a property is modern does not necessarily mean that it can be assumed to be in good repair. Due to a particular design or the fact that properties in a locality have generally been allowed to deteriorate, the state of repair which might reasonably be expected may be lower than that attaching to similar properties outside the locality.

Locality “Locality” as used in Reg 6(6) may be taken to be any area or district which is generally recognised and described as such, not necessarily only by reference to the housing stock, but also by reference to the district’s associated infrastructure and the level of amenities it is seen to enjoy.

Character The “character” of a dwelling may be seen to consist of all those characteristics which are peculiar to it (as opposed to its locality) including any advantages or disabilities which exist.

Often the character of any given dwelling will be the same as that exhibited by neighbouring dwellings of a similar age and design and there will be little problem in arriving at the state of repair to be assumed. For example, if one dwelling on an estate of identical houses has been allowed to deteriorate, its basic character would nevertheless be the same as that of the neighbouring property and the inferior state of repair existing would not be reflected in its valuation banding. Conversely, if one was valuing a dwelling in a row of Georgian town-houses, all of which have minor structural defects (which would never be remedied due to the expense involved), the state of repair assumed would be that which actually exists. Similarly when valuing any dwelling which has been designated defective under the Housing Defects Act 1984 regard must be had to the state of repair which actually attaches to that type of property in the locality.

There will, however, be instances where despite the fact that a property might be of a similar age and design its character will vary from that of its neighbours, e.g. a Victorian terrace might comprise various properties whose character is seen to vary considerably, either due to general neglect or because substantial improvements have occurred. The role that the character of a given property will have in determining what is “reasonable repair” in any instance will depend upon the extent to which this character is seen to vary from that attaching to the majority of properties within the locality.

If it is considered that the character of any dwelling is so different from that of the majority of other dwellings within the locality, then it will generally be inappropriate to assume that the same state of repair exists. For example, in the case of a property which is in an inferior condition, if the works required to be carried out to achieve the same state of repair as that which attaches to the majority of other dwellings, would result in the creation of a dwelling which was wholly different in character in its repaired state from that presently existing, then a similar state of repair should not be assumed to exist. Such works would not constitute repair simply to make good the ravages of time but rather renewal or improvement and it cannot be assumed that they would be carried out. However, it may be assumed that repairs would be carried out to such an extent to bring the property up to the average state of repair of its peer group. Similarly, if a dwelling has been so substantially improved and extended, so as to become wholly different in character from those around it, the state of repair which it is appropriate to assume may well differ from that state which attaches to its previously similar neighbours.

Where a dwelling is identified as being of a different character to that of its neighbours, it should be valued having regard to the state of repair which is seen to attach to dwellings which exhibit the same characteristics as those which exist in the subject dwelling. In such circumstances it may be appropriate to assume a state of repair exhibited by more comparable dwellings elsewhere than in the immediate vicinity.

Hereditaments and the repair assumptions: A useful summary of case law relating to a state of reasonable repair as it applied in the domestic Rating context is contained in Benjamin (VO) v Anston Properties Ltd (1998), in particular Wexler v Playle (VO) (1960) and Saunders v Maltby (VO) (1976). More recent cases, however, in relation to repair for CT are the High Court appeals in Burke v Broomhead (LO for Camden) 2009, RGM Properties v Speight LO 2011 and Wilson v Coll LO 2011.

In the Burke case, it was confirmed that if a hereditament existed, the repair assumption must be assumed and it was not possible to reduce a valuation on account of a necessary repair, in this case, the necessity of a new roof. A calculation as to whether it was an economic repair was unnecessary.

In RGM Properties v Speight this principle was spelt out in paragraph 35, “The assumption as to a reasonable state of repair, applies…only if a building is already accepted as a hereditament …..It is not relevant to determining that a property which is plainly uninhabitable but could be made habitable by reasonable repair is in some magical way capable of occupation so as to be a hereditament. The proposition is obvious: a barn without a roof which might be converted into a dwelling is not capable of occupation for the purposes of a dwelling, merely because it could be repaired to reach that state. Once it is however put into position as being capable of being a dwelling, the fact that elements of disrepair about and around it do not affect the banding….”

In Wilson V Coll, a landlord argued that a hereditament did not exist because it made no made no economic sense for him to do so. The Judgement confirmed that whether a repair was economic or not was not a relevant consideration in council tax, as it was in Non-Domestic Rating. If a vacant property was capable of normal repair, without major reconstruction or character changing work, then it would still qualify as a hereditament and thus a dwelling. It was also emphasized that the initial hereditament question is entirely separate from the subsequent repair assumption with regard to reasonable repair of a dwelling. Only if a hereditament exists, can the repair assumption be invoked, and the two ‘repair’ issues should not be confused.

Dwellings subject to major repair work or structural alterations

With effect from 1 April 2000, article 2 of the Council Tax (Exempt Dwellings) (Amendment) (England) Order 2000 (SI 424) amends Class A of the 1992 Order SI 558 to limit the exemption from Council Tax for a vacant dwelling subject to structural alteration or requiring or subject to major repair work, to a maximum of 12 months. “Major repair work” includes structural repair work. This order revokes SI 1999/1522.

Empty houses or flats awaiting demolition should be treated in accordance with advice given on CTM PN4 para (6) where the Local Government Finance Act 1988 S66 (5) may come into play.

Summary It is necessary to judge each case of repair on its own merits within the meaning of “state of reasonable repair.” In the vast majority of cases the state which might reasonably be expected will be readily apparent as evidenced by the standard of repair attaching to the majority of similar dwellings (in terms of age, character and location) and it is this state which is to be assumed when banding. Only in those cases where the character of a dwelling is wholly different from the majority of its neighbours should one vary from the general level being adopted, at which time it will be necessary to have regard to the state of repair attaching to similar dwellings elsewhere.

4.5 Derelict properties

No property will constitute a dwelling unless it would have been a hereditament for the purposes of S.115(1) of the General Rate Act 1967 (S.3(2) of the LGFA 1992). Accordingly, where a domestic property is derelict or undergoing structural alterations to the extent that it is not ready for, nor capable of, beneficial occupation, it will not constitute a dwelling for the purposes of S.3 of the LGFA 1992. (See CTM: PN 4).

4.6 Size, layout and character of the dwelling and the physical state of the locality

Regs 6(2)(d) and 6(3) refer to the assumptions to be made in respect of the size, layout and character of the dwelling and the physical state of its locality. For valuation purposes, the regulations require it to be assumed that these variables were the same as at the AVD of 1 April 2003 as those actually existing at later dates. The variables are taken back to AVD for the purposes of valuation. The date(s) at which each variable needs to be considered whilst having regard to the level of values existing at the AVD will depend upon the occasion giving rise to the alteration of the list. (See CTM: PN3).

This section considers those matters which may be reflected under:-

(a) Size and Layout

(b) Character

(c) Physical state of the locality

(a) Size and layout A change in the size and layout of a dwelling will usually arise through structural alterations being carried out which reduce or increase the size of the property and/or alters its floor plan.

If structural alterations causing a reduction in value occur the definition of “Material reduction” will usually be satisfied and, if appropriate, an alteration of the list may be made. If however structural alterations increase the value of the property an alteration to the list cannot be made to reflect this “material increase” until there has been a “relevant transaction” (CTM: PN3).

(b) Character Any matter which can be considered to have a direct effect on the character of any dwelling (as opposed to its locality), and is not otherwise excluded by any of the assumptions contained in Reg 6(2), will generally fall to be reflected as it existed at a date other than the AVD.

However the word “character” does not allow a planning restriction or restrictive covenant, not otherwise made irrelevant by virtue of Reg 6(2)(h) or (i), to be reflected as it existed at a date other than the AVD. (For the treatment of planning restrictions and restrictive covenants which attach to properties see 4.10 and 4.11 below).

(c) Physical State of the locality

“Physical state of locality” may be taken to mean that which is readily apparent to anyone viewing that locality, without knowing or being made aware of any economic, social, legal or other non-physical factors affecting the locality.

This definition does not allow it to be argued that factors such as unemployment, the prospect of development, or the designation of a conservation area were any different from those actually existing at 1 April 2003. These factors may be reflected in the banding of a property only insofar as they may have affected its value at 1 April 2003 assuming they do not otherwise affect the physical state of the locality.

4.7 Use as a “private dwelling”

Reg 6(2)(h) requires it be assumed that,

“the use of the dwelling would be permanently restricted to use as a private dwelling”.

“Private dwelling” in the above context should be taken to mean a dwelling which is used primarily for private or domestic (as opposed to commercial or public) purposes. The definition does not exclude any partial non-private use so long as it does not stop the dwelling from being considered to be private.

The extent to which non-private uses may exist before they offend the definition of a private dwelling will be a matter of fact and degree in each case. Only if a use prevents a dwelling from being regarded as private should the effect of that use on its value be disregarded for banding purposes. For the purpose of clarification, those small guesthouses and holiday homes which are used for minor commercial purposes and defined as being wholly domestic by virtue of S.66(2A) and (2B) LGFA 1988 as amended respectively, are to be treated as being private dwellings for the purposes of Council Tax.

Situations where it is appropriate to adjust the market value to accord with the statutory assumption will be seen to be extremely rare. In most cases any substantial non-private use of any dwelling will result in the dwelling becoming a composite hereditament when Reg 6(2)(h) will not be applicable (CTM: PN6).

4.8 “permitted development”

It is to be assumed that the dwelling under consideration had no development value other than that attributable to “permitted development”. Permitted development is defined in Reg 6(5) as being development

“for which under the Town and Country Planning Act 1990 planning permission is not required, or for which no application for planning permission is required”

reflecting the differing situations which exist under Sections 57 (planning permission required for development) and 59 (development orders; general) respectively of the Town and Country Planning Act 1990.

Consequently, regard is to be had to both the Use Classes Order 1987 and the General Development Order 1988 along with any additional value they are seen to attach to a particular premises.

For example, any increases in value by virtue of there being a strong demand for holiday homes in a locality (a use permitted by class C3), or a plot being of sufficient size to allow development which would be granted permission by the General Development Order, should be correctly reflected in any valuation for banding purposes.

Conversely, any “hope” of obtaining planning permission in respect of a dwelling as at the AVD, which would have had the effect of increasing its value, should be disregarded as this would offend the definition of permitted development as contained in Reg 6(5). For example, a dwelling in, or on the verge of, an area where a substantial number have been converted into offices might well have had a market value in excess of similar dwellings in the immediate neighbourhood, but its banding will be the same.

It is to be noted that whilst there may be no difficulty in adequately reflecting any value which is attributable to “permitted development” (as such value is generally inherent in the open market sale price of a property), special attention should be paid to those factors which, though not always readily identifiable, are clearly outside its definition and must not be taken into account.

4.9 Rentcharges and incumbrances

It is to be assumed that no “rentcharge or other incumbrance” attaches to any dwelling. (Reg 6(2)(c)).

Reg 6(5) defines rentcharge as having the same meaning as in the Rentcharges Act 1977 which states (in section 1),

“For the purpose of this Act, “rentcharge” means any annual or other periodic sum charged on or issuing out of land, except –

(a) rent reserved by a lease or tenancy, or

(b) any sum payable by way of interest”.

The phase “or other incumbrance” should be interpreted in a restrictive sense namely something which it is in the power of the vendor to remove by his own unilateral action. Effectively that is limited to financial restrictions such as a mortgage on the dwelling. Thus there is a statutory right to redeem a rent charge in Sections 8-10 of the Rent Charges Act 1979; mortgages and other financial changes can be similarly redeemed as can a judgement against the land by paying the amount of the judgement.

Easements, rights of way , restrictive covenants, and planning restrictions are all ‘incumbrances’ in the widest sense of the word, but cannot be lifted by the unilateral action of the vendor. They therefore fall outside this valuation assumption that the dwelling is sold free from any such incumbrances as existed at the relevant date, with the result that such restrictions CAN be reflected in the valuation. Rentcharges, mortgages liens and the like must NOT be reflected in the valuation.

Support for this argument may also be gained by considering the order of the assumptions in Reg 6(2) of 1992 SI No 550. Assumptions (a) to (c) relate to the interest being valued, (d) to (g) to physical matters concerning the dwelling and its locality, and planning matters are referred to in (h) and (i). A planning restriction would therefore not fall within Reg 6(2)(c) as an ‘incumbrance’.

4.10 Planning restrictions

Regard should only be had to a planning restriction which was, or may be deemed to have been, attached to a property as at 1 April 2003.

Only if a value significant restriction was either

(1) actually attached to a property as at 1 April 2003

or

(ii) attached to a property constructed after 1 April 2003 and prior to its inclusion in the valuation list should it be taken into account for banding purposes.

Any planning restriction imposed on an existing dwelling or removed from a dwelling during the life of a list is a non physical change and should be ignored.

Relevant case law: The relevance of a planning restriction was considered by the Court of Session in Scotland in Re the Appeal of Grampian Valuation Joint Board Assessor 2003 RA167. It rejected an appeal made by the assessor against the decision of the Valuation Appeal Committee that in valuing a dwelling for the purposes of council tax, an agricultural occupancy condition in the planning permission for its construction was not to be ignored. There was nothing in the Council Tax (Valuation of Dwellings) (Scotland) Regulations 1992 which stated or implied that a planning restriction that affected the value of the dwelling should be ignored, and although under the regulations development value was to be ignored, the assessor was not required to ignore any depreciation in value that was due to a planning restriction. The contention that the planning condition fell to be ignored involved a departure from reality that was required neither by the assumption of a sale on the open market or by any of the specific valuation assumptions. Although the regulations in Scotland differ slightly from the wording of the equivalent regulations in England and Wales, the decision is equally applicable and should be followed.

Weight to be given: Where a planning restriction is correctly to be taken into account the likelihood of getting the restriction lifted at the AVD should be reflected in arriving at the valuation. Regard should be had to the local authority’s general policy on such matters and how they were seen to treat applications to have similar restrictions lifted as at AVD.

Agricultural occupancy restriction: If the restriction was attached to a property on or before 1 April 2003, or imposed on a new dwelling during the life of a list any reduction in value caused by its existence should be reflected. Imposition or removal of planning restrictions to existing dwellings should be ignored as these are non-physical factors.

The removal of an agricultural restriction should be ignored unless it is carved out from the main farm holding, in which case it will be a split from the main hereditament and be treated as a new dwelling with different boundaries.

Key worker restrictions: Planning agreements made under Section 106 of the Town & Country Planning Act 1990 often include references to low cost housing and restricted to key workers, eg nurses, teachers, police etc. The restriction on occupation may be reflected, where that is judged to affect value, but specific restrictions on price reflected in leases is to be disregarded as explained below.

4.11 Restrictive covenants

Restrictive covenants in a freehold or long leasehold interest which would have an effect on the sale price of that interest, should be taken into account for Council Tax purposes and assumed to coexist with the hypothetical sale on the grounds that the dwelling must be valued on the assumption of a hypothetical sale of the freehold, or 99 year lease in the case of a flat.

Coll v Walters 2016 EWHC 831 (Admin) , a High Court case, examined whether a restrictive covenant benefiting neighbouring land should be taken into account. The restrictive covenant, benefiting the neighbouring land, provided that the house and an annexe in the garden, together the subject property, should not be occupied separately. The judge held that a restrictive covenant of this nature fell outside the definition of Reg 6 (2) ( c) “ free from any rent charge or other incumbrance” and, as such, had to be taken into account in the banding. The freehold was encumbered by the restriction and it is the freehold that has to be valued in the case of a house. It is considered the same answer would result with a flat notwithstanding the assumption of a 99 year lease rather than the actual lease. This is because the restrictive covenant would have an existence outside the actual dwelling being considered, as it benefitted other land.

By way of contrast however, a restrictive covenant that provided a mechanism to create a discounted sale price should be ignored because it is in the nature of a “rent charge or incumbrance” . An appeal was made to the High Court was made by the Listing Officer in 1994 against the decision of the Birmingham Valuation Tribunal, that 52 dwellings in a sheltered housing development in Selly Park Birmingham, owned by the Sanctuary Housing Association, should be valued by reference to the restricted re-sale value of the leasehold interest under the terms of the lease ie 70% of the open market. This restriction was imposed because of the original funding of the development by way of 30% grant aid. Legal advice was that Regulation 6(1) requires value to be ascertained for a hypothetical sale of the dwelling in question, not the particular interest which is held by the occupier. In the case of a flat that is a 99 year lease, and in the case of other properties a sale of the freehold is to be assumed. In neither case is the actual interest relevant, nor can price restrictions within that lease be taken into account.

The case was settled on this basis by solicitors acting for all parties by a Consent Order of the High Court and the original bands were restored. Listing officers should not, therefore, reflect such restrictions in price in bands.

4.12 Use of common parts

“Common parts” are defined in Reg 6(5) as being, in relation to a dwelling,

“any part of a building containing the dwelling and any land or premises which the owner or occupier of the dwelling is entitled to use in common with the owners or occupiers of other premises in the immediate locality”.

Where an owner or occupier is entitled to use “common parts”, it is to be assumed that those parts are not only in a state of reasonable repair, as defined above, but that the purchaser would be liable to contribute towards the cost of keeping them in this state. (Reg 6(2)(f)).

Even if, in practice, no contribution is actually required to be made for the upkeep of common parts, the valuation for banding purposes is to assume such an outgoing if the owner or occupier is entitled to their use. In such instances the amount of expenditure to be incurred should be estimated by having regard to how such a cost would be apportioned if actually demanded.

4.13 Service charges

Service charges are not specifically referred to in the regulations and accordingly regard should generally be had to those which were actually payable (or were deemed to be payable in the case of new property) as at 1 April 2003, and the extent to which they were seen to affect value.

However it should be noted that where a service charge includes an amount to reflect the cost of repairing a property whose state of repair is not consistent with the assumptions contained in Reg 6(2)(e) and (f) then the valuation is to have regard to the assumed additional or reduced charge that would be required as opposed to the actual charge which was passing at 1 April 2003.

4.14 Disabled persons provisions

There is a specific provision contained in the regulations concerning a dwelling which has been made suitable for use by a physically disabled person.

Reg 6(2)(g) states that if a dwelling contains fixtures to which the sub-paragraph applies, then such fixtures are to be assumed not to be included in the dwelling. Reg 6(4) identifies these fixtures as follows;

“Sub-paragraph (g) of paragraph (2) applies to any fixtures which -

(a) are designed to make the dwelling suitable for use by a physically disabled person; and (b) add to the value of the dwelling”.

Consequently any fixtures which satisfy the criteria laid down in Reg 6(4) should be assumed not to be included in the dwelling, (all fittings are already excluded under the general basis of valuation to be applied, see 4:15). Fixtures which are designed to make a dwelling more suitable for use by a physically disabled person will be extremely varied but will include ramps, some sanitary appliances, rails, chair lifts etc. It is to be noted that the actual use to which such features are put is irrelevant when considering whether they are appropriate for exclusion.

Where any fixture which has been designed to make a dwelling suitable for use by a physically disabled person does not add value to the property, it will not satisfy Reg 6(4) and must not be treated as a relevant fixture for the purposes of Reg 6(2)(g). Consequently, regard is to be had to the existence of the fixture and any reduction which it may cause when considering the appropriate band which should be ascribed to the property.

It should be noted that The Council Tax (Reductions for Disabilities) Regulations 1992 (SI No. 554) provide that the Council Tax bill of a person to whom the regulations apply (“the eligible person”) will, except in the case where a dwelling has been ascribed a band A, be calculated as if the dwelling was in a lower valuation band than is in fact the case. This is a charging provision and not one of valuation. Offices must not, therefore, become involved in discussions as to whether an individual qualifies as an “eligible person”. Taxpayers may be advised of the regulations’ existence but informed that it is a matter for the Billing Authority to determine.

4.15 Fixtures and fittings

When considering the value of any dwelling the effect of any fittings is to be ignored. Only items which may be considered to be fixtures are to be reflected unless, in relation to physically disabled persons, they are excluded by virtue of Reg 6(2)(g) (see section 4:14).

The mere fact that an item may be fixed does not automatically mean that it is to be regarded as a fixture. Similarly, simply because any item is not actually fixed does not necessarily mean that it is a fitting.

Regard is to be had not only to the degree of fixing but also the actual purpose of the fixing. If the main purpose of the fixing is in order to allow the better enjoyment of an item, as opposed to trying to effect an improvement in the dwelling, the item is to be regarded as a fitting. Conversely, if an item which is not fixed is placed to effect an improvement to the dwelling it is to be regarded as a fixture.

Fittings: Carpets and Curtains Fixtures: Bathroom Suites, Kitchen Units , Secondary Glazing, Central Heating.

4.16 The concept of ‘tone of the list’

In the High Court decision of Domblides v Listing Officer 2008, Counsel for the LO had introduced into her argument the concept of ‘tone of the list’. This is a familiar concept to Rating, but not until that time for Council Tax. This decision showed that evidence for banding can be gleaned, not from primary sales evidence, but (in that case) from decided cases. Hence the need for primary sales evidence is not always necessary to prove a band in a list that has been established over time. In his decision the Judge said:

“Secondly, it is the case that over time valuation tribunals’ decisions will shift from a consideration of individual sale prices, as they were in 1991, and will develop a body of case law which establishes that certain types of properties fall within bands. Thus, in relying on the later decisions, the tribunal is not relying on specific valuations; though it was specific valuations that underlay the subsequent decisions of the tribunal. This resembles the accepted method of valuation known as relying on the, “tone of the list” and this is an appropriate valuation method that is supported by a reference to Ryde on Rating.

He continued:

“It is very important to note that the further away one gets from the 1991 list the more appropriate it becomes for the valuation tribunal or the listing officer to have regard, particularly in the interests of consistency, to the decisions of the tribunal….”

(It will be noted that the banding in this decision was 1 April 1991 which is still the base date in England for banding).

Valuation Bands

All dwellings are to be ascribed valuation bands for the purpose of S.23(2) of the Local Government Finance Act 1992 (as amended), in accordance with those set out in S.5 (3) of the Act, namely,

Post 1st April 2005 the bands applicable in Wales are

Practice note 1: appendix 1 - understanding the chargeable dwellings order 1992

1.0 Introduction

PN1 explains the meaning of Section 3 LGFA 1992 that creates the primary basis of a dwelling as a domestic hereditament. A hereditament is an old concept connected with rateable occupation, being a unit of property, either occupied or capable of occupation, to be shown in a valuation list. Thus the vast majority of dwellings comprise living accommodation in the form of houses, bungalows and flats, occupied by a single household. There are, however, exceptions to the ‘hereditament’ rule, and the power reserved in Section 3(5) to create different types of dwellings gave rise to the Council Tax (Chargeable Dwellings) Order 1992 (as amended) (CDO).

The CDO is one of the most misunderstood pieces of council tax legislation. This purpose of this appendix is to increase understanding and consistency in its application.

Section 3(5) of the LGFA 1992 states:

5) The Secretary of State may by order provide that in such cases as may be prescribed by or determined under the order -

a) anything which would (apart from the order) be one dwelling shall be treated as two or more dwellings; and

b) anything which would (apart from the order) be two or more dwellings shall be treated as one dwelling.

The CDO created principally two new kinds of dwellings, which are modifications to the hereditament rule.

Firstly, the introduction of the concept of the self contained unit (SCU) being a possible basis. More than one SCU found within a single dwelling is to be treated as a dwelling.

Secondly, the concept of amalgamating multiple dwellings found within a single self contained unit, into a single dwelling.

2.0 The Council Tax (Chargeable Dwellings) Order 1992 (as amended)

SI 1992 No.549

Note – The following paragraphs set out the CDO with comments in italics to explain the meaning of each part of the Order or emphasize the importance of understanding its application:-

The Secretary of State for the Environment, as respects England, and the Secretary of State for Wales, as respects Wales, in exercise of the powers conferred on them by section 3(5)(a) and (b) and section 113(2) of the Local Government Finance Act 1992, and of all other powers enabling them in that behalf, hereby make the following Order—

This Order may be cited as the Council Tax (Chargeable Dwellings) Order 1992 and shall come into force on 31st March 1992.

Comment: The following definitions are vital to understand to apply the provisions correctly.
- In this Order—
“the Act” means the Local Government Finance Act 1992;

“care home” means a home within the meaning of the Care Standards Act 2000, in respect of which a person is registered in accordance with Part 2 of that Act in relation to Wales, or Part 1 of the Health and Social Care Act 2008, in relation to England.

Comment: Only Registered care homes are covered under this Order.

“multiple property” means property which would, apart from this Order, be two or more dwellings within the meaning of section 3 of the Act;

“single property” means property which would, apart from this Order, be one dwelling within the meaning of section 3 of the Act;

Comment: ‘..within the meaning of section 3 ..’ Understanding the concept of ‘multiple property’ and ‘single property’ is vital. A single property is a single hereditament, ie a single occupation or household. A multiple property is comprised of multiple hereditaments (separate occupations or households). Both being within the primary meaning of dwelling in section (3).

“self contained unit” means a building or part of a building which has been constructed or adapted for use as separate living accommodation.

Comment: definition amended in 1997, to relate to fixed property only. Thus caravans and boats are not SCUs, and are not covered by these provisions. This general definition has been discussed and refined in numerous High Court cases, as reflected in VOA CT Manual and public factsheets.
- Where a single property contains more than one self contained unit, for the purposes of Part I of the Act, the property shall be treated as comprising as many dwellings as there are such units included in it and each such unit shall be treated as a dwelling.
Comment: Every SCU found within a single hereditament or household will be separately banded as a dwelling. ‘Single property’ does not relate to a single building or part of a building, but to a whole hereditament. That means the total boundaries of accommodation occupied as a single unit by a person or persons enjoying paramount control of that accommodation. That could be a mansion with servants quarters and grounds, or an ordinary house with an annexe.

3A. A care home shall be treated as comprising the number of dwellings found by adding one to the number of self-contained units occupied by, or if currently unoccupied, provided for the purpose of accommodating, the person registered in respect of it in accordance with Part 2 of the Care Standards Act 2000 in relation to Wales, or Part 1 of the Health and Social Care Act 2008, in relation to England, and each such unit shall be treated as a dwelling.**

Comment: 3A was added in 2004 to treat registered care homes as special cases, by aggregating all the SCUs found in them, disaggregating only those occupied by the registered person. Further amended in England by The Health and Social Care Act 2008 (Consequential Amendments) (Council Tax) Order 2012, in force from 23rd Aug 2012. Care should be taken to identify the care home part on sites where there is also sheltered housing.

4.—(1) Where a multiple property—

(a) consists of a single self contained unit, or such a unit together with or containing premises constructed or adapted for non-domestic purposes; and

(b) is occupied as more than one unit of separate living accommodation, the listing officer, may, if he thinks fit, subject to paragraph (2) below, treat the property as one dwelling.

In exercising his discretion in paragraph (1) above, the listing officer shall have regard to all the circumstances of the case, including the extent, if any, to which the parts of the property separately occupied have been structurally altered.

Comment: Requirements 1. Multiple Property. 2. A single SCU, occupied in separate parts. If either of these are not present, the paragraph cannot apply. The same definition of SCU applies here as defined in Article 2.

It has been a common fallacy when dealing with HMOs to go straight in and look for SCUs in the same way as under Article 3. This is quite wrong in law. Firstly identify section 3 dwellings, then the LO according to the proper exercise of discretion may aggregate parts into an underlying and recognisable SCU. Where structural alterations render the building or part of a building not recognisable as a single SCU then the LO is required to maintain separate bands.

3.0 Conclusion

See Practice note 5 which deals with disaggregation under Article 3

See Practice note 6 which deals with Aggregation under Article 4.

Practice note 2: the valuation of composite hereditaments for Council Tax

1.0 Introduction

A ‘composite’ hereditament is a dwelling (Local Government Finance Act 1992 Section 3(3)) which has domestic and non-domestic parts, specifically one where an appropriate entry will appear in both the Council Tax and Rating List.

The basis of valuation of a dwelling which is a composite hereditament, or part of a composite hereditament, is contained in The Council Tax (Situation and Valuation of Dwellings) Regulations 1992 (SI No 550) as amended. The Regulations require a value to be attributed to domestic use of such dwellings. This practice note details the approach to be followed when placing a band on the domestic use.

2.0 Definition of a composite hereditament

The definition of a composite hereditament is contained in S.64(9) of the Local Government Finance Act 1988. It provides that,

“A hereditament is composite if part only of it consists of domestic property”

(Hereditament is defined in S.64(1) of the Act by reference to S.115(1) of the General Rate Act 1967 whilst the definition of domestic property is contained in S.66 of the 1988 Act, as amended.)

Composite properties fall into two main categories, namely,

(a) those that include a non-domestic element which appear (or will appear) in the non-domestic rating list (the majority), and

(b) those that include a non-domestic element which is exempt from rating and for that

reason do not appear in the non-domestic rating list (the minority).

3.0 Definition of dwelling

The definition of a dwelling for Council Tax is contained in S.3 of the Local Government Finance Act 1992. S.3(3) makes specific reference to composite hereditaments providing

“A hereditament which –

(a) is a composite hereditament for the purposes of Part 111 of the 1988 Act: and

(b) would still be such a hereditament if paragraphs (b) to (d) of section 66 (1) of that Act (domestic property) were omitted,

Is also, subject to subsection (6) below, a dwelling for the purposes of this Part.”

Accordingly any property which is a composite hereditament for the purposes of S.64(9) of the Local Government Finance Act 1988 is a dwelling unless it only includes domestic property which is,

(i) a yard, garden, outhouse or other appurtenance belonging to or enjoyed with the property used wholly for the purposes of living accommodation;

(ii) a private garage which either has a floor area of 25 square metres or less or is used wholly or mainly for the accommodation of a private motor vehicle; or

(iii) private storage premises used wholly or mainly for the storage of articles of domestic use.

In all instances where any of the above forms the only domestic property within the hereditament it will not constitute a dwelling and should not be valued for Council Tax.

More than 1 self-contained unit

Article 3 of The Council Tax (Chargeable Dwellings) Order 1992 (SI No 549) made under the provisions of Section 3(5) of the LGFA 1992 provides that,

“Where a single property contains more than one self-contained unit, for the purposes of Part 1 of the Act, the property shall be treated as comprising as many dwellings as there are such units included in it and each such unit shall be treated as a dwelling”.

“Single property” is defined as property which would apart from this order be one dwelling within the meaning of section 3 of the LGFA 1992.

Many large composite hereditaments contain more than one self-contained unit as defined by the Order and therefore will consist of more than one dwelling, each requiring a band. For guidance as to when disaggregation of the larger hereditament is to occur see Practice Note 5.

4.0 Basis of valuation

The basis of valuation of a dwelling which is also a composite hereditament or part of a single property which is a composite hereditament (see 3 above) is contained in The Council Tax (Situation and Valuation of Dwellings) Regulations 1992 as amended. Regulation 7(1) states,

“In the case of a dwelling which is a composite hereditament or is part of a single property which is a composite hereditament, the value of the dwelling, for the purposes of valuations under Section 21 of the Act, shall be taken to be that portion of the relevant amount which can reasonably be attributed to domestic use of the dwelling”.

(a) “The Relevant Amount”

The “relevant amount” referred to above is defined in Reg 7(2) as being,

“the amount which the composite hereditament might reasonably have been expected to realise on the assumptions mentioned in Regulation 6, other than paragraph (2)(h) of that regulation, if for references to the dwelling throughout paragraphs (2) to (6) of that regulation, there were substituted references to the composite hereditament”.

Thus, the relevant amount represents what the composite hereditament would have achieved if sold on the open market by a willing vendor as at AVD, subject to the assumptions laid down in Reg 6(2) (excluding that contained in paragraph (2)(h) which states that the use of the dwelling would be permanently restricted to use as a private dwelling). The assumptions are detailed in full in point 3 of Practice Note 1 of this Manual.

As the composite hereditament (dwelling) to be valued is derived from the definition of a hereditament contained in S.64(1) of the LGFA1988, a sale of the entire composite hereditament as one unit is to be assumed. Any additional value derived from sub-sales or lotting, would be inconsistent with the requirement to value the composite unit as a whole, and must be disregarded.

Because it is necessary to assume that the dwelling is sold as one unit the “relevant amount” will only reflect demand from persons who are in the market to purchase it in its entirety. In instances where there would be a strong demand for certain constituent parts if sold in isolation, it is likely that the “relevant value” will be below the value of the unit if sold in parts.

(b) “Domestic Use”

In order to exclude the non-domestic element of a dwelling which is a composite hereditament Reg 7(1) provides that the value shall be that portion of the relevant amount which can reasonably be attributed to domestic use of the dwelling.

Reg 7(2) provides that “domestic use” has the same meaning as in Section 24 of the LGFA 1992. S.24(10) states that “domestic use”, in relation to a dwelling, means use in such a manner as to constitute it domestic property for the purposes of Part III of the LGFA 1988. Domestic property is defined in S.66 of the 1988 Act

4.1 The monmouth school case

The case of Daniels LO v Monmouth School 2009 concerned the identification of the composite hereditament to be apportioned. The East Wales VT had accepted a case that dwellings which were separate hereditaments and situated in various parts of Monmouth outside the main school boundaries were to be mathematically apportioned from a relevant amount comprising the ‘whole school valuation’, without reference to the curtilage of the specific composite hereditament in question. The High Court rejected such a basis, confirming that the valuation unit to be apportioned was the hereditament that had the domestic element and it was wholly incorrect to include any other property.

5.0 Establishing the domestic use to be valued

(a) Notional and Actual Use

Reg 7(1) requires a band to be placed, which reflects the value that would reasonably be attributable to the domestic use of the dwelling. Therefore, the distribution between domestic and non-domestic use of any composite hereditament should reflect how the market would view its use if it were made available with vacant possession, and not necessarily the use made of the property by the actual occupier.

When determining what portion of the “relevant amount” is to be attributed to domestic use, the caseworker should stand in the shoes of a typical prospective purchaser and determine how that person would be most likely to occupy the dwelling under consideration. Where a clear and discernible pattern is evident (e.g. a parade of shops with flats above, most of which are being occupied in a particular manner), this should be followed.

Any actual distribution between domestic and non-domestic uses which does not conform with the prevailing pattern of use in that locality should be disregarded. Where there is no obvious pattern it will be appropriate, in most instances, to have regard to the actual use rather than any notional one.

Where an actual use is adopted, and a change in the distribution between domestic and non-domestic accommodation subsequently occurs, consideration will need to be given as to whether the band which has been placed on the domestic use of the hereditament needs to be reviewed.

(b) Property used for both domestic and non-domestic purposes

Where use of any part of a property is shared, or for the purposes of nationality, is assumed to be shared, (e.g. a bathroom or a lounge in a guest house), unless the non-domestic use can be considered to be de minimis, that part of the property does not constitute domestic property under Part III of the 1988 Act because it is not used wholly for the purposes of living accommodation (S.66(1)(a) of the 1988 Act).

However, whilst such accommodation should not be valued directly as part of the dwelling, the existence of this non-domestic property, as part of the hereditament, should ensure that no depreciation is caused to that portion of the “relevant amount” which is properly required. For example, living accommodation at the rear of a shop may have only one WC which is used by the proprietor and staff alike. Although none of the value which attaches to the WC can be reflected for Council Tax purposes the value which is attached to the domestic use of the remainder of the living accommodation will nevertheless reflect its existence as part of the larger composite.

6. Attributing a value to domestic use

Having established the likely extent of the domestic use of the hereditament, Reg 7(1) requires a portion of the “relevant amount” to be attributed to it.

In the appeals of Atkinson and others v Lord (LO) 1997 RA 413 before the Court of Appeal the appellants submitted that Reg 7(1) requires the determination of that portion of the relevant amount which can reasonably be attributed to the domestic use of the dwelling, and in order to establish that portion it is necessary to firstly establish the relevant amount, i.e. the value of the whole composite hereditament. In the subject appeals, which concerned valuation of agricultural dwelling houses, the Listing Officer did have regard to the value of the hereditaments as a whole, in the sense that he placed each of them within a valuation ‘bracket’, then discounted for ‘separate lotting’ by deducting 10% from the figure which otherwise would have been attributable to domestic use.

In the judgement of Lord Justice Schiemann “the valuer is indeed required always to have regard to the relevant amount and a failure to consider it would amount to making an error of law. However, the valuer is not invariably required to determine the relevant amount. In certain circumstances it can suffice if he determines that the relevant amount must lie in a certain range or be above or below a certain figure”.

The legislation prescribes what has to be valued but does not prescribe how or by what method. LJ Schiemann had no conceptual difficulty in having regard to an amount without having determined it. In the words of LJ Hutchinson,

“Having regard to it (ie. the value of the property as a whole) means forming a general view - which, because he is an expert, will be an informed view - of the broad range within which the value of the whole property falls, taking into account the assumptions required by the Regulations to be made. Only thus will he have any means of cross-checking whether his attribution of value to the domestic part is reasonable”.

Having reached a general but ‘informed’ view of the value of the whole hereditament it is then necessary to attribute a value to the part in domestic use.

By definition there can be no comparable evidence of domestic property which is sold as part of a composite and, therefore, that part of the “relevant amount” which represents the value attributable to domestic use cannot be derived directly from market evidence. Nevertheless there will often be sales of domestic property of a similar size and quality which will provide a guide as to the value of the domestic use which attaches to a composite hereditament for the purposes of Council Tax.

It is unlikely, however, that this comparable evidence will fully reflect all the characteristics of domestic property situated within composites. Accordingly, where not already inherent in comparable evidence, adjustments (or further adjustments) may be required to reflect for such factors as the lack of “self containment”, inferior layout or the nuisance generated by the non-domestic part.

When considering such factors, however, it will be necessary to offset against any depreciation any increase in value which results from the convenience of being situated so close to the non-domestic part.

The band placed on any domestic use must fully reflect the fact that the domestic property to which it relates is an integral part of a larger hereditament for which there is a completely different market. The variables of size, quality and location are to be viewed in terms of how they affected the market for the composite hereditament as a whole as at AVD, and this will often result in a different value attaching to its domestic part as compared to that which is suggested by sales of similar but non-composite property.

It may be necessary to stand back and consider whether the figures arrived at, after making any adjustments for such factors as mentioned above, are reasonable given the market for the composite hereditament. Sometimes it will be necessary to make a further subjective adjustment to the figures arrived at in order to reflect adequately the fact that the living accommodation is part of a larger hereditament.

Due to the subjective nature of establishing a value which is attributable to domestic use of a composite hereditament it is necessary to ensure that all bandings can be shown to be reasonable in terms of:

The value of similar living accommodation in the vicinity which is not part of a composite hereditament,

The value which remains to be attached to the non-domestic part; and

The bands which attach to similar living accommodation situated within a similar composite hereditament.

In the light of the Court of Appeal decision in the Atkinson and Others case, the Listing Officer must keep a written record of the matters which have been taken into account when valuing particular classes of composite hereditaments e.g. agricultural dwellings, especially when it is common practice to adopt a particular size of discount to reflect ‘separate lotting’ (10% in the agricultural dwelling house examples before the Court of Appeal).

7.0 List alterations

7.1 Dwelling ceases to be a composite

The Council Tax list will need to be altered if a dwelling becomes or ceases to be a composite. This may occur where a farmhouse is sold as a family home separately from the land and buildings. While this will always result in an alteration, in the addition or removal of a composite identifier in the list, it will not always result in a band change. Council Tax (Alteration of Lists and Appeals) Reg 1993 Reg 4(1) (a)(iii)

7.2 Addition or deletion of a composite indicator – note for referencers

Reason for Report CR09 should be used for the addition or deletion of a composite indicator to a dwelling in the Council Tax List. This is a List Alteration which will result in a LON being generated and this should be sent.

For public houses, the name of the pub should be entered in the address before the road number. If the word ‘The’ is included in the pub name it should be included in the name in the Rating List as well. The address of composite dwelling accommodation at pubs should be the same as the pub, but in some cases it may be necessary to include extra information e.g. if there is more than one domestic banding - Flat 1 and Flat 2, or Manager’s Flat and Staff Flat.

7.3. Composites and the material increase provisions

Material increase provisions apply to dwellings (LGFA1992 Section 24(10), whereby there needs to be a relevant transaction (RT) before physical change can be reflected in the banding. Thus a new extension for wholly domestic use added to a composite dwelling will not fall to be valued until a RT takes place.

However, the Council Tax (Alteration of Lists and Appeals) Regulations 1993 Reg 4(1)(a)(iv), states that where the domestic part of a composite increases or decreases, the list can be altered,

Questions have arisen as to the working of these two provisions in practice and the following advice gives guidance on how to apply the provisions.

7.3.1 Material increases: extensions to domestic accommodation

It has not been the past practice of Listing Officers to alter the list where, for example, an extension to a farm house takes place, where the house is actually part of a composite (the non-domestic part of the farm being exempt). It is considered that this is correct where the extension to the living accommodation is newly built and not a conversion of part previously used for non-domestic purposes.

7.3.2 Where there is a conversion of previous non-domestic space:

If, however, an ‘extension’ involved increasing the domestic space at the expense of the non- domestic space, then that would fall within the provision of Reg 4(1)(iv) where the list can be altered … “ in the case of a dwelling which continues to be a composite hereditament, there has been an increase or reduction in its domestic use.” In these circumstances the new domestic proportion should be taken into account in the banding. The effective date of such a change will be the date of the change of circumstances (Reg 14(4))

7.3.3 Previous extension followed by change in proportion of domestic use:

There may be circumstances where a separate new domestic extension has been previously built and treated as a material increase, and subsequently there is an increase (or decrease) in the domestic use of the rest of the composite. It is considered that the legislation provides only limited protection against list alteration, and that in this case, then all the domestic part of the dwelling should be valued, under 4(1)(iv) including the extension, as the relevant date for the physical state of the dwelling will be the date of the change under the Council Tax (Situation and Valuation of dwellings) Regs 1992 6(1)(d) and (5A) (b) and (5B)(c). The physical state of the dwelling at the relevant date will include the extension and should be valued.

8.0 Valuation of public houses and farms

The approach to the valuation of public houses and farms is explained in Appendices 1 and 2 to this Practice Note.

Practice note 2: appendix 1 - the valuation of public houses for Council Tax (England 1993 list)

1.0 Introduction

The open market value of public houses is determined primarily by reference to trade, which itself will be dependent partly on location. Unlike most other types of property, where there will be a physical measure of comparison (e.g. m2 ITZA for shops), the value of a public house cannot be determined solely by reference to its size and accommodation.

In order that the band ascribed to any domestic use fully reflects the fact that it is a portion of the value of a larger hereditament, which is normally valued having regard to its trading potential, it is necessary to consider the actual/notional accommodation, trade and location.

As part of the banding exercise Listing Officers prepared tables in consultation with Regional Licensed Property Valuers (RLPVs). These comprised a minimum, a maximum and a trading band. The manner in which these tables were constructed and the significance of the bands produced are explained in paragraph 2. The application of the tables is explained in paragraph 3.

2.0 Construction of tables

2.1 Minimum band

The living accommodation in a public house will always have a value to a prospective purchaser, either as somewhere to live or in order to provide accommodation for a manager. Irrespective of the level of trade, this value will not fall below the lowest value which attaches to similar, alternative accommodation which could be used satisfactorily to fulfil this purpose. This level of value was called the “minimum band”.

The determination of the minimum band was particularly relevant where a property was situated in a pocket of high values, e.g. Chelsea; a Georgian terrace in a Spa Town; overlooking a picturesque harbour.

The minimum band was determined at the lowest value of alternative domestic property (after making all appropriate adjustments as described in part 6 of PN2 above) which was,

a) of a similar size and quality;

b) situated within the locality of the subject property (as defined in CTM:PN1:4.4) and its adjoining localities. These will generally be within the normal commuting distance that a licensee would be prepared to travel; and

c) in a locality where a prospective purchaser of the public house would be prepared to live.

For example, the domestic use of a public house situated in a city centre location comprises living accommodation on two floors. Values of flats and maisonettes of similar size and which would be acceptable to prospective purchasers ranged from £50,000 to £80,000 as at the AVD of 1 April 1991. Accordingly the value of the domestic use of the public house would not fall below:

£50,000

less Adjustments

(for disadvantages) say £ 5,000

£45,000 Band B

(in England)

(ie. The MINIMUM BAND)

It should be noted that where the subject property was in a locality which had a lower level of values than adjoining localities, the values of the actual locality were used to determine the minimum band.

2.2 Maximum band

The maximum band reflected the value (after making all appropriate adjustments as described in part 6 of PN2) which attached to the domestic property of the actual public house in its immediate environment.

If, in the example 2 above, the value of flats and maisonettes of a similar size and quality in the immediate vicinity was £80,000 as at the AVD, the value of the living accommodation would not exceed:

£80,000

less Adjustments £10,000

(for disadvantages) say £70,000 Band D

(in England)

(ie. The MAXIMUM BAND)

In rural areas and small towns where only one value significant location was applicable the minimum and maximum bands were the same and this band was adopted.

2.3 Trading Band

In cases where location determined that there was a difference between the minimum and maximum bands it was necessary to consider the trading potential of the public house when ascribing a band to domestic use.

The trading band was determined having regard to the capital value of the public house. The more profitable the business was in actual terms the more a potential purchaser would have been able to pay for the domestic use.

RLPVs analysed market evidence and rateable values of all public houses that were sold during the year preceding and the year following the AVD. From their analysis ranges of likely capital value, of the entirety were estimated, by reference to the 1990 non-domestic RVs. An indication of the band which the trade of a public house was likely to be able to support in England where there was a single unit of domestic use (ie. where disaggregation does not apply) is shown below:

3. Application of tables - Band to be adopted

In instances where the minimum and maximum bands are the same the subject band letter will represent the value attributable to domestic use.

Where the minimum and maximum bands differ, the value to be ascribed will never fall below the minimum band. Where the trade justifies a higher band than the minimum this will be adopted, subject to not exceeding the maximum band, except in those instances where the potential purchaser is likely to include persons whose overwhelming motivation is to own the property, and its situation and domestic use are paramount to the business, e.g. a public house in a national park or a sought-after picturesque village.

For example, if the domestic use of the public house detailed in 2.1 above has a minimum band of B and a maximum band of D, the band to be adopted would be as follows:

NB. It is assumed in (a) and (b) that potential purchasers will not include individuals who are primarily motivated by the domestic use and situation of the property as opposed to the business as a whole.

Practice note 2: appendix 2 - the valuation of farms for Council Tax

1.0 Introduction

This Practice Note considers situations where domestic property occupied with agricultural land is to be treated as a composite hereditament and how the valuation of this composite dwelling is to be approached. It also covers the valuation of non- composite dwellings which are subject to agricultural planning restrictions.

2.0 Extent to which a farm is a composite hereditament

2.1 Establishing whether composite

Section 3(3) of the Local Government Act 1992 provides that:

“A hereditament which,

(a) is a composite hereditament for the purposes of Part III of the 1988 Act (LGFA); and

(b) would still be such a hereditament if paragraphs (b) to (d) of section 66(1) of that Act [domestic property] were omitted, is also, subject to subsection (6) below [“Aggregation”/”Disaggregation”], a dwelling for the purposes of this Part.”

In order to determine whether a farm is a composite hereditament, and therefore a dwelling, it is necessary to establish the extent of the hereditament.

The majority of farms comprise a main holding which includes a farmhouse with adjoining land and buildings all of which are occupied by one person i.e. the farmer. In such cases the farmhouse and the land and buildings will together usually form the hereditament. In such circumstances the farm is a composite hereditament, as it comprises both domestic (i.e. farmhouse) and non-domestic property (land and buildings).

It is vital to establish whether the dwelling actually composite. The occupier of the house must be the occupier of the land. Common pitfalls which may be found:-

Land actually farmed by another. Where occupation of the land is by another party, (not merely use of contractors) or where the land has been let out or sold off, then the house will not be composite.

Retired occupier, no longer a working farmer. The farmhouse may be occupied by the retired farmer no longer connected with farming the land.

A retired farmer must be still be part of or have a share in a controlling farming company that owns the whole hereditament and works the land before conceding composite.

Farm workers job contract may not tie house with job.

Farm cottage let to another occupier, unconnected with farm.

Houses on farm in separate ownership/occupation from the land.

2.2 Information required

In order to establish whether a composite exists, and the nature of the occupation the following information should be requested from agents acting following a proposal or enquiry, if that information is not already available.

A copy of the valuation

The comparable evidence to support request for a review

A plan showing the boundaries of the farm and the farmhouse

Confirmation of whether any alterations or extensions have been made to the property since 1 April 1993 (full details, including dates, where alterations or extensions have been carried out)

Confirmation of who are the legal owner and occupier of the farm and house i.e. if there is a farm company established for the occupation/ownership of the agricultural land and buildings, or if the house has been gifted to or occupied by another family member, etc.

Confirmation of the exact nature of the duties that the occupier of the dwelling has in farming the land.

Confirmation of whether the occupier of the dwelling is bound by employment contract to live in that particular dwelling.

Confirmation as to whether any parts of the farm have been sold or let out since 1 April 1993

A skeleton enquiry letter has been prepared.

2.3 Houses and cottages situated within the main holding

Agricultural workers cottages

Some farms include houses or cottages which are “occupied” by farm workers and form part of the main holding. The question to be answered is, are they actually part of a larger composite? Whether these properties form part of the main composite hereditament (e.g. farmhouse and land) depends on who would have been considered to have been in rateable occupation of the property had the 1973 List remained in force. Accordingly it is necessary to look at the nature of the occupation which exists.

Nature of occupation

1) If it is essential to the performance of the duties of the farm worker that the farm worker should occupy the house; or

2) Whilst it is not essential for the farm worker to occupy a particular house, if the farm

worker can better perform his/her duties as a servant to a material degree by occupying the house, and it is part of his/her contract of employment (e.g. a cottage occupied by a herdsman who is obliged, by his contract of employment, to live there in order to be in close proximity to the herd at all times), then the employing farmer is in ‘rateable occupation’, the farm worker is in the nature of a ‘servant’ of his employer, and the subject domestic property will form part of the composite hereditament.

Cases of doubt should be referred to Technical Advisers for specific guidance as necessary.

Temporarily Vacant Cottages

Where an agricultural worker’s cottage, which forms part of the farm hereditament, becomes vacant and it appears likely that the next occupant of the house will also be required to live in that house for the better performance of the worker’s duties, then the house should be regarded as remaining part of the farm hereditament during the period of vacancy.

2.4 Property Occupied by a Farming Partnership

Farming partners (e.g. father and son) who occupy domestic properties held under a partnership agreement will usually be joint rateable occupiers and both properties will form part of the larger composite hereditament. Where a member of the family occupies a domestic property but is not a partner the tests of occupation described at 2.2.2 above will apply.

Land Situated away from Main Holding

‘Farms’ may comprise a number of parcels of land which whilst farmed as one unit are in fact severed from each other not just by roads but sometimes by a distance of miles.

The practice of treating farms divided by roads as one hereditament prior to agricultural de-rating was one of the examples quoted by Lord Denning when establishing the functionally essential test in Gilbert v Hickinbottom 1955. He stated:

“There are exceptional cases where two properties, separated by a road, may be treated as one single hereditament for rating purposes.” And,

“In such cases the two properties on either side of the road are so essentially one whole - by which I mean, so essential in use the one to another - that they should be regarded as one single hereditament.”

It is not considered likely that parcels of land separated by more than the width of a road will be so essential in use “the one to another” that they will form part of the same hereditament but a situation could arise when all the principal from buildings are located on the opposite side of a public road away from the main area of land. In these circumstances it may be difficult to argue that there is not a functionally essential link between the two parts. In cases of doubt, as in the case of farm workers cottages and where treating separated land as a single hereditament together with the main holding would affect the band to be ascribed, details should be referred to Technical Advisers for specific guidance.

Houses and Cottages Situated away from Main Holding

When considering whether a house separated from the main holding forms part of the composite hereditament the first question to be addressed is: Who would have been regarded as in rateable occupation had the 1973 list remained in force? This involves applying the tests detailed in 2.2.2 above. If any person other than the occupier of the main holding (ie. the farmer) would have been in occupation there will be no need to consider whether the cottage is functionally essential to the holding as it will form a separate hereditament by virtue of its occupation.

If it is decided that the farmer would have been the rateable occupier then the test of functionally essential needs to be applied to determine whether it is part of the farm or a separate hereditament (albeit in the farmer’s rateable occupation). It will sometimes be the case that a farm cottage occupied by an employee but which would have been in the rateable occupation of the farmer for the purposes of the 1973 List and situated on the other side of the road from the farm should be treated as part of the composite hereditament.

A farmhouse separated from the farm land and buildings by more than the width of a road may constitute a hereditament in its own right, irrespective of who would have been in rateable occupation.

3.0 Valuation

3.1 Relevant Amount: Sale of the Whole Farm to be Assumed

A sale has to be assumed of the composite hereditament as one unit. Regard must not be had to the price which would be achieved if the farm was divided into more profitable lots as this would offend the concept of “the hereditament”.

The fact that a sale of the whole farm is required to be assumed, will not preclude bids from the non-farming sources, but it is to be assumed that the dwelling had no development value other than value attributed to “permitted development” (Reg 6(2)(h)). Any additional value attaching to any land or buildings because of their development potential therefore must be ignored.

It is to be noted that there is no specific requirement in Reg 7 to carry out an actual valuation of the composite hereditament (ie. the whole farm) to determine the relevant amount. What is required is merely “that portion of the relevant amount which can reasonably be attributed to domestic use”. However, whilst it is not considered necessary for Listing Officers to carry out specific valuations it will sometimes be necessary to state a range of values within which it is believed the value of the farm falls e.g. between £800,000 and £1m. This will enable all parties to discuss the nature of the demand for the whole and estimate the value which should be attributed to domestic use. This approach was endorsed by the Court of Appeal in Atkinson and others v Lord (LO)1997 RA 413 referred to in paragraph 6 of the Practice Note.

3.2 Valuing the Domestic Use – General

It is not possible to arrive at “that portion of the relevant amount which can reasonably be attributed to domestic use” of the farm directly from market evidence, because separate sale prices of former farm dwellings will not reflect composite status. Clearly there can be no direct comparable evidence of domestic property which is sold as part of a farm. Whilst there is sales evidence of “farmhouses” sold in “isolation” (i.e. without any non-domestic property) it is essential that this evidence is adjusted where appropriate to reflect the fact that the domestic property (use) being valued forms part of a larger hereditament, ie the farm.

Two approaches

The guidance below sets out two possible approaches to valuation apportionment - the application of discounts from non composite evidence, and a full mathematical apportionment approach.

3.3 sets outlines a simplified approach, to arrive at an apportioned band value based on discounting from non composite evidence. A simplified approach has been approved in the courts as a valid method, (see PN 2 for detail of Atkinson v Lord case) and is recommended for caseworkers to adopt.

3.4 sets out a mathematical apportionment method of valuation. It may well be, however, that insufficient information on land values is available to successfully carry out such a detailed valuation, thus para 3.3 would be the usual approach, which has been accepted and approved by Valuation Tribunals.

3.5 and 3.6 sets out the separate consideration of planning restrictions involving discount judgements to non-composite agricultural dwellings.

3.3 Valuation by reference to adjusted sale prices - applying discount factors

The cases of Atkinson and Lord confirmed that it was not necessary for a LO to carryout a detailed valuation of the relevant amount such as in 3.6 below. It is sufficient that an opinion of value be arrived at by applying an appropriate discount to reflect the domestic use value apportionment. Base evidence, therefore to be adjusted, may form sale prices of similar non-composite dwellings in a locality, and realistic discounts should be applied to take account of the various factors to be reflected.

As a general rule the larger the farm unit in terms of acreage, the larger the adjustment factor. In the early years of the Lists general agreement was reached as to the simplified approach of adopting discount factors from non composite evidence, according to regional evidence and practice.

Whilst at larger acreages basic discounts may typically reach 15%, small units of a few acres may not qualify for any discount at all, it being likely that purchasers in the market (where no specific agricultural planning restriction applies) may even cause a premium demand, over and above standard dwellings. LOs should build up evidence discount necessary.

The important thing is to be able to demonstrate that the legislative requirement to apportion domestic use value out of something larger has been undertaken, which properly reflects a restricted value, where appropriate.

Method summary:

Determine the extent to which the farm is a composite identifying the dwelling(s) to be apportioned

Select sales evidence from the locality of similar age size and character as possible. Former farmhouses would be ideal.

Apply a percentage deduction according to the acreage of the composite land holding. This is to reflect an average value reduction for the domestic element based on size of the holding.( See notes below)

Nuisance factors: Consider the proximity of buildings which would detract from the domestic use amenity, and make a further adjustment if applicable. This takes account of case specific disabilities. Though by nature the living accommodation serves a farm, close proximity to pig sheds or slurry pits, for example, will not enhance the domestic use value. However, this could be offset by the convenience of location of the living accommodation to other essential amenities on the farm. Proximity of general barns and buildings may be an advantage for the working farmer.

Note 1. In applying this method there will be minor regional variations to reflect local market conditions and practice as at AVD.

Note 2. Milk quotas: In dairy farms where values may have been affected by milk quotas at AVD, the existence of a quota should be reflected, if it affected market value of the ’relevant amount’ ie the whole composite value to be apportioned. There is nothing in the legislation that requires any particular farm quota to be adjusted. The farm value must be what a farmer would have paid for the farm unit. It follows that it is incorrect to adjust for milk quotas as a separate deduction when apportioning the value of domestic property on a dairy farm. Sale of a milk quota will also not fulfil the requirements of a relevant transaction nor will it constitute a material decrease, so will not affect banding.

3.4 Full apportionment approach:

3.4.1 Farms which contain a single unit of domestic property

NB. This approach can only be used if information relating to farm values around AVD sold with and without agricultural dwellings are available and reliable.

If, having regard to market conditions at AVD, a farm would have been sold in separate parts ie lotted, great care must be taken when valuing the domestic use to avoid any over-valuation.

The lotting of a farm introduces a different market, usually one which is interested in purchasing a house and/or accommodation land as opposed to a working farm. Where the constituent parts are of such a character that their aggregated values if sold in isolation would be in excess of the figure which would be achieved as a working farm, lotting usually occurs, e.g. large character farmhouse away from farmyard; land easily served from the road by neighbouring farmers.

Because it is necessary to assume a sale of the single unit, any additional value which would be generated by lotting must be ignored. In most instances the level of values attaching to farmhouses sold in isolation will have been generated by a “non-working farm” market. Any increase in value over and above the value which a comparable farmhouse would have achieved if sold as part of a working farm must be removed before arriving at the value of the domestic use.

To ensure that an appropriate adjustment is made to the sale prices achieved by farmhouses sold in isolation, the “non-working farm” market in any given area requires to be identified. For different types and sizes of farms (and farmhouses) apportionments can be made in order to establish the extent to which the sales evidence should be analysed, e.g.

LOs may receive representations suggesting that a given farmer only requires a house or bungalow which enables him to operate his farming activities effectively. Because a substantially inferior property would achieve this end it may be suggested that when arriving at the value of the house as part of the composite the sale price achieved in isolation should be substantially discounted.

However, it is to be assumed that the farm is sold with vacant possession and that the portion of the relevant amount which is attributable to domestic use should reflect the value which the market (albeit for the whole) would place on it. Even where the market for a particular farm consists only of working farmers it is suggested that many will often be prepared to pay considerably more for a farm which, although similar in all other respects, has a farmhouse which is substantially better in terms of character/quality.

3.4.2 Farms which contain more than one self contained unit of domestic property

Where a farm contains more than one self contained unit that portion of the relevant amount which attaches to each individual unit requires to be ascertained.

When arriving at a value in respect of each of the respective units the preferred approach to be adopted is as follows:

Value of domestic parts

if sold in isolation

___________ x Value of farm if sold as one unit

Value of all parts in isolation

Example

House and 200 acres and 2 cottages if sold as a single unit £480,000

Value of land if sold in isolation

320,000

Value of house if sold in isolation

125,000

Value of cottage 1 if sold in isolation

55,000

Value of cottage 2 if sold in isolation

55,000

555,000

3.5 Effect of Planning Tie –non composite dwellings

This may have an effect where the planning authority have stipulated agricultural occupancy conditions. It will often occur when new dwellings have been built for sons or daughters who are employed on the farm, where development would not otherwise be allowed.

If a farm is a composite, then it will be already occupied by a working farmer. Traditional farmhouses, however, which for centuries have been at the centre of a working farm unit may well not have any specific planning ties stating that the dwelling must be occupied by an agricultural worker. In the vast majority of cases, once a composite farm dwelling has been adjusted for factors in 3.4.1 above, no further deduction for a planning tie would be applicable. Such a deduction would effectively amount to double counting. The purpose is to arrive at a value of the domestic part to reflect the composite on a working farm. Having already made deductions from market value, the reduced composite value would be the value that a working farmer would pay. It follows, therefore, that only where the composite has a small acreage which does not qualify for acreage deduction, would an additional discount for a planning restriction be warranted.

Where, however, the dwelling is not a composite, ie in separate occupation or not situated on the land, but is subject to a an agricultural planning tie, then a full deduction will need to be made to reflect the restricted market for the dwelling as at AVD.

3.6 Date of planning tie

It is necessary to establish whether such a condition existed at AVD, (or later if the dwelling was constructed post compilation date.) If a condition was attached to the property at list commencement, the extent to which this would have affected its market value at AVD should be fully reflected. The adjustments which it is appropriate to make in comparison to a similar property which has no such restriction will depend on:

(i) the nature of the restriction

(ii) the area in which the dwelling is located - the level of demand for such dwellings by working farmers.

(iii) the likelihood as at AVD, that if requested, the restriction would have been lifted by the local planning authority.

LOs should ensure that they are fully aware of the different types of planning restrictions which have been imposed by their respective planning authorities and the general policy adopted towards them.

The method of reflecting such conditions in the valuation of the dwelling has in practice been to make a reduction of 10-30% in the unrestricted vacant possession value of the dwelling, but this will be a matter of local evidence.

Where such a property is considered to form part of the larger holding it is unlikely that any further reduction will need to be made to reflect the fact that it is part of a composite although all “nuisance factors” should be considered on their own merits.

Practice note 2: appendix 3 - composites - a guide for CT referencers

1.0 Definition

Council Tax Manual - Practice Note 2 - Paragraph 2

The definition of a composite hereditament is contained in S.64(9) of the Local Government Finance Act 1988. It provides that:

“A hereditament is composite if part only of it consists of domestic property”

(Hereditament is defined in S.64 (1) of the Act by reference to S.115 (1) of the General Rate Act 1967, whilst the definition of domestic property is contained in S.66 of the 1988 Act, as amended)

Composite properties fall into two main categories, namely:

(a) those that include a non-domestic element which appear (or will appear) in the non-domestic rating list (the majority), and

(b) those that include a non-domestic element which is exempt from rating and for that reason do not appear in the non-domestic rating list (the minority)

2.0 Address Changes

When dealing with address changes the following codes should be used:

CR12 Address Change (LON not issued)

CR14 Postcode, number or name amendment only

Code CR12 (Address Change) cannot be used for the addition or deletion of a composite indicator. This is a List Alteration and a LON should be served for the change. Instead, Reason for Report CR09 should be used which will result in a LON being generated and this should be sent.

For public houses, the name of the pub should be entered in the address before the road number. If the word ‘The’ is included in the pub name it should be in the Rating List as well. The address of composite dwelling accommodation at pubs should be the same as the pub, but in some cases it may be necessary to include extra information e.g. if there is more than one domestic banding - Flat 1 and Flat 2, or Manager’s Flat and Staff Flat.

The correct procedure for creating new addresses is set out in the Central Database Best Practice Guide. Please note that for a Public House, the name should be entered first, followed by the street number.

If dealing with a public house name change by means of a one to one recon, please use the attached guide:

3.0 Contact with Billing Authorities

The best source of information on occupiers is the billing authority, but care should be taken not to overburden BAs with queries, and it may be best to send schedules to them from time to time to verify if certain properties are still composite.

4.0 Contact with ratepayers/taxpayers

When dealing with CR12 changes for CT, it is not considered necessary to make any contact. If it is possible to make an alteration from the desk, and if that alteration is likely to have a significant effect on liability, then it would be prudent to send an explanatory letter with the notice.

5.0 Data Enhancement for Composite Properties

The latest advice is contained in CTRE IA 110405

6.0 Effective dates

CT – The effective date is the date of the event. The date of change of either becoming or ceasing to become composite or a change in balance between domestic and non-domestic is the correct effective date.

7.0 Effect on charging

The designation ‘composite’ merely indicates that the assessment or banding relates to the use of only part of a property, it does not have any effect on the level of charging for Council Tax or NDR purposes.

8.0 Farmhouses

Council Tax Manual Practice Note 2: Appendix 2 deals with the valuation of farmhouses for Council Tax.

If a composite farmhouse has been sold separately from the farmland, it will be necessary to delete the composite designation and to review the band if necessary. This procedure should only be followed if there is some certainty that a sale has taken place, the main source of information will be PD/SDLT forms. No investigation should be carried out in other cases, because we should not be seen to be carrying out exercises which could be in the nature of a Revaluation.

The effective date will be the date the circumstances first arose, but in the absence of any indication that the change took place prior to a sale, the date of sale should be taken as the effective date.

9.0 List alterations

Becoming or ceasing to be composite

The Council Tax list will need to be altered if a dwelling ceases to be a composite. Whilst this will always result in a list alteration because of the need to add or remove a composite identifier, it will not always result in a band change.

Material Increases

A ‘composite’ hereditament is a dwelling (LGFA 1992 Section 3(3)) which has domestic and non-domestic parts, specifically one where an appropriate entry will appear in both the Council Tax and Rating List.

Material increase provisions apply to all dwellings (LGFA1992 Section 24(10), whereby there needs to be a relevant transaction (RT) before physical change can be reflected in the banding.

Thus a new extension for wholly domestic use added to a composite dwelling will not fall to be valued until a RT takes place. However, the Council Tax (Alteration of Lists and Appeals) Regulations 1993 (Wales) and the Council Tax (Alteration of Lists and Appeals (England) Regulations 2009 state that where the domestic part of a composite increases or decreases, the list can be altered.

Questions have arisen as to the working of these two provisions in practice and the following advice gives guidance on how to apply the provisions.

Material increases: extensions to domestic accommodation

It has not been past practice of LOs to alter the list where, for example, an extension to a farm house takes place, where the house is actually part of a composite (the non-domestic farm being exempt). It is considered that this is correct where the extension to the living accommodation is newly built and not a conversion of part previously used for non-domestic purposes.

Where there is a conversion of previous non-domestic space:

If, however, an ‘extension’ involved increasing the domestic space at the expense of the non domestic space, then that would fall within the provision of regulation 4(1)(iv) where the list can be altered … “ in the case of a dwelling which continues to be a composite hereditament, there has been an increase or reduction in its domestic use.” In these circumstances the new domestic proportion will fall to be taken into account in the banding. The effective date of such a change will be the date of the change of circumstances (Reg 14(4))

Previous extension followed by change in proportion of domestic use:

There may be circumstances where a separate new domestic extension has been previously built and treated as a material increase, and subsequently there is an increase (or decrease) in the domestic use of the rest of the composite. It is considered that the legislation provides only limited protection against list alteration, and that in this case, then all the domestic part of the dwelling would fall to be valued, under 4(1)(iv) including the extension, as the relevant date for the physical state of the dwelling will be the date of the change under the Council Tax (Situation and Valuation of dwellings) Regs 1992 6(1)(d) and (5A) (b) and (5B)(c). The physical state of the dwelling at the relevant date will include the extension and falls to be valued.

10.0 Reference numbers

Contact should be made with BAs to clarify if they are content to use the same reference number as before, if an address is changed or if they would prefer a new reference number.

11.0 Referencing composites

The following information from the CT Referencers Guide Section 5 is reproduced below. Please note the requirement to complete a VO7413 for each new composite.

Where a dwelling is part of a composite property (i.e. a property used for both domestic and non-domestic purposes regardless of whether the non-domestic part is subject to non-domestic rating) you should complete the survey particulars as far as possible in respect of the domestic part only.

A special ‘Composite Property’ form (VO7413) was devised for recording details of composite properties and a set should be maintained at each location. You should complete a VO7413 for each new composite property and add it to the existing set. This is in addition to amending the existing dwelling survey or creating a new one.

A note should be taken of the rateable non-domestic part and a survey made if this is thought to be appropriate. If the referencing of the non-domestic part is thought to be beyond the scope of the visiting caseworker, the inspection should be abandoned after an explanation is made to the occupier, and the whole case passed to a more experienced referencer. The aim must be to avoid the need for two visits to be made to what is, as far as the occupier is concerned, a single property.

However, referencers should be aware before they make arrangements for an inspection that a non-domestic part will require referencing, and the case passed to a suitably experienced referencer. Therefore, occasions when an inspection will be abandoned will be extremely rare.

12.0 Value significant codes

The following codes should be used on all council tax surveys and should be entered on the individual property details:

Value Significant Codes for Composites

Practice note 2: appendix 4 - the treatment of National Trust composites

1.0 Introduction

1.1 Many National Trust (NT) properties comprise large mansion houses open to the public containing domestic non self-contained flats, apartments or houses that form part of the overall NT occupation, and the hereditament is a composite containing non-domestic and domestic parts. Living accommodation within a mansion house may often be accessed via parts of the main house which are open to the public, or have very poor access arrangements along tortuous passages and back stairways.

1.2 An understanding has been reached with NT following proposals and representations, that the following principles will be recommended to Listing Officers (LOs) when asked to consider proposals or review the banding of living accommodation within NT holdings. The following principles have been established with the NT representative as a basis for an agreed approach to any future adjustments in banding of such properties.

1.3 The following principles should be adopted where the LO is approached by the NT or their agents to undertake a band review where a proposal cannot be validly made, or where a new individual resident makes a valid proposal.

2.0 Part of composite or not?

2.1 It must first be established whether the domestic accommodation is part of the composite. The occupants will be NT staff who are required to occupy the rooms for the better performance of their duties on the estate. They will not have separate tenancy agreements which give them rights of occupancy apart from their job contract.

2.2 Accommodation occupied by workers who have separate tenancies, or whose location on site is not for the better performance of their duties and not linked to their employment, will not be part of the composite.

3.0 Apportionment of value of domestic accommodation.

3.1 The whole of the hereditament is assumed to be sold as at AVD to arrive at the ‘relevant amount’ and the domestic part apportioned out of that value and subject to banding. Where more than one self contained unit of domestic accommodation exists each such unit must be treated as a dwelling under article 3 of the Council Tax (Chargeable Dwellings) Order 1992.

3.2 The relevant amount will be the value of the whole hereditament to one purchaser including the mansion and any flats & houses. Whilst a rental value in Rating terms of the mansion may be nil, it is not considered the same can be said of the capital value. NT houses are often unique treasures preserved for the enjoyment of the nation. Whilst they may be expensive to upkeep and not produce a positive divisible balance when adopting a receipts and expenditure valuation, it does not necessarily follow that the Open Market value would be low. Many of the houses would be in a world market, which might attract bids from very wealthy foreign buyers to whom economic considerations are not a prime consideration. The NT itself has paid large sums for mansions. What that precise figure is does not matter, however.

3.3 Following the approach in Atkinson v Lord (See PN 2 para 6) the valuer simply has to have regard to the relevant amount, not necessarily calculate the exact amount, and make a reasoned apportionment of the domestic element. In the Lord case, an agricultural estate with domestic properties, a fixed deduction amounting to 10% deducted from non composite evidence was judged to comply with the statute.

3.4 A similar approach in principle is to be applied to NT properties to reflect domestic elements. It will thus be demonstrated that the LO has reflected an apportionment, having regard to the relevant amount, and has not simply adopted a separate lotting approach. A check should be made to identify the individual dwellings, and then compare with external comparisons. Where the values of the subject dwellings appear not to have been discounted, but appear in similar bands to comparables in the locality, then a reduction in value approximating to 20% should be considered. This approximates to one band reduction.

3.5 It is conceded that this approach cannot be an exact method because of the varying band widths and individual circumstances. Though there may be exceptions, there is no doubt that as a general rule, the dwellings as part of a whole, and subject to various forms of disability over shared access and layout, will be worth considerably less than if sold on an individual basis, and a deduction of 20% is felt to take a realistic stance overall. This approach is agreed to cover all the variations, and should be applied generally to all composite dwellings within NT properties.

4.0 Where not part of composite

4.1 Where the accommodation is not part of the composite, for example, where a dwelling is let on a normal tenancy whether to staff or not, the property must be compared with normal comparables and not be subject to any notional deductions for apportionment. The physical situation, location and nature of the accommodation will, of course, still be relevant in calculating its open market value.

5.0 Possible exceptions

5.1 It is acknowledged that the above approach will not necessarily be a ‘fit all’ solution e.g.

Where the dwelling is not part of a mansion house complex, but, for example is a sm

all domestic part of a hereditament consisting of mainly ruins or other structures like bridges that are very expensive to maintain, then it may be that the above approach will not offer a satisfactory approach. Such necessary liabilities within the hereditament, that remain after applying the valuation assumption of ‘reasonable repair’ may warrant a lower banding on the domestic part to reflect a fair apportionment.

5.2 In cases of high value properties where an estimated 20% value reduction does not come anywhere near a band margin.

6.0 Individual residents have rights to make a proposal

6.1 The paramount occupier of the dwelling will often be NT. Therefore, for establishing the extent of the hereditament this will be a relevant factor. However, being a resident of a dwelling, according to the CT legislation, is the overriding criteria defining an interested person who has a right to make a valid proposal, notwithstanding they may not be the paramount occupier of the whole hereditament. Thus, it would be possible for a resident to make a valid proposal, should circumstances allow. If such a proposal is received it should be dealt with on the basis of the principles outlined in this advice.

Practice note 3: England only: valuation factors and material and effective dates

1. Basic principles

When carrying out a valuation for the purposes of an alteration to a valuation list, the basis of valuation to be adopted is contained in Reg 6 and 7 of The Council Tax (Situation and Valuation of Dwellings) (Amendment) Regulations 1994.

The basis of valuation states that the value of any dwelling shall be taken to be the amount which, subject to certain assumptions, it might reasonably have been expected to realise if it had been sold by a willing vendor on 1 April 1991.

However, although the dwelling must be valued at the fixed date of 1 April 1991, its size, layout, character and physical state of the locality are required to be considered as they existed at 1 April 1993 or a later date, depending on why the list is being altered.

In essence the question when valuing is always, “Given the size, layout, character of the dwelling and the physical state of its locality at a given date on or after 1 April 1993, how much would it have sold for on 1 April 1991?”

It is the purpose of this Practice Note to explain the date at which each of those variable factors requires to be considered.

2. When a valuation is required

A valuation is required where:

1. A dwelling was omitted in error from the compiled list or its initial entry in the compiled list is thought to be incorrect.

2. A new (post 1 April 1993) dwelling requires to be inserted.

3. There has been a “material increase” in the value of a dwelling and a “relevant transaction”.

4. A dwelling has become or ceased to be a composite dwelling or where, continuing to be a composite, there has been a change in the domestic/non-domestic balance of the dwelling.

5. There has been a “material reduction” in the value of a dwelling, caused (in whole or in part) by the demolition of any part of the dwelling. See Planning for blight and your Council Tax.

6. There has been a “material reduction” in the value of a dwelling, caused (in whole or part) by any change in the physical state of the dwelling’s locality.

7. There has been a “material reduction” in the value of a dwelling, caused (in whole or part) by any adaptation of the dwelling to make it suitable for use by a physically disabled person.

8. A mistake was made when altering the list for any of the above reasons.

9. A clerical error requires correction.

3. Definition of “Material increase”

This means “any increase in the value of a dwelling which is caused (in whole or in part) by any building, engineering or other operation carried out in relation to the dwelling, whether or not constituting development for which planning permission is required.” (Section 24(10) LGFA 1992)

(NB. Changes in locality in isolation do not constitute material increases though the physical state of the locality needs to be taken into account at relevant dates.)

4. Definition of “Relevant transaction”

This is defined as “a transfer on sale of the fee simple, a grant of a lease for a term of 7 years or more, or a transfer on sale of such a lease.” (Section 24(10) LGFA 1992).

The Dictionary of Law defines a “transfer” as “the conveyance of title or other interest in property from one person to another e.g. by sale or gift”. A sale is defined as “a contract for sale of goods whereby the seller transfers or agrees to transfer the property or goods to a buyer for a money consideration called the price”.

A Scottish case provides guidance on the difference between a sale and a gift. Lord Hamilton in the Grampian Valuation Joint Board Assessor v Macdonald case said that ‘…It was material to distinguish between a sale on the one hand and a transfer of property on the other…’ and although the circumstances are somewhat different I think it is tolerably clear that an inheritance is not a purchase/sale arrangement and it cannot be a relevant transaction. For a sale to take place there must be some form of consideration, either money or money’s monetary consideration, this requirement will not be satisfied. Since no sale within the definition of Section 24(10) has taken place, the band cannot be altered because of a “material increase”.

Notes:

Transfer of shares are not to be treated as relevant transactions, See CTM Section 2 part 3.

The sale of a fee simple subject to a long leasehold interest for consideration does constitute a “relevant transaction” and if two properties are exchanged, even with little or nil equality of exchange consideration that transaction will fall within the definition.

A “right to buy” purchase will be a “relevant transaction”, even though the taxpayer in occupation of the dwelling remains unchanged.

The sale of part of a dwelling is a relevant transaction, which includes sales of garden land for whatever use.

The purchase of additional land constitutes the coming into existence of a new dwelling because the boundaries of the hereditament have changed. The land occupied as evidenced by the new curtilage has changed, and thus a new dwelling has come into existence. This follows the principle laid down in a the Rating Case of Baker (VO) v Citibank NA (RA 2007 93), where it was decided that new hereditaments came into existence every time additional floor space was added, which was outside the previous boundaries. This requires the new hereditament to be valued as a new dwelling, taking into account the physical characteristics of it at the date of valuation, and taking it outside the “material increase”, “relevant transaction” provisions which apply only to the alteration of existing “dwellings”.

Inheritance of property

Where an improved dwelling with the improvements that would normally be considered amounting to a “material increase” is inherited , the transfer on inheritance should not be considered a relevant transaction.

Receipt of property by gift

Where an improved dwelling with the improvements that would normally be considered amounting to a “material increase” is received by way of gift, the transfer by gifting should not be considered a relevant transaction.

5. The Date(s) at which the Size, Layout, Character of a Dwelling and its Physical Locality requires consideration

When carrying out a valuation for any of the reasons in section 2 above the size, layout, character of a dwelling and its physical locality require to be viewed as they existed at the specific date(s).

These date(s) are detailed in Regs 6(2)(d), 6(3) and 6(3A) of The Council Tax (Situation and Valuation of Dwellings) Regulations 1992 as amended by The Council Tax (Situation and Valuation of Dwellings) (Amendment) Regulations 1994.

6. Effective dates*

An effective date is the date at which any change in band becomes effective for charging purposes, and is often different from material dates used in valuation for establishing physical characteristics.

A summary of effective dates appears in CTM Section 2 appendix 2.3. Practical applications are set out in the examples below:

Reason for valuation:

1. Dwelling was omitted in error from compiled list or its initial entry in the compiled list is thought to be incorrect.

When carrying out a valuation for either of these reasons all physical factors require consideration as they existed at 1 April 1993.

Therefore if a property was improved between 1 April 1991 and 1 April 1993 the question to be asked is, if this improvement had existed at 1 April 1991, for how much would the property have sold at that time?

Effective date omission: date of omission 1 April 1993.

Effective date error: date of schedule if increase, date of original entry if decrease.
- Insertion of a new dwelling.
Example (a). The completion notice issued in respect of a new dwelling indicates that the property was completed on 3 June 2007.

The date at which all physical factors are to be considered is the 3 June 2007 (the day stated on the completion notice).

It important to remember that the physical state of the locality of many new estate dwellings often greatly improves as the larger development nears completion and this should be allowed for when considering what it would have fetched if sold on 1 April 1991.

Effective date: date of coming into existence of dwelling.

Example (b). A piece of garden land is purchased from a neighbour and a new boundary fence erected. The boundaries of the hereditament have changed, and thus a new dwelling has come into existence that was not occupied before. The additional land together with the former dwelling becomes a new dwelling. The property whose land is sold, also has new boundaries after the transfer and also becomes a new dwelling.

Effective date: Date of coming into existence of new dwelling, ie date of the land transaction.

3. There has been a “material increase” and “relevant transaction”.

Example. A property has a new kitchen installed on 23 November 2006 and a swimming pool added in February 2007 before being sold on 14 June 2007.

When valuing the property to decide whether it’s banding should be increased, its size and layout and all other physical factors require consideration as they existed at 14 June 2007 (the day on which the sale was completed). Therefore when deciding what the property would have sold for at 1/4/91 it is necessary to assume that it had both the kitchen extension and the swimming pool at this time.

Effective date: date of schedule alteration (post 1 April 2007).

4. Dwelling has become or ceased to be a composite dwelling or, in the case of a dwelling continuing to be a composite, where there has been a change in the domestic/non-domestic balance of the dwelling.

Example. A taxpayer stops using a ground floor room in her home as a hairdressing salon and begins using it as a bedroom on 24 November 2004.

When valuing the property to decide whether it’s banding should be increased, its size and layout and all other physical factors require consideration as they existed at 24 November 2004 (the day when the circumstances giving rise to increase in the domestic use occurred). Therefore when deciding what it would have fetched at 1 April 91 it is necessary to assume that the ground floor room was included and reflects any additional value which it would have had.

Effective date: date circumstances arose: 24 November 2004.

5. “Material reduction” caused by the demolition of part of a property.

Example. A taxpayer demolishes his garage on 1 November 2006 and has no intention of rebuilding it.

When valuing the property to decide whether it’s banding should be reduced, its size and layout and all other physical factors require consideration as they existed at 1 November 2006 (the date the demolition occurred). Therefore when deciding what it would have fetched at 1 April 1991 it is necessary to assume that it had no garage.

Because all physical factors must be taken into account, if, since the Valuation List was compiled or last altered the above dwelling had been substantially improved, these improvements would also require consideration and to be offset against any proposed reduction (but not so as to increase the band).

Effective date: date the change occurred, 1 November 2006.

**6. “Material reduction” caused by the adaptation of a dwelling to make it suitable for use by a physically disabled person.

Example. The taxpayer finishes installing a chairlift and adapting the bathroom for use by a disabled parent on 23 February 2006.

When valuing the property to decide whether it’s banding should be reduced, its size and layout and all other physical factors require consideration as they existed at 23 February 2006 (the date the adaptation occurred). Therefore when deciding what it would have fetched at 1 April 1991, it is necessary to assume that it had a chairlift and a specially adapted bathroom.

Effective date: date the adaptation completed, 23 February 2006.

7. “Material reduction” caused by a change in the physical state of the dwellings locality.

Unlike any of the situations above when carrying out a valuation as a result of change in the physical state of a dwelling’s locality, the size, in this example, layout and character of the dwelling is always considered at one date and its locality at another.

Example (i). A new sewage treatment plant opens close to a dwelling on 4 July 2007. The banding of the dwelling was last altered following the sale of that dwelling on 4 February 2004 when improvements carried out since 1 April 1993 were reflected.

Regulation 6(3)(b)(ii) states that in a case where there has been a previous alteration of the list in relation to that dwelling then you must assume that the size, layout, and character of the dwelling were as on the date from which that alteration had effect.

In the case of a “material increase” followed by a “relevant transaction” - the sale of the dwelling on 4 February 2004 - then the material date is the date of sale, and this is the date on which the physical characteristics of the dwelling must be considered.

The state of the locality is to be considered at 4 July 2007 - the date when the new sewage treatment plant opened (Regulation 6(3)(a) of the Order).

Therefore when deciding what it would have fetched at 1 April 1991 it is necessary to assume that there was a sewage treatment plant nearby and that the dwelling itself was as it existed as at 4 February 2004.

Effective date: for reduction, date physical change of locality occurred – 4 July 2007.

Example (ii). A new sewage treatment plant opens close to a dwelling on 4 July 2007. The banding of the dwelling has not been altered since Council Tax came into force although it was sold on 23 January 2004. (The banding was not increased because the improvements made were limited).

When valuing the property to decide whether it’s banding should be reduced, the date at which the dwellings locality should be considered is 4 July 2007 (the date of the change of the locality). The date at which the size layout and character requires consideration is 23 January 2004 (the date of the previous relevant transaction not giving rise to an alteration).

Therefore when deciding what it would have fetched at 1 April 1991 it is necessary to assume that there was a sewage treatment plant nearby and that the dwelling itself was as it existed as at 23 January 2004. In this example therefore, the value of any improvements, as existing at the previous relevant transaction date, would be set against the effect of any reduction in value, even though they did not trigger a band increase at the time.

Effective date for any reduction: date physical change of locality occurred – 4 July 2007.

Example (iii). A new sewage treatment plant opens close to a dwelling on 4 July 2007. The banding of the dwelling has not been altered since Council Tax came into force.

When valuing the property to decide whether it’s banding should be reduced, the date at which the dwelling’s locality should be considered is 4 July 2007 (the date of the change of the locality). The date at which the size layout and character requires consideration is 1 April 1993 (as there has been no previous alteration or “relevant transaction” giving rise to an alteration).

Therefore when deciding what it would have fetched at 1 April 1991 it is necessary to assume that there was a sewage treatment plant nearby and that the dwelling itself was as it existed as at 1 April 1993.

Effective date: date physical change of locality occurred - 4 July 2007.

8. Correction of a mistake which was made when altering the list on account of any of the reasons given in Nos 1 - 7 above.

Example (i). Band increased following material increase and relevant transaction following circumstances detailed in the example given in reason 3 above. Taxpayer makes proposal challenging the alteration.

When valuing the property to decide whether it’s banding should be reduced, its size and layout and all other physical factors require consideration as they existed at 14 June 2007 (the day which was applicable when the previous alteration was made).

Effective date: Increase in band - date of schedule alteration.

Effective date: Reduction in band - date previous alteration had effect.

Example (ii). Band reduced following change in the physical state of the dwelling’s locality as detailed in the example (iii) given in reason 7 above. The Listing Officer subsequently becomes aware of improvements made to the property that were carried out prior to 1 April 1993.

When valuing the property to decide whether it’s banding should be increased, the date at which the locality requires consideration is 4 July 2007 (the date applicable in respect of previous alteration). The date at which the size layout and character requires consideration is 1 April 1993 (the date which was applicable when the previous alteration was made).

9. Correction of a clerical error.

Example (i). Band (not altered since the List came into force on 1 April 1993) increased due to clerical error.

When altering the list to correct the clerical error the dwelling’s size, layout and all other physical factors should be considered as they existed at 1 April 1993.

Example (ii). Band reduced and list altered following reduction in value caused by circumstances detailed in reason 5 above. A year later the list is again altered, this time as a result of a complete error.

When altering the list to correct the clerical error the dwelling’s size, layout and all other physical factors require consideration as they existed at the day when the list was altered because of reason 1, 2, 3, 4, 5, 6, or 7. In this case 1 November 2006

England only: practice note 3: appendix 1 - summary of regulations

England only: Practice Note 3: Appendix 1 – Summary of Regulations

Reason for Valuation

Date at which layout, size and character considered

Date at which locality considered

1. Initial Compiled list entry incorrect

1 April 1993

2. New Dwelling

Day when dwelling came into existence (the day stated in completion notice)

3. Material Increase and Relevant Transaction

Day When Relevant transaction completed

4. Dwelling has become / ceased to a composite dwelling or there has been a change in the balance of a composite dwelling.

Day when circumstances causing increase / reduction in domestic use occurred

5. Material reduction caused by demolition of part of the dwelling

Day when part of dwelling demolished

6. Reduction in value caused by adaptation of dwelling to make it suitable for use by physically disabled person

Date of Adaptation

7. Change in the physical state of the dwellings locality

Which is the latest of :

i) Date of Previous alteration

ii) Date of any previous relevant transaction not giving rise to an alteration.

iii) 1 April 1993

Date of change to Locality

8. Mistake when previously altering the list because of either 1, 2, 3, 4, 5, 6 or 7 above

Date which was properly applicable at 1, 2, 3, 4, 5, 6 or 7 above

9. Clerical Error

Date which was applicable when list was altered because of 1, 2, 3, 4, 5, 6 or 7 above, or if no such alteration 1 April 1993.

Practice note 3: Wales 2005 list only: valuation factors and material and effective dates

1. Basic principles

When carrying out a valuation for the purposes of an alteration to a valuation list the basis of valuation to be adopted is contained in Regulations 6 and 7 of The Council Tax (Situation and Valuation of Dwellings) (Amendment) Regulations 1994 as amended by the Council Tax (Situation and Valuation of Dwellings)(Wales) (Amendment) Regulations 2005.

The basis of valuation states that the value of any dwelling shall be taken to be the amount which, subject to certain assumptions, it might reasonably have been expected to realise if it had been sold by a willing vendor on 1 April 2003.

However although the dwelling must be valued at the fixed date of 1 April 2003 its size, layout, character and physical state of the locality are required to be considered as they existed at 1 April 2005 or a later date, depending on why the list is being altered.

In essence the question when valuing is always, “Given the size, layout, character of the dwelling and the physical state of its locality at a given date on or after 1 April 2005 how much would it have sold for on 1 April 2003?”

It is the purpose of this practice note to detail the date at which each variable requires to be considered.

2. When a valuation is required

A valuation is required where:

1.A dwelling was valued at too high a band in the compiled list

2.A dwelling was omitted in error from the compiled list or its initial entry in the compiled list is thought to be incorrect

3.A new (post 1 April 2005) dwelling requires to be inserted

4.There has been a “material increase” in the value of a dwelling and a “relevant transaction”

5.A dwelling has become or ceased to be a composite dwelling or where, continuing to be a composite, there has been a change in the domestic/non-domestic balance of the dwelling

6.There has been a “material reduction” in the value of a dwelling, caused (in whole or in part) by the demolition of any part of the dwelling

7.There has been a “material reduction” in the value of a dwelling, caused (in whole or part) by any change in the physical state of the dwelling’s locality

8.There has been a “material reduction” in the value of a dwelling, caused (in whole or part) by any adaptation of the dwelling to make it suitable for use by a physically disabled person

9.A mistake was made when altering the list for any of the above reasons. 10) A clerical error requires correction.

See paragraph 7 below for practical

3. Definition of “material increase”

This means “any increase in the value of a dwelling which is caused (in whole or in part) by any building, engineering or other operation carried out in relation to the dwelling, whether or not constituting development for which planning permission is required.” (Section 24 (10) LGFA 1992).

(NB. Changes in locality in isolation do not constitute material increases).

4. Definition of “relevant transaction”

This is defined as “a transfer on sale of the fee simple, a grant of a lease for a term of 7 years or more, or a transfer on sale of such a lease”. (Section 24(10) of the LGFA 1992).

The Dictionary of Law defines a “transfer” as “the conveyance of title or other interest in property from one person to another e.g. by sale or gift”. A sale is defined as “a contract for sale of goods whereby the seller transfers or agrees to transfer the property or goods to a buyer for a money consideration called the price”.

A Scottish case provides guidance on the difference between a sale and a gift. Lord Hamilton in the Grampian Valuation Joint Board Assessor v Macdonald case said that ‘…It was material to distinguish between a sale on the one hand and a transfer of property on the other…’ and although the circumstances are somewhat different I think it is tolerably clear that an inheritance is not a purchase/sale arrangement and it cannot be a relevant transaction. For a sale to take place there must be some form of consideration, either money or money’s monetary consideration, this requirement will not be satisfied. Since no sale within the definition of Section 24(10) has taken place, the band cannot be altered because of a “material increase”.

Note:

Transfer of shares are not to be treated as relevant transactions, See CTM Section 2 part 3.

The sale of a fee simple subject to a long leasehold interest for consideration does constitute a “relevant transaction” and if two properties are exchanged, even with little or nil equality of exchange consideration that transaction will fall within the definition.

A “right to buy” purchase will be a “relevant transaction” even though the taxpayer remains unchanged.

Both the purchase of additional land and the sale of part of the existing hereditament (for example, the sale of part of the garden) is not a relevant transaction, but instead constitutes the coming into existence of a new dwelling because the boundaries of the hereditament have changed. The land occupied as evidenced by the new curtilage has changed, and thus a new dwelling has come into existence. This follows the principle laid down in a the Rating Case of Baker (VO) v Citibank NA (RA 2007 93), where it was decided that new hereditaments came into existence every time additional floor space was added, which was outside the previous boundaries. This requires the new hereditament to be valued as a new dwelling, taking into account the physical characteristics of it at the date of valuation, and taking it outside the “material increase”, “relevant transaction” provisions which apply only to the alteration of existing “dwellings”.

Inheritance of property

Where an improved dwelling with the improvements that would normally be considered amounting to a “material increase” is inherited , the transfer on inheritance should not be considered a relevant transaction.

Receipt of property by gift

Where an improved dwelling with the improvements that would normally be considered amounting to a “material increase” is received by way of gift, the transfer by gifting should not be considered a relevant transaction.

5. The Dates(s) at which the size, layout, character of a dwelling and its physical locality requires consideration

When carrying out a valuation for any of the reasons in section 2 above the size, layout, character of a dwelling and its physical locality require to be viewed as they existed at the specific date(s). These are known as material dates.

These date(s) are detailed in Regulation 6(2) (d), 6(3) and 6(3A) of The Council Tax (Situation and Valuation of Dwellings) Regulations 1992 as amended by The Council Tax (Situation and Valuation of Dwellings) (Amendment) Regulations 1994 and the Council Tax (Situation and Valuation of Dwellings) (Wales) (Amendment) Regulations 2005.

They are summarised in Appendix 1 to this note.

6. The difference between material and effective dates – post 1 April 2010 position

A material dates is often different from an effective date, which is the date at which any change in band becomes effective for charging purposes. This is now subject to an important change post 1/4/2010.

Introduction of the 6 year backdating rule in Wales: An amendment to the 1993 Regulations was effected by The Council Tax (Alteration of Lists and Appeals) (Amendment) (Wales) Regulations 2010. Regulation 2(2) substitutes Regulation 14 of the 1993 Regulations with regard to effective dates in the following circumstance.

Where an alteration is made to correct an inaccuracy and the inaccuracy is that the original list showed the valuation band as being too high, then the alteration has effect from the later of the day on which the list was compiled and the day six year earlier than the day on which the alteration is entered in the list.

Because the 2005 list in Wales is 6 years old after 31 March 2011, from 1 April 2011 onwards the effective date in such cases will no longer be date of list compilation, but will move according to the date of schedule of alteration minus 6 years.

See CTM Section 2 Appendix 2.3 for a summary of effective dates.

7. Practical examples

Reasons for valuation 1- 10 in paragraph 2 above:-

1. A dwelling was valued at too high a band in the compiled list

A property which was incorrectly banded too high in the compiled list is subject to the provisions of the 2010 amendment to the1993 Appeal Regulations (see para 6).

Effective date (error Band too high) is limited to six years before the date of schedule of alteration of the list of the date of compilation, whichever is the later.

2. Dwelling was omitted in error from compiled list, or its initial entry in the compiled list is too low

When carrying out a valuation for either of these reasons all physical factors require consideration as they existed at 1 April 2005.

Therefore if a property was improved between 1 April 2003 and 1 April 2005 the question to be asked is if this improvement had existed at 1 April 2003 for how much would the property have sold at that time?

Effective date (omission): date of omission 1 April 2005.

Effective date (error Band too low): date of schedule in increase.

3. Insertion of a new dwelling

Example (a). The completion notice issued in respect of a new dwelling indicates that the property was completed on 3 June 2006.

The date at which all physical factors are to be considered is the 3 June 2006 (the day stated on the completion notice).

It important to remember that the physical state of the locality of many new estate dwellings often greatly improves as the larger development nears completion and this should be allowed for when considering what it would have fetched if sold on 1 April 2003.

Example (b). A piece of garden land is purchased from a neighbour and a new boundary fence erected. The boundaries of the hereditament have changed, and thus a new dwelling has come into existence that was not occupied before. The additional land together with the former dwelling becomes a new dwelling. The property whose land is sold, also has new boundaries after the transfer and also becomes a new dwelling.

Effective date: Date of coming into existence of new dwelling, i.e. date of the land transaction.

4. There has been a “material increase” and “relevant transaction”.

Example. A property has a new kitchen installed on 23 November 2005 and a swimming pool added in February 2006 before being sold on 14 June 2006.

When valuing the property to decide whether it’s banding should be increased, its size and layout and all other physical factors require consideration as they existed at 14 June 2006 (the day on which the sale was completed). Therefore when deciding what the property would have sold for at 1/4/03 it is necessary to assume that it had both the kitchen extension and the swimming pool at this time.

Effective date: date of relevant transaction 14 June 2006.

5. Dwelling has become or ceased to be a composite dwelling or, in the case of a dwelling continuing to be a composite, where there has been a change in the domestic/non-domestic balance of the dwelling

Example. A taxpayer stops using a ground floor room in her home as a hairdressing salon and begins using it as a bedroom on 24 November 2005.

When valuing the property to decide whether it’s banding should be increased, its size and layout and all other physical factors require consideration as they existed at 24 November 2005 (the day when the circumstances giving rise to increase in the domestic use occurred). Therefore when deciding what it would have fetched at 1 April 2003 it is necessary to assume that the ground floor room was included and reflects any additional value which it would have had.

Effective date: date circumstances arose 24 November 2005.

6. “Material reduction” caused by the demolition of part of a property.

Example. A taxpayer demolishes his garage on 1 November 2005 and has no intention of rebuilding it.

When valuing the property to decide whether it’s banding should be reduced, its size and layout and all other physical factors require consideration as they existed at 1 November 2005 (the date the demolition occurred). Therefore when deciding what it would have fetched at 1 April 2003 it is necessary to assume that it had no garage.

Because all physical factors must be taken into account, if since the Valuation List was compiled or last altered the above dwelling had been substantially improved these improvements would also require consideration and to be offset against any proposed reduction (but not so as to increase the band).

Effective date: 1 November 2005.

7. “Material reduction” caused by the adaptation of a dwelling to make it suitable for use by a physically disabled person

Example.

A taxpayer finishes installing a chairlift and adapting the bathroom for use by his disabled mother on 23 February 2006. When valuing the property to decide whether it’s banding should be reduced, its size and layout and all other physical factors require consideration as they existed at 23 February 2006 (the date the adaptation occurred). Therefore when deciding what it would have fetched at 1 April 2003 it is necessary to assume that it had a chairlift and a specially adapted bathroom.

Effective date: date adaptation completed 23 February 2006.

8. “Material reduction” caused by a change in the physical state of the dwellings locality

Unlike any of the situations above, when carrying out a valuation as a result of change in the physical state of a dwelling’s locality, the size, layout and character of the dwelling is always considered at one date, and its locality at another.

Example (i). Dwelling has band sensitive improvements - RT has taken place:

A new sewage treatment plant opens close to a dwelling on 4 July 2006. The banding of the dwelling was last altered following the sale of that dwelling on 4 February 2006 when improvements carried out since 1 April 2005 were reflected.

Regulation 6(3)(b)(ii) states that in a case where there has been a previous alteration of the list in relation to that dwelling then you must assume that the size, layout, and character of the dwelling were as on the date from which that alteration had effect.

In the case of a “material increase” followed by a “relevant transaction” - the sale of the dwelling on 4 February 2006 - then the material date is the date of sale, which is the date in relation to the size and character of the dwelling.

The state of the locality, however, is to be considered at 4 July 2006 - the date when the new sewerage treatment plant opened (Regulation 6(3) (a) of the Order).

Therefore when deciding what it would have fetched at 1 April 2003 it is necessary to assume that there was a sewerage treatment plant nearby and that the dwelling itself was as it existed as at 4 February 2006.

Effective date for size and locality – 4 Feb 2006

Effective date: for reduction, date physical change of locality occurred – 4 July 2006

Example (ii). Dwelling has non-band sensitive improvements – RT has taken place:

A new sewage treatment plant opens close to a dwelling on 4 July 2006. The banding of the dwelling has not been altered since Council Tax came into force although it was sold on 23 January 2006. (The banding was not increased because the improvements made were limited).

When valuing the property to decide whether it’s banding should be reduced, the date at which the dwellings locality should be considered is 4 July 2006 (the date of the change of the locality). The date at which the size layout and character requires consideration is 23 January 2006 (the date of the previous relevant transaction not giving rise to an alteration).

Therefore when deciding what it would have fetched at 1 April 2003 it is necessary to assume that there was a sewage treatment plant nearby and that the dwelling itself was as it existed as at 23 January 2006. Thus in this example, the value of any improvements, as existing at the previous relevant transaction date, would be set against the effect of any reduction in value, even though they did not trigger a band increase at the time.

Effective date size and locality - date of RT

Effective date: date physical change of locality occurred - 4 July 2006

Example (iii). Dwelling with improvements –but no RT taken place

A new sewage treatment plant opens close to the dwelling on 4th July 2006.

There has been no RT to cause the improvements to be considered part of the dwelling. The physical layout of the dwelling will be taken as at 1 April 2005. The improvements must await a RT to have any effect on value. The effect of the sewage treatment plant will be offset against the unimproved dwelling.

Effective date for size and layout: 1st April 2005

Effective date for locality: 4th July 2006.

Example (iii). Dwelling unchanged since compilation:

A new sewerage treatment plant opens close to a dwelling on 4 July 2006. The banding of the dwelling has not been altered since Council Tax came into force.

When valuing the property to decide whether it’s banding should be reduced, the date at which the dwelling’s locality should be considered is 4 July 2006 (the date of the change of the locality). The date at which the size layout and character requires consideration is 1/4/05 (as there has been no previous alteration or “relevant transaction” giving rise to an alteration).

Therefore when deciding what it would have fetched at 1 April 2003 it is necessary to assume that there was a sewerage treatment plant nearby and that the dwelling itself was as it existed as at 1 April 2005.

Effective date for size and layout 1st April 2005

Effective date: date physical change of locality occurred - 4 July 2006

9. Correction of a mistake which was made when altering the list on account of any of the reasons given in Nos 1 - 7 above

Example (i). Band increased following material increase and relevant transaction following circumstances detailed in the example given in reason 3 above. Taxpayer makes proposal challenging the alteration.

When valuing the property to decide whether it’s banding should be reduced, its size and layout and all other physical factors require consideration as they existed at 14 June 2006 (the day which was applicable when the previous alteration was made).

Effective date: Decrease in band – date previous alteration had effect.

Example (ii). Band reduced following change in the physical state of the dwelling’s locality as detailed in the example (iii) given in reason 7 above. Listing Officer subsequently becomes aware of improvements made to property which were carried out prior to 1 April 2005.

When valuing the property to decide whether it’s banding should be increased, the date at which the locality requires consideration is 4 July 2006 (the date applicable in respect of previous alteration). The date at which the size layout and character requires consideration is 1 April 2005 (the date which was applicable when the previous alteration was made).

Effective date: Increase in band – date of schedule alteration.

10. Correction of a clerical error

Example (i). Band (not altered since the List came into force on 1 April 2005) increased due to clerical error.

When altering the list to correct the clerical error the dwelling’s size, layout and all other physical factors should be considered as they existed at 1 April 2005.

Example (ii). Band reduced and list altered following reduction in value caused by circumstances detailed in reason 5 above. A year later the list is again altered, this time as a result of a clerical error.

When altering the list to correct the clerical error the dwelling’s size, layout and all other physical factors require consideration as they existed at the day when the list was altered because of reason 1, 2, 3, 4, 5, 6, or 7. In this case 1 November 2005.

Effective date: Decrease in band – date previous alteration had effect.

Effective date: Increase in band – date of schedule alteration.

Wales 2005 list only: practice note 3: appendix 1 - summary of regulations

Reason for Valuation

Date at which layout, size and character considered

Date at which locality considered

1. Initial Compiled list entry incorrect

1 April 2005

2. New Dwelling

Day when dwelling came into existence (the day stated in completion notice)

3. Material Increase and Relevant Transaction

Day When Relevant transaction completed

4. Dwelling has become / ceased to a composite dwelling or there has been a change in the balance of a composite dwelling.

Day when circumstances causing increase / reduction in domestic use occurred

5. Material reduction caused by demolition of part of the dwelling

Day when part of dwelling demolished

6. Reduction in value caused by adaptation of dwelling to make it suitable for use by physically disabled person

Date of Adaptation

7. Change in the physical state of the dwellings locality

Which is the latest of :

i) Date of Previous alteration

ii) Date of any previous relevant transaction not giving rise to an alteration.

iii) 1 April 2005

Date of change to Locality

8. Mistake when previously altering the list because of either 1, 2, 3, 4, 5, 6 or 7 above

Date which was properly applicable at 1, 2, 3, 4, 5, 6 or 7 above

9. Clerical Error

Date which was applicable when list was altered because of 1, 2, 3, 4, 5, 6 or 7 above, or if no such alteration 1 April 2005.

Practice note 4: disrepair, building works, temporary disabilities and flooding

Summary: PN 4 has been amended to reflect the law as considered in the ‘repair’ case of Wilson v Coll LO [2011] EWHC 2824 (Admin) and to take account of the Supreme Court decision in the rating case of Newbigin (VO) v Monk [2017] UKSC 14.

1. Introduction

Practice Note 1 (Definition of Dwelling and Basis of Valuation for Council Tax) sets out the basis of the dwelling, as being a hereditament from Section 3 LGFA 1992. Para 4.4 of PN1 deals with the assumption that the dwelling to be banded is in a ‘state of reasonable repair’. This Practice Note 4 covers all aspects of disrepair, including whether a hereditament exists at all, (truly derelict properties), the effect on banding of dwellings undergoing works of repair or improvement and temporary disabilities external to the dwelling.

Since April 2013, the Council Tax (Exempt Dwellings) Order 1992 has been amended by the abolition of Class A which gave mandatory relief for a set period of up to 12 months for properties awaiting or undergoing structural repair.

Appendix 1 to PN4 Gives examples of possible list alterations due to disrepair and building works. Appendix 2 is a summary of the basic principles to be applied. Appendix 3 is a practical guide to assist in deciding whether a property is derelict or not.

2. A hereditament must exist

It is important to understand that a dwelling must exist before repair assumptions can be invoked. Thus the ‘hereditament test’ must be applied and satisfied first, then the matter of valuation considered separately. The question posed by the hereditament test is “Having regard to the character of the property and a reasonable amount of repair works being undertaken could the premises be occupied as a dwelling?”

Newbigin (VO) v Monk adds a further consideration. Where a hereditament is vacant and undergoing a scheme of works, the hereditament may cease to exist – see paragraphs 4. and 5.2 below for further explanation. As a dwelling cannot exist without first identifying a hereditament, vacant domestic property evidenced as undergoing a scheme will be deleted from the CT list.

3. Reasonable repair assumption

In PN 1 it is explained that if a dwelling exists, then the assumption that the dwelling is in a state of reasonable repair becomes valid. The standard of repair to be assumed is that which would be appropriate having regard to the dwelling’s age, locality and character. The importance of determining the ‘character’ of the dwelling is considered, in particular how in, say, a Victorian terrace, the character of the various properties might vary considerably either due to general neglect or because substantial improvements have been made. In some circumstances the character of a property might be so different from the majority of other properties in the street that it would not, necessarily, be appropriate to assume the same state of repair to exist.

4. Scheme of works

If a vacant property is shown to be undergoing a scheme of works, then the decision in Newbigin (VO) v Monk must be considered. In this NDR case, a floor in an office was undergoing works to rearrange elements to give the landlord more flexibility to find tenants. The Supreme Court examined a series of rating cases and found case law:

‘…distinguished between a mere lack of repair, which did not affect rateable value because of the hypothetical landlord’s obligation to repair, and redevelopment works which made a building uninhabitable.’ (Monk, para. 17). The Supreme Court identified a ‘logically prior question’ that needed to be asked when a building was undergoing redevelopment: requiring the valuation officer to ascertain whether the premises were ‘undergoing reconstruction rather than simply being in a state of disrepair.’ If so, the premises would be incapable of beneficial occupation and cease to be a hereditament.

The same principle should be applied when considering a case for Council Tax. If a property is simply in poor repair, then LOs should follow Wilson v Coll. If there is a scheme of works, then LOs will need to consider the evidence and make a judgement if the works made a building uninhabitable. Clearly this will only apply to vacant property and generally where there is major renovation and extension underway. It is not envisaged works to replace a kitchen or bathroom, which may temporarily render a property incapable of beneficial occupation will be sufficient to delete a property from the valuation list.

5. Dwellings in Poor Repair and Derelict Properties

5.1 What constitutes a dwelling

Providing a property constitutes a dwelling it is required to be shown in a valuation list. As Band A includes dwellings with ‘values not exceeding’ £40,000 for England and £44,000 for Wales even if a dwelling’s capital value is nominal it will still be at least banded as ‘A’.

To be a dwelling a property has to satisfy the definition in s3 LGFA 1992 (see CTM:PN1). This particularly includes 3(2)(a) LGFA 1992: -

“…. a dwelling is any property which -

(a) By virtue of the definition of hereditament in Section 115(1) of the General Rate Act 1967, would have been a hereditament for the purposes of that Act if that Act remained in force….’

The effect of this is that behind the concept of the dwelling and Council Tax itself lies the rating concept of the hereditament. As with post-1990 rating, the definition of the hereditament refers back to what would have been a hereditament under the pre-1990 rating system. (See RM4: 2 for a detailed examination of the concept of the hereditament for rating purposes).

One of the valuation assumptions for Council Tax is that the dwelling is to be assumed to be in a state of reasonable repair having regard to the age, locality and character of the dwelling. This reasonable repair assumption, however, only applies after it is established that a property constitutes a dwelling. To be a dwelling it must first qualify as a hereditament.

5.2 The “hereditament test”

To establish for Council Tax whether a property in poor order constitutes a hereditament (and as long as the other requirements of s3 LGFA 1992 are satisfied, is therefore a dwelling) its character should be examined and the question posed.

‘Having regard to the character of the property and a reasonable amount of repair works being undertaken could the premises be occupied as a dwelling?’

The judgement in Wilson v Coll examined the validity of the hereditament test (the whole of PN4 being included in the LO case papers) and the Judge confirmed in para 40:

“I accept that as a matter of law the crucial distinction for the purposes of deciding whether there is, or continues to be, a hereditament should focus upon whether a property is capable of being rendered suitable for occupation (…as a dwelling) by undertaking a reasonable amount of repair works. The distinction, which was correctly drawn by the respondent…is between a truly derelict property, which is incapable of being repaired to make it suitable for its intended purpose, and repair which would render it capable again of being occupied for the purpose for which it is intended”.

These initial ‘repair’ considerations are entirely separate from the valuation assumptions as to repair. The character of a truly derelict property (for example with most roof tiles missing and so on), is one of dereliction and to make it habitable a substantial amount of repair would need to be undertaken. This would change its character and be more than a reasonable amount of repair.

Alternatively, where a property, though in poor order, would be habitable if say the broken sanitary fittings were replaced, some window glass repaired and general tidying up/redecoration carried out, the character would be that of a run-down property and the works of repair would be reasonable.

Character is not merely confined to the view which a passer-by would form from an external inspection but also involves the internal state.

In some situations houses are deliberately made uninhabitable to prevent domestic occupation, for example where a housing association purchases a property to convert to flats but does not intend to start work for a year. To prevent squatters it removes the services, sanitary fittings, kitchens and plumbing, floorboards, ceilings etc. Before deletion in such a case, the LO needs to be satisfied that the extent of the damage is so severe, that, having regard to its character (so that of a, probably, run-down house), the amount of repair work needed is not reasonable and the property does not constitute a hereditament.

Additionally, LOs will need to consider if there is evidence of a scheme of work which may also render the hereditament incapable of beneficial occupation.

5.3 Not an economic test

The Wilson v Coll judgment confirmed that the hereditament test was not an economic one: “The crucial distinction in that regard is not between repairs which would be economic to undertake or uneconomic to undertake”.

The Judge accepted that an ‘economic test’ was not applicable as a matter of law, as it was entirely absent from council tax legislation, unlike the regime which governs non-domestic rating.

It should be appreciated that this test of whether a reasonable amount of repair would be undertaken to make a property habitable is separate from the assumption of reasonable repair having regard to age, locality and character. The first test is only to establish whether the property constitutes a hereditament, the second is an assumption applied after it is established it is a dwelling and may, having regard to age, locality and character, assume a degree of repair well in excess of that required merely to make the dwelling habitable.

The ‘hereditament test’ simply establishes whether a property may be required to appear in a valuation list. If it is wholly domestic or composite, then providing the domestic property is not merely a private garage, private storage premises or garden (as defined in 3(4) LGFA 1992) the property will constitute a dwelling and require banding.

Once it is concluded that a dwelling exists, then the assumption of ‘state of reasonable repair’ for the whole dwelling becomes mandatory, and cannot be set aside by the facts, as per the judgement in R v East Sussex VT ex parte Silverstone (1996) RVR 203-205.

5.4 Decline/Improvement in state of repair post commencement of a list

If a property fails the hereditament test it cannot be included in a valuation list and if it appears in a list, it should be deleted.

The worsening of disrepair after the start of a list would not constitute a material reduction, unless it also involves demolition of any part of the dwelling, because a reduction in value due to disrepair does not fall within the definition of ‘material reduction’ in 24(10) LGFA 1992. Unless, due to the state of disrepair, the property ceased to be a hereditament an alteration to the list would not be possible.

The remedying of disrepair might be such as to alter the character and in some cases justify a higher valuation band. Whilst this would constitute a ‘material increase’ an existing band cannot be altered without a ‘relevant transaction’.

In the case of Burke v Listing Officer for Camden 2009 (unreported) the High Court held that disrepair to a dwelling is not a relevant matter affecting valuation of a dwelling, owing to the ‘reasonable repair’ assumption of Regulation 6(2)(e) of the Council Tax (Situation and Valuation of Dwellings) Regulations 1993. If a dwelling existed the Judge held that any repair argument involving costs was superfluous. In that case there was no evidence to suggest that the dwelling, though neglected and in poor repair, was not a hereditament for the purposes of Section 3 of Local Government Finance Act 1992.

6. Vacant property awaiting demolition – the application of S66 LGFA 1988

In the context of determining what is domestic property, 66(5) LGFA 1988 states ‘Property is domestic if it appears that when next in use it will be domestic’.

This has become more relevant in recent years where 1950s and 1960s tower blocks are being redeveloped, by public social landlords, and tenants are decanted prior to demolition. This paragraph does not apply to blocks awaiting refurbishment or repair.

The application of the 66(5) principle as applicable to property destined for demolition comes from a completely different legal angle to that considered above and can have a fundamental effect on the approach to dwellings which are vacant and awaiting demolition. The question is whether the property is domestic or not. If a property is not domestic property, it should not appear in a CT list. In such a case it may appear that a property vacant, sealed off and boarded up, will never again be used for living accommodation even though it may be otherwise structurally sound. If this is the case it should be removed from the council tax list.

Before such an approach is adopted, however, LOs should be satisfied that evidence exists to show that the dwellings are intended for demolition, as evidenced by a proposed scheme or planning permission etc. It is important, however, that this provision should not be used as a device to avoid liability where a mere assertion that vacant property will be demolished is made.

The criteria, as evidenced by fact and degree may include:

Consideration of any planning permissions for redevelopment:- for example whether outline only (low weight), detailed (medium), or published regeneration scheme (high)

Physical works:- for example property curtilage fenced off; property secured/tinned/boarded; floors or wings sealed off; the degree of constructive vandalism; removal of services; building/demolition contract signed

When the above factors satisfactorily apply to whole blocks, or whole floors or wings, the position should be clear. The position may be less clear when considering individual flats which have simply been vacated and are still surrounded by other occupied flats. When considering individual flats, where it appears that the vacant flat may easily be brought back into use, then it will still be domestic.

As the standing property may well still be a hereditament, consideration needs to be given as to whether it would have a positive rateable value as an unoccupied non domestic property. In most cases it is considered unlikely that a positive RV would result.

In any cases of difficulty technical advice should be sought following the Standard Operating Procedure (SoP).

7. Dwellings undergoing building works

7.1 Conversion *

Where an existing unoccupied dwelling is undergoing works to split it into a number of dwellings it will usually not constitute a hereditament. It would fail the ‘hereditament test’ described above as there is evidence of a scheme of works underway. The same applies where a number of unoccupied dwellings are undergoing works to merge them. The existing entry or entries should be deleted from the List with effect from the date the works have rendered the dwelling(s) incapable of beneficial occupation.

The exception will be where one part remains capable of occupation as a dwelling. This will usually only be the case where someone is in fact in residence, for example a person converting a four-storey house into a number of flats whilst living in part. Where that person occupies a distinct part as the living accommodation, for example the top floor, this will form a different hereditament from the original house and a new dwelling with appropriate banding should be entered into the list with the old entry deleted, the rest of the property not now constituting a hereditament or dwelling. Where, however, there is no clear unit of occupation then the whole property will remain the dwelling and, unless demolition work is involved, the requirement of a ‘material reduction’ will not be satisfied and no band reduction will be appropriate until the building is reconstituted as a number of flats.

7.2 Extension/Renovation

Where a vacant property is undergoing works to extend it or carry out major renovations, it is likely there will be sufficient evidence for the LO to conclude there is a scheme of works rendering the property incapable of beneficial occupation. In such cases the LO should delete the property from the valuation list. The Council Tax payer must be advised that a new entry will be inserted in the list once the scheme has been completed.

7.3 Material reduction and demolition

For a reduction in the capital value of a dwelling to affect its banding there has to be a ‘material reduction’. This is defined in 24(10) LGFA 1992 and means in relation to the value of the dwelling:

“any reduction which is caused (in whole or in part) by:-

i. the demolition of any part of the dwelling

ii. any change in the physical state of the dwelling’s locality

iii. any adaptation of the dwelling to make it suitable for use by a physically disabled person.”

7.4 No reduced band for demolition during works

Assuming a property remains a dwelling during works it may be that its capital value is temporarily depressed because of the works, for example the demolition of a small rear wing to clear the ground to build a larger extension, or the demolition of a garage to the side prior to its replacement by a two storey side extension, or the gutting of part prior to renovation.

A reduced band is prohibited in these circumstances by Reg 3(3) of the 2009 Alteration of lists & Appeals Regulations (England) - there are similar provisions for Wales - which states:

(3) Where a material reduction in the value of a dwelling is caused wholly by the demolition of any part of the dwelling, the valuation band shall not be altered if the works of demolition are part of, or connected with, a building, engineering or other operation carried out, in progress or proposed to be carried out in relation to the dwelling.

(4) The reference in paragraph (3) to an operation does not include the repair of any damage caused to the dwelling in the course of demolition.

This provision prevents a reduced band forming the basis for a material increase, for which a relevant transaction would be required to correct the list.

It will usually be apparent when the demolition works are ‘part of, or connected with’ other works underway. Determining whether the demolition is ‘part of, or connected with’ proposed works may be more difficult. It will be necessary to establish the purpose of the demolition and establish if it is part of, or connected with a future scheme. The future scheme merely needs to be ‘proposed’ and whilst it should be more than a possibility that there will be connected future building, engineering or other operations it is not essential that there be a firm intention to carry out a fixed designed scheme. The regulation does not provide a time period in which any proposed works are required to be expected to start or finish.

Whether the works are ‘in progress or proposed’ should be established as at the date of the demolition, that is the date of the ‘material reduction’. The later abandonment of a project will not permit any reduction in value to be given effect to, by reducing the band. This is because the works of demolition were in fact part of, or connected with works in progress or proposed at the date of the material reduction even though they were later abandoned.

Reg 3(3) provides that an ‘operation’ in 3(2), that is ‘a building, engineering or other operation’, does not include works proposed or in progress which are merely works to repair damage caused to the dwelling during the course of the demolition. This allows band reductions to be made where part of a dwelling is demolished and the only associated works are those to make sound the damage caused for example a poor rear brick extension is demolished and the old rear wall of the house is reinstated. These works would not bring Reg 4(2) into operation as they would come within Reg 4(3) as ‘repair of any damage caused in the course of demolition’.

8. Recognising the difference between repair and improvement

8.1 What is repair?

Repair is simply replacing an element already there but which is worn out. Improvement, however, introduces a new feature which was not part of the structure before.

In a Rent Act case Morcom v Campbell-Johnson (1956) the Court of Appeal considered the difference between repairs and ‘improvements’. The same principles must apply to a dwelling:-

Lord Denning said: “It seems to me that the test, so far as one can give any test in these matters, is this: if the work which is done is the provision of something new for the benefit of the occupier, that is, properly speaking, an improvement; but if it is only the replacement of something already there, which has become dilapidated or worn out, then, albeit that it is a replacement by its modern equivalent, it comes within the category of repairs…”

In the majority of cases where a property is empty and is disrepair, proposed works will not stop at repair, but will include elements of improvement. Where it is relevant to consider such a list of works it will be necessary to distinguish between works of repair and improvement.

8.2 Recognising the difference between lack of modernisation and disrepair

It is possible for the ‘character’ of a dwelling to be unmodernised, and therefore a different character from one which may superficially appear the same externally, but be completely different inside, owing to extensive improvements.

Example 1: A terraced house in an ‘as built’ condition. A property with no insulation, no felted roof, original single glazed windows, bath under worktop in kitchen, WC in the old washroom with single skin 100mm (4 inch) brick, no central heating, no or inadequate damp proof course (DPC), no modern kitchen, old plumbing possible lead, lath and plaster ceilings which have been cracked for many years and covered with polystyrene tiles. Tapping plaster around windows reveals extensively perished under the layers of wallpaper around windows, but overall accommodation is quite liveable. Where electrical alterations have been done, to render circuits safe, wiring has been surface mounted.

It is quite possible, however, that such a dwelling has been kept in ‘reasonable repair’ taking into account its age and character. If it has been allowed to deteriorate, then the state of repair to be assumed for CT is no better than what was there originally, or a modern equivalent – but NO improvement can be assumed – it is a dwelling of unmodernised character, subject to the valuation assumptions.

Example 2: Adjoining house, of similar original design, but completely renovated & improved. New re-tiled, felted and fully insulated roof, upstairs bath/shower created. Full central heating, new boiler and radiators, DPC installed, rear washhouse demolished & rebuilt across back of house to form new kitchen extension, opened up with a lintel in the rear wall to form a large kitchen/diner. New ceilings with spot lights, fully rewired and re-plumbed to latest specification. New double glazed windows & doors and enclosed storm porch, re-plastered throughout.

This property has not just been ‘repaired’. It is of different character and quality to the adjoining one, though superficially they may look the same from the outside. The fixtures / fittings and alterations have gone far beyond normal repair and into the realms of structural improvement, which would qualify as a material increase (defined as ‘any building engineering or other operation carried out in relation to a dwelling, whether or not constituting development for which planning permission is required;’).

The state of repair expected in this type will be that expected of this improved type, all the improvements will be assumed to be kept in repair.

9. Updating bands where modernisation has taken place

When a street shows varying degrees of the above two extremes, it is probable that the original banding will have consistently adopted a ‘modernised’ assumption, where it was considered that the dwellings in the locality had kept up with ‘normal’ improvements to their structure, services, fixtures and fittings etc. over the years, as reflected by the general appearance of the street. Where the evidence reflected central heating, and a reasonably modern kitchen & bathroom, then the trend of prices would have been higher than an ‘as built’ property. Thus an unmodernised property might be an exception, but one which may affect value and therefore banding. There may have been evidence which pointed to unmodernised properties selling in a lower band.

In these circumstances band reductions may have been correctly conceded in the early years of the lists on those dwellings which fall into the ‘unmodernised’ category, where this was band sensitive.

Often, such properties will subsequently have been subject to improvements comprising ‘material increases’ and a subsequent sale may trigger a band increase. Problems may occur where no detailed notes still exist, and the reason why a band was conceded is not obvious. Where such a dwelling now appears no different from others in the street or locality, it will be apparent that the dwelling has subsequently been improved and a CR10 report should be raised so that the band can be reviewed on the next sale. Where it is apparent that a sale of an improved dwelling has already taken place the band should be corrected, following an explanation to the taxpayer of the reasoning behind the decision to review.

It will be apparent from the above, that as ‘reasonable repair’ is an essential assumption, bands cannot be conceded merely for lack of repair, and if such concessions have been made in error the bands should be corrected.

10. Inherent structural defects

10.1 At compiled list date

Where at the commencement of a list a dwelling suffers from an inherent structural defect this will form part of the character of the property and is not something which is deemed to be remedied by the assumption of a ‘state of reasonable repair’ (see CTM:PN1). The state of reasonable repair to be assumed is that appropriate to dwellings which are similar in character (that is, dwellings with similar inherent structural defects) as opposed to those in the immediate neighbourhood which do not have those structural defects.

10.2 During lists

The worsening of a structural defect of itself, however, or the manifestation of a new structural defect which was not apparent at list commencement, after the start of a list would not of itself justify re-banding as this would not constitute a ‘material reduction’. Material reduction under 24(10) LGFA 1992 is limited to 3 elements: demolition of whole or part, change to physical state of locality and disabled persons adaptations which reduce value. Structural problems to the hereditament itself are not covered.

Providing the defect does not affect the ability to occupy the dwelling (even though it may affect value) it will remain a dwelling subject to the ‘reasonable repair’ assumption. The need for underpinning or underpinning actually being carried out, depending on fact and degree, may not affect the ability to occupy a property and therefore the dwelling will still exist.

10.3 When band reviews may be possible

Circumstances may arise where a valid proposal can be made for a sound reason under ‘material increase’ or ‘material reduction’ provisions, which will necessitate taking into account the character of a property at the relevant date, for example a change to the physical state of the locality. If it is judged that the structural defect does not come within the scope of normal repair, but is inherent to the dwelling’s character, then in those circumstances it will be possible to reflect the new damaged state of the hereditament in the band value.

It is likely that validity of proposal issues will arise, and questions be raised as to the ability to alter lists in relation to the above. Where difficulties arise, or where defects are claimed to be associated with physical changes to the state of locality advice should be sought following the SoP.

11. Temporary nuisances beyond the dwelling’s boundaries

The definition of ‘material reduction’ includes ‘any reduction which is caused in whole or in part by any change in the physical state of the dwelling’s locality’.

Reg 3(2) which prevents reductions in banding due to the demolition of part of a dwelling where the reduction in capital value will only be temporary, due to planned building work, does not apply to nuisances beyond the dwelling’s boundaries which might temporarily affect capital value.

The situations where a temporary nuisance, (such as street works), as opposed to a permanent one (such as a motorway being built and opening adjoining the dwelling), will have a significant effect on capital value, are likely to be much fewer than where a temporary nuisance would have affected the rental value on an annual tenancy under the old domestic rating system. The purchaser in the market will take a longer view and capital values are much less likely to be affected by temporary factors. However, in rare circumstances where it can be established that such a material reduction does sufficiently reduce the value of a dwelling to change its band then this reduction should be conceded.

Where such a reduced banding is agreed it will not be possible to restore the band on the cessation of the nuisance as a change in the physical state of a dwelling’s locality does not constitute a ‘material increase’. If conceded, the only way in which the band can be reinstated would be reviewing for some other reasons for example a material increase and relevant transaction. In arriving at the banding for this other reason the ‘physical state of its locality’ will be taken as being the same as at the effective date for that alteration and will therefore take into account the fact that the temporary nuisance has ceased.

12. Flooding

Freak weather conditions from time to time cause flooding usually affecting low-lying areas near rivers. Usually even severe floods only last a few days before they subside, but cause havoc to a dwelling and can render it uninhabitable, at least temporarily. Extreme flooding is not something that is a ‘change to the physical state of the dwelling’s locality’, and so flooding cannot give rise to a ‘material reduction in the value of the dwelling’ for 24(10) 1992 Act. Deletion from the list may be appropriate where the flooding means that the dwelling is no longer a hereditament.

The approach to altering the list in these circumstances is summarised as follows:

12.1 Reliefs: Since April 2013, the former Class A exemption under the Council Tax (Exempt Dwellings) Order 1992, for properties awaiting or undergoing structural repair no longer exists. BAs have powers to apply their own policies regarding empty property relief. In cases of emergency evacuation of dwellings, like flooding, it is possible that BAs will have their own discretionary policy on the liability for CT, and should be contacted immediately to enquire as to whether they will be granting relief. This will clearly affect the number of requests to take damaged properties out of lists. Where enquiries or proposals are received they should be dealt with under the principles outlined above following Wilson v Coll, and a judgement made on whether the property is repairable.

12.2 Hereditament test:A proposal can be made when a dwelling ceases to exist because it is rendered incapable of beneficial occupation. In this case the hereditament test (referred to above) will be applied. If the property remains uninhabitable because damage has rendered it beyond normal repair, thus failing the hereditament test, then it is not a dwelling and should be removed from the list. It would then go back into the list as a new dwelling complete with any improvements once it has been re-instated. If the dwelling is simply damaged but capable of repair, then it must remain in the list at its existing band. If there is evidence of a scheme of work such as contractors on site to dry a property prior to repairs, the property may also fail the hereditament test.

12.3 Material reduction: This is very strictly defined under 24(10) of LGFA 1992, meaning ‘any reduction which is caused (in whole or in part) by the demolition of any part of the dwelling, and any change in the physical state of the dwelling’s locality…’ The phrase concerning physical state envisages something fixed and permanent, not essentially transient like a flood or the short-term effects of a flood. It is not considered that the locality changes after freak weather conditions. The flood is a manifestation of a greater or lesser risk according to its proximity to a river’s flood plain. Inundation of a dwelling is not a change to the locality. In a similar way a freak winter could inundate the locality and dwelling with ice and snow, freezing rivers, and even drains. When the snow melts; all returns to normal. Proposals made for material reduction are unlikely to be valid unless there has been a resulting physical change in the locality, for example the washing away of a bridge.

Thus temporary reductions are inappropriate due to flooding, and any proposal seeking a temporary reduction should be treated as invalid.

There is no provision for re-instatement of a band reduced for disabilities of a temporary nature.

12.4 Known risk not reflected: There could be circumstances where a valid proposal cannot be made, but where all the evidence points to the conclusion that the known risk of flooding as at 1 April 1991 has not been reflected in the band. In that case the LO can correct the list. A one-off flood occurring after AVD that has never happened before is unlikely to lead to that conclusion.

12.5 Repair works following flood damage: If a flood damaged property is vacant and undergoing a scheme of works to repair the damage, it may be appropriate to delete as the scheme has rendered the hereditament incapable of beneficial occupation. Works should include any initial strip out and any period where the property is drying out provided this is part of the scheme.

Practice note 4: appendix 1: possible band changes due to disrepair or building works

To assist LOs, here are some examples. It is important in all cases to look at the facts of the specific case and not to try and fit the facts to one of the examples.

In any case where a property is deleted, once the works are finished and the property re-banded, it will be treated as a new dwelling. Any improvements which may have occurred should therefore be reflected which may mean the improved property being placed in a higher band than the original.

Example 1: Property in poor repair - no scheme evidenced

This is the situation in Wilson v Coll. The property is in need of some repair but generally wind and water tight. The owner has no plans to undertake any works at the relevant date or, if there are plans, no work is evidenced as starting at the property. LOs should follow the guidance in Wilson v Coll and the band should remain in the valuation list.

Example 2: Property “truly derelict

This is the alternative situation considered by the judge in Wilson v Coll. Refer to paragraph 40 which includes: “… The distinction, which is correctly drawn by the respondent, in my view, is between a truly derelict property, which is incapable of being repaired to make it suitable for its intended purpose, and repair which would render it capable again of being occupied for the purposes for which it is intended.”

If a property is “truly derelict” then it ceases to be a hereditament and should be deleted from the valuation list.

Example 3: Occupied property with an ongoing scheme of works

In any case where there is ongoing occupation throughout a scheme of works, however severe, there should be an entry in the valuation list. If the property is a single dwelling and will remain a single dwelling after the works, the band should remain as it was before the scheme of works started. A CR10 will need to be logged against the property.

Where the scheme is to create different dwellings in the property (for example, the creation of an annex), the LO will need to review the property once the works are completed.

Example 4: Unoccupied property with an ongoing scheme of works

Following the decision in Newbigin v Monk, if an unoccupied property is undergoing a scheme of works that renders it incapable of beneficial occupation, it ceases to be a hereditament and should be deleted from the valuation list. Each case will require careful consideration but it is envisaged simply replacing a kitchen or bathroom would not be sufficient to trigger a deletion. However, if a property was undergoing a major improvement scheme including re-wiring, installation of central heating, new kitchen and bathroom, then a deletion would be appropriate.

Caseworkers will need to be satisfied there is a scheme of works actually underway. If no scheme has started you must assume reasonable repair. It is for the taxpayer to provide evidence the scheme has started and what is intended. Photos showing works underway and a written explanation of the proposed works are the bare minimum required. Caseworkers will need to make a judgement on the evidence available. Borderline cases can be escalated in accordance with the SoP ‘Obtaining technical advice’.

Example 5: Vacant property being extended

LOs will need to consider the extent of the scheme of works. If the extension is part of some major improvements, a deletion is likely to be appropriate. Simply adding a small extension without affecting the rest of the property is unlikely to warrant a deletion.

Example 6: Demolition of part of the property

If the demolition is part of a scheme of works to carry out other improvement, then demolition is not a trigger for a material reduction and possible band reduction but may warrant a deletion as discussed in examples 4 and 5. If works are carried out simply to make good damage caused by the demolition this does not prevent a material reduction arising, for example the construction of a new outside wall to fill in a gap left by demolishing an outbuilding.

If the demolition is to permanently reduce the size of the property, then it may result in a lower band as a material reduction. For example, the demolition of an old garage or conservatory without any replacement being built.

Example 7: Flood or fire damage

If a property has been damaged by flood or fire, LOs need to follow the same thought process outlined above. If a flood or fire damaged property is simply vacant with no scheme of work evidenced, then the guidance in Wilson v Coll should be followed. If the damage is minor and the property simply needs some repair, it should remain in the valuation list. If it is truly derelict, it should be deleted.

If the property remains occupied, regardless of how severe the damage is, it remains a hereditament and should be valued assuming reasonable repair.

If there is a scheme of works evidenced to repair the property following the damage, then Newbigin v Monk should be followed as in example 4.

Practice note 4: appendix 2: repair of dwellings and deletion

When can a dwelling be removed from the valuation list?

Introduction:

The following guidance is designed to help in explaining what principles LOs use when dealing with cases involving properties in disrepair and associated issues.

A primary assumption for Council Tax is that a dwelling is in reasonable repair. There are, however, situations that arise which, owing to the physical condition of a property, raises the question as to whether a dwelling actually exists for Council Tax purposes.

Whether the property qualifies as a dwelling will be decided on the facts of each case. As a basic principle, properties that are actually occupied will never be removed from a list, even if repair or renovation works are on-going. The examples below apply only where a property is vacant.

1. Properties in poor repair:

age, character and locality. Where a property is neglected and in poor repair, it is assumed that repairs have been carried out. In these cases a reduction in banding is not possible, nor is removal from the list.

2. Severe disrepair-dereliction:

If a property has reached a state where it is truly derelict and requires very significant work to make it habitable, it may be removed from the list as it is uninhabitable and incapable of beneficial occupation. Often the rule of thumb test will be “is the property wind and watertight?” but the listing officer will have to consider all the individual facts of the case. (See Practice Note 4 Appendix 3 for further consideration of this.)

3. Lack of modernisation

Just because a property is unmodernised, as opposed to derelict, does not mean it is not a dwelling. Unmodernised properties may not be up to expected modern standards, but they may still be habitable. If the property has been occupied up until a short while before the request for deletion is considered, such an application would be unlikely to succeed. If a property is simply unmodernised, it can still be assumed to be ‘in repair’.

4. Properties actually undergoing repairs or renovation:

Where a property is undergoing repair or renovation, LOs will need to consider the specific facts of the case including considering the extent of the scheme of works being undertaken. The scope of the scheme of works and whether it has actually started must be established.

If the works are planned but haven’t physically started the state of repair must be considered as in examples 1 and 2 above. Once a scheme of works is evidenced at the property and is sufficient to make it incapable of beneficial occupation, the effective date for deletion is the commencement of the works.

4.1 Small scale works:

Where there are relatively minor works being carried out such as the replacement of a kitchen, bathroom or minor repairs to a roof, it is unlikely the listing officer will delete the property from the valuation list.

4.2 Renovation and structural alteration:

Where the works are more substantial including structural alterations, major renovation or other alterations and the listing officer considers the scheme of works render the property incapable of occupation, then the band may be deleted.

4.3 House being converted into flats, or vice versa.

Where a single unit is being converted into two or more units of living accommodation by structural works of division and cannot be occupied as a single unit, the property can be removed from the list as it is evidenced there is an ongoing scheme of works. If part remains occupied then that part would be banded whilst the works are in progress. Once completed each of the new units will be banded as separate dwellings.

4.4 House being extended

If a vacant property is being extended, listing officers will need to consider the extent of the scheme of works as outlined above in 4.2 Renovation and structural alteration. Adding a small extension without affecting the rest of the property is unlikely to warrant deletion from the valuation list. If, on the other hand, the extension is part of a major renovation of the whole property, the scheme of works is likely to be sufficient to warrant deletion from the valuation list.

If the extension required part of the main house to be demolished during the course of the works, or in connection with any planned works, then that demolition cannot be taken into account to reduce the band of the dwelling.

**5. Effect of deletion and reinstatement as ‘new’ on completion **

Whilst no council tax will be payable if an entry is deleted from a list, when the property is next banded it will be treated as a new dwelling. All improvements will then be taken into account in the new banding, from the date the new dwelling came into existence.

Practice note 4: appendix 3: normal repair works and the hereditament test for dwellings

The following notes are designed to give referencers and caseworkers a steer on judgements to be made in connection with deletion decisions when answering the question “Does a hereditament exist?”. Following Wilson v Coll 2011 the test is a physical one, not based on economic cost. The judgement to be made is whether a property is capable of normal repair without changing its character – which may be that of a derelict property. Mere boarding up of a property for security purposes will not be an indicator either way, but will only serve to conceal its true nature and make inspection more difficult. This appendix assumes there is no “scheme of works” underway.

Negative indicators: A truly derelict property will be typically indicated by a combination of the following features. It will be unoccupied, possibly for some years and will have deteriorated to such an extent that normal or a reasonable degree of repair will not make the property capable of occupation without more major reconstruction work to structural elements. A derelict building will normally display many of the following features:

The property is not wind and watertight: The property is exposed to the elements by a significant degree.

Many roof tiles or slates are missing and severe and on-going ingress of water through the roof, and associated extensive damage to more than one room, penetrating the structure and the structural elements to the roof are also damaged.

Ceilings have collapsed and there is damage to the floor joists.

Extensive wet or dry rot may make entry dangerous. It has spread to floor joists and staircases and possibly other structural elements.

Plaster is crumbling extensively or stripped back to brickwork.

Window frames are missing and external doors missing.

The property may have been vacant for many years. Vegetation growing inside the property or over structural elements of the property.

Services wiring and pipe-work has been stripped and the building appears more a shell than a building fit for occupation.

Structural problems and cracking compromise stability.

Fire damage has taken out structural elements.

Positive indicators: A dwelling still exists where the property is capable of normal repairs to make it habitable. Significant reconstruction of structural elements is not necessary. Actual costs of repair are not relevant. Typical examples:

The property is generally wind and watertight.

Some roof tiles have slipped or are missing –causing minor damage internally.

The whole property requires redecoration internally and externally.

Localised plaster /ceiling repairs.

Areas of floorboards may have woodworm and require renewal.

Windows frames need repainting or possible renewal.

External woodwork needs stripping down, repair of localised wet rot.

Random broken panes of glass.

Kitchen and bathroom fittings require renewal/replacement.

Pipe-work & copper tank stolen.

Electric wiring needs replacing.

Water tank leak in loft has brought down bathroom ceiling.

Garden overgrown and fences dilapidated.

An old wooden conservatory, not forming part of the main structure needs demolishing or renewal. It will not affect the ability to inhabit the main living accommodation.

Conclusion: This can be a difficult area and it is important that any inspection makes a detailed record of the state of the property with sufficient photographs to give an overall picture. It will be often necessary to refer borderline cases to the CT complex caseworker or Team leader. Technical Advisers are also able to assist.

Practice note 5: disaggregation of dwellings

1.0 Introduction – Two types of dwellings - hereditament & self-contained unit

Liability for Council Tax arises primarily in respect of dwellings. Section 3 of the Local Government Finance Act 1992 (LGFA 1992) defines “dwelling” in terms which begin with the concept of a hereditament for rating purposes. Any property which, by virtue of the definition of hereditament in section 115(1) of the General Rate Act 1967, would have been a hereditament for the purposes of that Act if that Act remained in force, is a dwelling unless it is non-domestic property (section 3(2)). This aspect is explored more fully in Council Tax Manual Practice Note 1 paragraph 2 – definition of dwelling.

The Council Tax (Chargeable Dwellings) Order 1992 (see paragraph 4 below) introduces the concept of the need to identify any ‘self-contained units’ found within hereditaments, and treat them as separate dwellings. This is called ‘disaggregation’, though nowhere does this word appear in the legislation. They are not dwellings defined by occupation, they are treated as dwellings because they are self-contained units.

thus the basic dwelling defined above is one based on rateable occupation there is a second type of dwelling introduced in this section i.e. one defined by the existence of a ‘self-contained unit’

It is vital that before the concept of disaggregation is considered at all, that the number of hereditaments (i.e. units of actual occupation) in a particular property must be determined as a first priority. This principle was emphasised in the High Court case of Rawsthorne v Parr (2009) RVR 247.

2.0 The need to establish the hereditament

The disaggregation provisions require to be considered only when a single hereditament (occupation) appears to contain an additional self-contained unit, capable of occupation by more than one person or household.

The first question to be asked, therefore, is “What is the extent of the hereditament?” i.e. who occupies what, and on what basis?

In most cases the hereditament will simply be defined by the extent of a person’s rateable occupation. Adjoining property that is all in the same occupation will normally constitute a single hereditament. (Further guidance can be obtained from the leading case of Woolway (VO) v Mazars [2015 RA 373])

*if within a property there is any unit of occupation which would have formed a hereditament in its own right for the purposes of the 1967 General Rate Act, then it is a separate dwelling based on occupation, irrespective of whether or not it is self-contained

*accordingly, if each individual dwelling within a property is found to be a hereditament in its own right, it should be banded as such and the disaggregation provisions do not apply. (NB Consideration may, however, be given to the application of Aggregation in certain cases)

*disaggregation is the identification of any separate self-contained units within a person’s occupation, which must be treated as a dwelling. Such dwellings will not be separate occupations, they will be found within larger hereditaments or occupations

3.0 The application of disaggregation to the self-contained unit

Where more than one self-contained unit of living accommodation can be found within a single hereditament, each unit must be treated as a dwelling.

For Council Tax purposes such dwellings are to be split up, or disaggregated, where there are separate units of self-contained accommodation.

This is provided for by The Council Tax (Chargeable Dwellings) Order 1992 SI No. 549 (“the Order”) as amended by The Council Tax (Chargeable Dwellings, Exempt Dwellings and Discount Disregards) Amendment Order 1997 SI No 656.

4.0 The Council Tax (Chargeable Dwellings) Order 1992 SI No 549

This Order has been made under Section 3(5) LGFA 1992 and provides for both the aggregation and disaggregation of dwellings in specified circumstances (see Practice Note 6 regarding aggregation).

Article 3 of the order provides:

“3. Where a single property contains more than one self-contained unit, for the purposes of Part I of the Act [LGFA 1992], the property shall be treated as comprising as many dwellings as there are such units included in it and each such unit shall be treated as a dwelling.”

Article 2 of the order provides:

“single property” means property which would, apart from this Order, be one dwelling within the meaning of section 3 of the Act. (i.e. one ‘hereditament’ dwelling defined by occupation)

As from 1 April 1997 the definition of self-contained unit was changed to mean “a building or part of a building which has been constructed or adapted for use as separate living accommodation”.

4.1 Disaggregation: does not apply to caravans or boats

As Caravans and boats are not ‘buildings’ they cannot, therefore, be disaggregated so that where a caravan or boat forms part of a single hereditament they are not treated as a separate dwelling. If they are a sole or main residence of an individual, however, they will be separate dwellings in their own right, see Practice Note 7.

4.2 Disaggregation: Application to Registered Care homes

As from 1 January 2004 in England a new Article 3a is inserted after Article 3 by Article 2 of the Council Tax (Chargeable Dwellings, Exempt Dwellings and Discount Disregards) ( Amendment) (England) Order 2003 SI 3121.

As from 1 April 2005 in Wales the same provision is enacted by the Council Tax (Chargeable Dwellings, Exempt Dwellings and Discount Disregards) (Amendment) (Wales) Order 2004.

As from 23 August 2012 Article 3A was amended for England to include reference to the Health and Social Care Act 2008, under which provisions care certificates are now issued in England.

Article 2 of the Order defines “care home” as ..”a home within the meaning of the Care Standards Act 2000, in respect of which a person is registered in accordance with Part 2 of that Act in relation to Wales, or Part 1 of the Health and Social Care Act 2008, in relation to England.

Article 3a of the Order states:

“A care home shall be treated as comprising the number of dwellings found by adding one to the number of self-contained units occupied by, or if currently unoccupied, provided for the purpose of accommodating the person registered in respect of it in accordance with Part 2 of the Care Standards Act 2000 in relation to Wales, or Part 1 of the Health and Social Care Act 2008, in relation to England, and each such unit shall be treated as a dwelling. “

This provision gives registered care homes (within the meaning of part 2 of the Care Standards Act 2000) a special concession in the method of calculating the number of dwellings for banding. The total number of dwellings will be found (i.e. calculated) by adding one to the number of self-contained units provided to accommodate the registered person.

Practical application:

It will be essential to correctly identify the care home proper. A care certificate will refer to the number of people subject to care, and the location of that living accommodation with any immediate ancillary associated accommodation will define the care home. Often a care home may be situated on a site together with sheltered accommodation where domiciliary care is administered to the person in their own home. Any blocks where people occupy their own home within a complex and who may happen to purchase a care package should be differentiated from the accommodation occupied by the number of registered persons on the care certificate.

Despite the rather complex wording of Article 3A, the application is straightforward once facts are established. Any self-contained units within the care home must be treated as one dwelling. Only those units occupied as living accommodation by the care provider will be disaggregated.

4.3 Disaggregation: not discretionary

In any instance where the property comprises more than one unit ‘‘which has been constructed or adapted for use as separate living accommodation’’ a separate band must be ascribed to each unit.

Listing Officers do not have any discretion in determining how to operate the provisions of Article 3 as they do in relation to Article 4 of The Council Tax (Chargeable Dwellings) order 1992. (See Aggregation of dwellings - Practice Note 6)

4.4 Disaggregation: splits and mergers & interaction with material increase provisions

The requirement that each self-contained unit be treated as a dwelling has the following implications:-

(i) When the provisions are applied, effectively, there is the equivalent of a reconstitution of the hereditament and two new dwellings come into existence. This will apply to all SCUs within the single hereditament including detached annexes within the domestic curtilage. Such garden annexes will be treated as splits creating two dwellings from the one original.

(ii) Thus from that point, material increase provisions will apply to each part, as they are treated as separate dwellings

(iii) At the point of application of Article 3, any existing material increases will be reflected in the valuations of each part, reflecting their status as ‘new’ dwellings on the split.

(iv) If works of re-conversion take place to make physically just one dwelling, then the

physical state of the reconfigured building will be reflected in the new aggregated band

at the relevant date, and it will be treated as a new dwelling. Any extension that formed

a previous annex will not be a material increase. Any CR10 that has been registered

should be no-actioned as any extensions will be included in the new band.

(v) The Effective Date, however for creating disaggregated dwellings, is different in England from Wales, following 2007 changes to the English regulations now reflected in the 2009 Appeal regulations. Reference should be made to CTM Section 2 Appendix 2.3. Where conversion works create a single merged dwelling, the ED will be the date of the creation of the new dwelling. Where a new hereditament, which is domestic, comes into existence comprising two self-contained units and no entry is present in the Valuation List then the effect date for both dwellings is date of event.

5.0 Interpretation – high court decisions

Appendix 1 contains case summaries of all the leading cases concerning disaggregation.

Once it has been decided that there is a single hereditament a decision to disaggregate has to be made on the facts of each particular case. A house in multi occupation sharing a kitchen and bathroom may be a single dwelling if it is in the paramount occupation of the landlord, but each bed sit could be separate hereditament depending on the terms of occupation, in which case there is no need to go on to consider disaggregation. It will, however, be necessary to consider aggregation (see Practice Note 6) in such circumstances.

Where there is one hereditament but more than one self-contained unit then the decision must be made to disaggregate under Articles 2 and 3/3A.

In deciding whether or not a ‘‘self-contained unit’’ exists careful consideration must be given to the definition ‘‘Constructed or adapted for use as separate living accommodation’’.

Is the unit physically constructed or adapted for use as separate living accommodation?

5.1 Degree of communal living not relevant

In Batty (LO) v Burfoot and Others, Batty (LO) v Merriman, Gilbert (LO) v Childs and Rodd (LO) v Ritchings 1995 RA 299, Counsel for the listing officers argued that the Valuation Tribunal had misdirected itself and derived from the degree of communal living the conclusion that the whole premises comprised a “single family unit of occupation”. Ognall J accepted the submissions as well founded.

“In particular, it seems to me that to give account to the level of communal living is to introduce a consideration which is outwith the relevant criteria required in order to test properly the definition in question. It will be obvious that the purpose behind the great majority of these annexes is to furnish separate accommodation for an older generation in such a way as to allow of mutual privacy, whilst at the same time allowing for the degree of community which gives peace of mind to both parts of the family. It follows that in most cases the degree of communal living will be, or probably will be, significant. But that cannot assist, in my judgement, in answering the question as to whether the annexe in question was constructed or adapted for use as a separate dwelling”.

5.2 Meaning of separate living accommodation: means of access

It is considered that the words ‘‘separate living accommodation’’ do not mean merely living accommodation which is physically apart or distinct from other accommodation.

The meaning of “separate” was considered in the case of McColl v Subacchi (LO) 2001 RA 342. It was decided that there was nothing in the Chargeable Dwellings Order which compelled the conclusion that the fact that in order to gain access to the flat one had to pass through the house meant that the flat was not to be regarded as separate accommodation. Access was by a hall, stairs and landing, shared by the owner of the house, and not through one of the main living rooms of another unit. The question of access, while a material factor, was not an essential condition of separateness for the purposes of council tax. The house was separate from the flat by virtue of the lockable door between the house and the flat, and nothing in the Order compelled the conclusion that the house ceased to be separate because the appellant had granted the tenants of the flat a licence to pass through her hall, stairs and landing in order to reach the flat.

The impracticalities of sale resulting from physical characteristics such as shared entrances and services go to valuation and not disaggregation.

In contrast in Batty (LO) v Merriman the facts were that access to the annex was through the lounge of the main house. The Judge said that if he were judging the merits of Mr Merriman’s appeal on the particular facts he would have a deal of sympathy with the contentions which were directed to the physical character and layout of the annex, and in particular, to the means of access and egress. In the circumstances of the Merriman case it is unlikely that there is more than one self-contained unit as required by Article 3.

In Batty v Burfoot, the means of access to the annex was from the hallway of the main house. It is significant that although the Judge was well aware of this, he did not show the same sympathy in respect of this point as he did in the case where access to the annex was through the lounge of the main dwelling. There is, therefore, strong support for maintaining that access to the annex from the hallway of the main house would not prevent disaggregation.

In Ramdhun v Listing Officer [2014] EWHC 946 Admin. The finding of a self-contained unit on the second floor of a terraced house was not impeded by the lack of a door between the floors.

5.3 Meaning of constructed or adapted: objective physical test

Whilst the High Court Judge in the Batty cases refrained from deciding whether the phrase “has been constructed or adapted for use as separate living accommodation” should be construed objectively or subjectively, nevertheless the main thrust of his reasoning was that the question must be answered on the basis of a close examination of the physical character and layout of the premises - is the unit of accommodation physically capable of use as separate living accommodation?

In Beasley (LO) v The National Council for YMCAs 2000. RA 429, the decisions and judgements in the Batty appeals were approved by Sullivan J.

That case concerned 10 flats in a property known as Pinder House in Skipton North Yorkshire, which is owned by the National Council for YMCAs and is operated as a “foyer housing scheme” for homeless young people between the ages of 16 and 25. There was no dispute that the YMCA was in paramount occupation and that there was a single hereditament, but it was disputed that each of the flats was a separate self-contained unit. Each of the flats comprised a bed-sitting room, with a kitchenette area and an en suite shower room with shower, wash hand basin and a lavatory. The kitchen areas were equipped with a sink, cooker and fridge and each flat had its own door lock. Communal facilities included two meeting rooms, laundry, disabled lavatory, bicycle store, refuse store and a kitchen. There was also a management office and a staff bedroom and lavatory which were separately rated. The building was purpose built in 1995.

In his decision Sullivan J accepted that there was a distinction on the facts from the Batty v Burfoot cases but considered that the underlying principle remains the same.

“when looking at Articles 2 and 3 of the 1992 Order, one focuses not upon the use that is actually made of the building, but upon whether it has been constructed for use as separate living accommodation….. Whether Pinder House was controlled by one body, and whether that body had criteria for residency, had nothing to do with whether the flats had been constructed for use as separate living accommodation…… I would be prepared to accept that in deciding whether a particular flat has or has not been constructed for use as separate living accommodation within a larger building, it will often be relevant to consider the extent of the communal facilities which have been provided in the flat and the extent of the communal facilities which have been provided in the remainder of the building.”

An analogy was drawn of traditional student accommodation in a student hostel where all that is available in a student’s room is a bedroom, and all other facilities are provided communally, compared to a flat with all facilities en suite.

In the case of Coleman ( LO) v Rotsztein 2003 RA 152, Sullivan J followed his decision in Beasley (LO) v YMCA and quashed the decision of the valuation tribunal not to separately band an annex constructed by the taxpayer as an extension to his family home for use of the family, because the taxpayer’s subjective intention in constructing the annex, and the use to which his family made of it, was not relevant to the question of whether it was a self-contained unit, which depended on what had physically been constructed on the ground ( an objective or a “bricks and mortar” approach).

The law was further clarified in the High Court case of Jorgensen v Gomperts 2006. This concerned a second floor flat in a large Victorian house in London N7, accessed via the front door, hall, stairs and landing of the main house. The ‘flat’ comprised a living/sleeping area, with a kitchenette and a bathroom, and was occupied by a lodger, who was free to use other parts of the house. The VT previously had decided to amalgamate the flat with the main house on the basis that:

The flat had no lockable door; the VT felt that this did not satisfy ‘constructed or adapted for use as separate living accommodation’ (comparison was made with McColl-v-Subacchi Officer where a lock existed)

No evidence had been provided that the property had been purposely constructed for use as separate living accommodation.

a previous visit by a Listing Officer had not resulted in a separate banding.

There was no intention that the flat would be occupied entirely separately, and there was no history of this happening.

The ‘lodger’ was not restricted to the ‘flat’ alone but was able to entertain friends in the main house.

At the High Court each of the above points was challenged and overturned. After referring to cases such as Coleman(LO) v Rotsztein 2003 and Clement (LO) v Bryant 2003 and others, Deputy Judge Kenneth Parker QC sets out in paragraph15 of his decision in Jorgensen v Gomperts in the clearest terms that the disaggregation test is a purely an objective ‘bricks and mortar’ test.

“In my judgement, these passages from the foregoing authorities conclusively demonstrate that the test is an objective bricks and mortar test. Intention and use, actual or prospective are not relevant…”. He then adds some further reasons why a subjective test cannot be right. “… However, it seems to me….there are good policy reasons why an interpretation based on intention or purpose should not be adopted in this context. First, there may be real practical difficulties by reason of the passage of time or otherwise in ascertaining the intensions of an original constructor or later adaptor of the building. Secondly, a test based on intention might encourage taxpayers to devise strategies with varying degrees of ingenuity to persuade listing officers and/or the Tribunal that they had no deliberate aim to create separate living accommodation. Thirdly, administrative and judicial time would be employed in seeking to test the veracity of subjective claims or lack of the necessary subjective intention. This process would be costly and uncertain, with the probable result that success would depend more on the skill of the advocate than upon the intrinsic merits of the claim. Inequality of treatment would be likely to occur. I do not believe that such consequences would be in the public interest or accord with the object of Article 2 of the Order.”

HMRCS recommends that from now on this passage should become the standard passage to which Listing Officers should refer at any VT/VTE hearing where disaggregation provisions are in issue.

In paragraph 20, the necessity to require the LO to present actual evidence of acts of construction or adaptation is robustly dismissed.

In paragraph 28 the “lockable door” issue is addressed. The Judge said:

“It is wrong in law to treat the presence of a lockable door as a necessary condition for the application of the order” and again “It is emphatically not a question whether any particular occupant might believe that privacy required a locked door, and without it there was no separate living accommodation. It is for the Tribunal, looking at the physical characteristics of the building, to determine on an objective basis whether those characteristics are sufficient to make part of the building separate living accommodation.”

In para. 29 in connection with taking into account the views of a previous LO, whilst allowing for a previous opinion sometimes to be admitted in evidence, the Judge stated

“In my judgement, it is for the Tribunal to decide whether on the facts of the given case the order applies” and “…at the end of the day, the judgement must be that of the Tribunal and the Tribunal alone”.

The decision in Corkish v Wright [2014] EWHC 237 (Admin) has also introduced a test of ‘reasonableness’, by reference to contemporary standards, when considering the presence of a separate self-contained unit, viz: “ relevant building or part of a building reasonably suitable for use as separate living accommodation,… because it makes clear that what matters is its fitness for that purpose by reference to contemporary standards of what is reasonable, not merely whether it might conceivably be used for such purpose however remote the possibility.”

5.4 Provision of standard facilities

The occupier of a self-contained unit would usually expect it to have facilities for living, sleeping, preparation and cooking of food, and bathing facilities such as a bath, wash hand basin or shower room, and toilet.

The legislation does not provide that to be self-contained a unit has to have all standard facilities and exceptionally there may be instances where the lack of a facility does not prevent a unit from being self-contained. For example a unit purposely built and designed for occupation by an elderly person and which comprises a living room, bedroom, kitchen, wash hand basin and WC may fall to be treated as being self-contained despite the fact that bath/shower facilities are off a hall or landing and shared with others. (See Figure 1 of Appendix 2.) This was confirmed in a decision of the High Court in Clement (LO) v Bryant and others 2003 RA 133.

5.5 Use

The YMCA case makes it clear that actual use is not the determining factor, although it may be indicative of whether the building was constructed for use as separate living accommodation.

5.6 Physical identity

A self-contained unit should normally have a single curtilage and not be spread over different parts of a building (.e. a living room with a kitchen and bathroom situated across a common hallway should not be treated as being self-contained).

5.7 Unit of sale

If a unit is one which could be sold separately, either freehold or on a long lease, then this would point to it being self-contained. However, the fact that part of a property cannot be sold separately does not mean that it is not self-contained.

6.0 Disaggregation particular classes

You must judge the facts of each case on its own merit when you are considering applying Article 3 of the Council Tax (Chargeable Dwellings ) Order 1992. (http://www.legislation.gov.uk/uksi/1992/549/made)

A “self-contained unit” is part of a building which has been constructed or adapted for use as ‘‘separate living accommodation’’.

Even if access

may be shared with the main part of the property and/or

there may be shared service meters,

you may still decide an annex is self-contained. An example is provided at Appendix 2.

A legal restriction that stops the separate sale of an annex does not prevent the annex from being self-contained and being given a separate Council Tax Band. Those legal restrictions may have an effect on the value of the annex.

6.1 Care homes for the elderly and disabled

From the 1990s onwards an increasing number of care homes for the elderly and disabled have been constructed to provide residents with sufficient facilities for independent living. Rooms will often contain a toilet and shower, facilities for the preparation and cooking of food, and space for a bed and day time activities. Residents will have access to communal facilities such as restaurant recreational areas, and in some cases the extent of these facilities for communal living will be extensive.

In the case of Williams ( LO) v Royal National Institute for the Blind and others 2003RA 158, the High Court considered the Valuation Tribunal’s decision not to disaggregate 4 flats occupied by elderly and blind or partially sighted residents of Kathleen Chambers House Burnham on Sea, a care home that is operated by the RNIB. Each unit was capable of accommodating two people and comprised, in the case of two units a bedroom with en suite bathroom, a separate living room containing a work top and sink, two wall and base cupboards, a refrigerator, cooker or hob unit and separate oven. The other two units had two bedrooms and a shared bathroom, one of which had a separate kitchen area. The whole development contained 36 units of accommodation, but prior to the VT hearing the listing officer conceded that the small single rooms that contained the same kitchen, toilet and bathing facilities should not be disaggregated on the grounds of their size. The communal facilities were extensive and Counsel advised that the layout and design of the institution was such that general daily living requirements were met over the premises as a whole and not simply within the confines of the 32 individual smaller rooms. The rooms were so small that it would be difficult to entertain a guest or take meals within the room itself.

Mr Justice Mitting allowed the Listing Officer’s appeals and quashed the decision of the valuation tribunal, but was not persuaded by either interpretation of the definition of “self- contained unit” put forward by Counsel, preferring instead a middle course which allowed some account to be taken of the fact that this was clearly a building designed for the use of the blind. His Lordship accepted that the test was a purely objective “ bricks and mortar” test, but he also considered that when one came to consider part of a building which, judged by that objective test, was clearly a building for use of the blind and partially sighted people, then the test had to be modified so that one was not considering whether it could be used as separate living accommodation by an ordinary fit and able bodied person, but rather whether it could be used as separate living accommodation by blind and partially sighted persons. Because the VT had not made the necessary findings to enable him to answer this question for himself, the judge remitted the appeal back to the VT to reconsider its decision.

It is considered that following this case in deciding whether a unit of accommodation within a care home is self-contained, in accordance with an objective physical test, the following indicators may apply. None of them are determinative in themselves:

i) Is there a clearly defined kitchen area (e.g. in an alcove or a bay) in which a main meal can be prepared?

ii) Is there space for eating a main meal so prepared at a table?

iii) Is there space for personal furniture in addition to the basic requirements of a wardrobe, chest of drawers, bed and bedside table?

iv) Is there space where a guest can be seated?

v) Is there a bath or shower and toilet?

vi) Does the overall layout and design of the Institution indicate that the facility was constructed or adapted so that the general essentials of daily living were to be carried out by its residents in the private space or throughout the premises?

Following this decision Parliament amended articles 2 and 3 of the Council Tax (Chargeable Dwellings) Order to insert special provisions in relation to care homes (see para. 3 above).

With effect from 1 January 2004 in England (1 April 2005 in Wales) it is essential to examine care homes carefully, due to the provisions of Article 3a of the Order referred to in paragraph 4.2 above:

6.2 Sheltered housing schemes

In contrast to homes for the elderly and disabled a modern private sheltered housing scheme clearly provides self-contained units which are actively traded on the open market or let on a tenancy agreement notwithstanding the existence of some shared facilities such as a day room, a spare bedroom available for guests or the existence of a residential warden. Such units should be treated as separate dwellings, either each as a hereditament in its own right or by disaggregation. The value of the shared facilities should be reflected in the value of the individual units, to the extent that the market would do so. A degree of communal living within the hereditament will not prevent disaggregation. It is essential to first look at the terms of occupation of each unit before deciding whether each is a separate hereditament, and only if the landlord or owner of the building is in paramount occupation should the question of disaggregation be considered.

6.3 Foyer accommodation

Foyer housing schemes are an innovative development for homeless young people typically aged 16-25 years combining good quality accommodation with meaningful vocational training and further education. No formal qualifications are required in order for a young person to be offered accommodation in a Foyer; all that is required is a commitment on the part of the potential resident. Foyers offer a holistic approach to meeting the needs of disadvantaged young people by linking affordable hostel accommodation to training and employment.

By June 2001 there were almost 100 foyers across the UK, many run by the YMCA but others by Housing Associations and registered charities. All Foyers are owned, developed and managed by local partnerships, and the Foyer Federation represents the interests of Foyers at a national level. More information about Foyers can be obtained from the Foyer Federation web page at www.foyer.net

The buildings vary from purpose built accommodation of self-contained flats to converted churches, warehouses and offices. Each scheme will have individual characteristics in terms of entry qualification, and the amount and nature of the accommodation. There will, however, normally be communal meeting rooms and laundry facilities for residents, and a mixture of office/training rooms. Some schemes will provide bed sitting rooms each equipped with an en suite shower room, toilet, and kitchen area with a sink, cooker and fridge. Other schemes will only provide bedrooms, without cooking facilities, and with communal showers and toilets. Meals are taken in a communal dining room/cafeteria.

A national trawl in 1998 has shown that a consistent approach for Council Tax banding has not been adopted, and therefore further guidance is given in this section.

The first step is to decide ‘what is the hereditament?’ The normal tests of rateable occupation will be applied, and therefore it is necessary to examine carefully the terms of the tenancy agreements or other written terms of occupancy to decide whether the resident of the room is in rateable occupation of that part of the building, or whether the provider of the accommodation is in paramount occupation of the whole building.

If the scheme provider is in paramount occupation the caseworker must then consider whether the disaggregation provisions of 1992 SI 549 should be applied. When deciding what is “separate living accommodation” an objective test requiring a close examination of the physical character and layout of the premises should be applied.

Limited facilities which may be enjoyed in an individual unit and the existence of communal areas are not proper reasons for deciding that disaggregation is inappropriate, and are contrary to the dicta of Ognall J in Batty v Burfoot HC 1995 RA 308 and the decision in Beasley (LO) v National Council of YMCAs 2000 RA 429.

Where, however, there are no self-contained units of accommodation, but communal washing, eating and toilet facilities, clearly the property should be placed in a single band for Council Tax purposes.

There will be examples where the facts fit between these extremes, such as “clusters” of living accommodation, and any cases of doubt should be referred for advice to CEO Technical Centre, which holds a control list of such schemes across the country. It is anticipated that for most schemes it will be appropriate to disaggregate either by room or “cluster”, but older hostels are unlikely to satisfy the tests set out in Article 3 of the 1992 Order. Disaggregation should not be rejected purely for the reason that the taxpayer has identified other very similar accommodation which has been placed in a single band. Other examples where disaggregation has been applied can be provided by CEO Technical Centre.

6.4 Staff accommodation with large houses

Cottages, annexes and flats constructed or adapted to accommodate staff will normally be self-contained and should, therefore, be banded separately. Individual rooms within the main house will generally remain part of the house and their value included in the band of the main house.

6.5 Halls of residence

When considering the extent to which a hall of residence or any part of it is self-contained the test is not merely whether exceptionally it could be used as separate living accommodation but whether it was ‘‘constructed or adapted’’ for such use.

A stair or part of a hall might comprise the usual common room, study bedrooms, bathrooms, together with a kitchen but in practice, as intended in the designing of the hall, the kitchen may only be used for preparing coffee and snacks with the students generally dining together in a nearby refectory. In these circumstances the accommodation cannot be considered to be ‘‘self-contained’’ because it was not constructed or adapted to be separate living accommodation from the refectory.

However a “stair” or part of a hall intended to be self-catering and comprising the necessary facilities would fall to be disaggregated and banded separately.

6.6 Boarding houses in schools and barracks

It is likely that dining arrangements will be such that in the majority of instances several different buildings within the hereditament (dwelling) will require to be banded together.

6.7 Caravans and boats

Practice Note 7, Appendix 3 and Appendix 4 gives examples of the treatment of Caravans and boats.

The disaggregation provisions do not apply to caravans and boats after 1 April 1997 (see 1997 SI No 656) but prior to that date if a caravan situated within the curtilage of the principal dwelling was occupied as separate and independent living accommodation then it would have a separate valuation band attached to it.

In the case of a caravan which is used for temporary independent living accommodation whilst the main dwelling is in course of renovation or is in the course of construction, it is important to consider whether the hereditament comprises the caravan and its pitch, rather than the curtilage of the whole plot, otherwise once the new dwelling is completed and capable of occupation it will not be possible to increase the band until a ‘relevant transaction’ has occurred.

6.8 Hotels and guesthouses

Any units of accommodation within the larger dwelling which comprise several rooms and include a bathroom and cooking facilities should generally be treated as being self-contained e.g. a staff flat. Accommodation provided in a house or bungalow in the grounds of a hotel will normally be self-contained even where, in practice, the staff take their meals in the hotel.

Staff accommodation which comprises part of a hotel and essentially provides a room for each member of staff will not normally be self-contained. All of the non-self-contained domestic accommodation should normally be treated as a single separate dwelling being the remainder of the domestic property, after all the self contained units have been separately banded.

6.9 Refuges in Wales - this amendment operates in Wales only

By the Council Tax (Chargeable Dwellings) (Amendment) (Wales) Order 2014, the definition of dwelling (in Wales) has been amended for the purposes of the Council Tax (Chargeable Dwellings) Order 1992 (“the 1992 Order”).

By the Welsh Order, a refuge must be treated as a single dwelling. Accordingly, any building that qualifies under the definition of a ‘refuge’ under article 2 of the 1992 Order must be treated (notwithstanding that it might otherwise comprise several contiguous domestic hereditaments) as forming or being a single dwelling and must not be disaggregated.

By operation of Regulation 14 of the Council Tax (Alteration of Lists and Appeals) Regulations 1993 (which still applies in Wales), the effective date for deletion of entries and the creation of a new entry will be the date of commencement of the new Welsh Order, namely 22nd October 2014, or the date that the property concerned became a ‘refuge’ if that event occurred after the date of commencement.

It must be stressed that in identifying a property for CT purposes, the term ‘refuge’ must not be added to our publically accessible List Entries. It is essential for the effective operation of refuges and for the safety of their occupiers and staff that members of the public cannot identify a specific property or address as a refuge by reference to our publically accessible records.

Examples:

A charity buys a whole block of purpose built self-contained flats that is situated in Wales. It lets the individual flats to those fleeing violence from their partners on 6 month assured shorthold tenancies. Ordinarily, each flat would be a separate hereditament, amounting to a section 3 dwelling with its own band as it satisfies the usual tests, including that occupation is not too transitory. However, as the block satisfies the definition of ‘refuge’, it must be treated as a separate dwelling that should have its own band.

A charity buys a whole block of purpose built self-contained flats that is situated in Wales. It accommodates individuals fleeing violence from their partners in the flats, but maintains paramount control, including the authority to move occupiers from flat to flat, which it does on a frequent basis. Here, the test for separate hereditaments will not be satisfied as occupation is too transitory. Nevertheless, as the flats themselves are unarguably self-contained, they would ordinarily fall to be disaggregated under article 3, with each flat having its own band. However, once again, as the block satisfies the definition of ‘refuge’, it must be treated as a separate dwelling that should have its own band.

A charity buys a large house that is situated in Wales, which it converts into flatlets. The flatlets are domestic and, presuming that they satisfy the test for hereditament, amount to separate dwellings. They are however not self-contained, and the house has shared kitchens and bathrooms/WCs. Without the article 3B provision in the 1992 Order, the individual dwellings would fall to be tested under Article 4 for ‘aggregation’. The large house is the self-contained unit and so one aggregated dwelling is present. However, article 3B of the 1992 Order requires the building or part of the building being used as a refuge for those fleeing violence from their partners. As the house satisfies the definition of ‘refuge’, it must be treated as a separate dwelling that should have its own band. The outcome is the same but the process is different.

7.0 “Disaggregating” dwellings where all or part of the larger dwelling is subject to a legal restriction preventing a separate occupation or sale

Because the requirement to ‘‘split’’ the hereditament and attach a separate value to each self-contained part did not exist for the purposes of domestic rating and there is often a legal restriction preventing the separate sale of any self-contained part(s) the disaggregation provision often appears somewhat confusing to taxpayers. However, under Article 3 of the Council Tax (Chargeable Dwellings Order) 1992 the Listing Officer is under a duty to attach a separate band to each ‘‘self-contained unit’’ and no legal restriction, either public or private, can serve to frustrate this statutory requirement.

The valuation of any disaggregated dwelling where all or part of the larger dwelling is subject to such a restriction is explained in section 9 below.

8.0 Basis of valuation

Composite dwellings

If the original dwelling (hereditament) is a composite hereditament, the value of each of the self- contained units is arrived at by apportioning the amount which has been attributed to the domestic use of the composite (arrived at in accordance with regulation 7 of The Council Tax (Situation and Valuation of Dwellings) Regulations 1992 SI No 550 as amended).

Where the original dwelling is a composite regard can only be had to the demand from those persons who would have been in the market to buy the whole of the original dwelling (hereditament).

When attributing a value to any dwelling which has been created from a larger dwelling which is a composite hereditament, any restriction preventing separate occupation or sale will already have been reflected when arriving at the value of the domestic use and no further adjustment is appropriate, i.e. such a restriction on sale/occupation is inherent in the basis of valuation of composite hereditaments.

(See CTM: PN 2 for more detailed instructions about the valuation of composite hereditaments).

Non composite dwellings (hereditaments)

If the original dwelling (hereditament) was itself wholly domestic property, each self-contained unit, should be valued separately, in isolation and each in accordance with the principles and assumptions in Regulation 6 of The Council Tax (Situation & Valuation of Dwellings) Regulations 1992 SI No.550.

In Coll v Walters [2016] a self-contained unit comprising a separate building in the garden of a house, was subject to a restrictive covenant that benefited a neighbouring land . The covenant prohibited the occupation of the garden building separately from that of the main house. It was found that such a restriction did not form an incumbrance to be ignored for the purposes of SI No. xx-xxxx-xxxx. Impact of the restrictions like these need to be considered on a case by case basis, in the knowledge that a breach normally result in a claim for damages flowing from the reduction in value to the land benefitting from the covenant. Generally, the resultant damages may not to be significant but, where the self-contained unit is on a CT Band boundary, in the lower band.

9.0 Valuation of a dwelling (hereditament) part of which is subject to a legal restriction preventing separate occupation/or sale (with reference to a house and adjoining Granny Annex)

Usually a restriction preventing separate occupation/sale will not attach to the whole dwelling (hereditament). In the most common case of a house and granny annex, whilst it is usual for a planning condition to be attached which prevents the annex being used as an independent dwelling it is rare for the original house to be subject to any restriction.

Valuation of Dwelling (part) subject to restriction (e.g. the annex)

The valuation of any annex created from a wholly domestic hereditament and which is subject to a restriction preventing separate occupation should reflect the fact that a prospective purchaser would know that a planning restriction exists allowing occupation only for members of the main household. It must be assumed that the annex is sold at its market price. No restriction preventing sale can be relevant in the council tax context.

What is required to be determined is the amount which a prospective purchaser would pay knowing that the annex was subject to a restriction. In every case regard must be had to the likelihood, or not, that the local planning authority would take enforcement action should the terms be breached. Where it is probable that a planning authority would take enforcement action subsequent to any sale of the annex the valuation must properly reflect this fact.

When valuing an annex it will often be appropriate to assume that the highest bid would come from that person who would be in a position to occupy it legally (i.e. the owner of the main house). What discounted price would be willing to pay? That question may be of academic interest when smaller annexes are concerned, but what about large quality annexes, perhaps rivalling the main house in size and attractiveness?

The valuation assumption of “willing seller” does not equate to accepting a forced sale value or a price where uneven negotiations take place. If a hypothetical owner of a large expensive annexe was being offered a Band A price by the owner of the adjoining property which it naturally supplements, what would occur in the market? If the special purchaser does not offer a realistic price, it would be open to the vendor to sell to anybody in the market willing to take on the property, who might be prepared to either to risk illegal occupation, or seek to get the restriction removed, or to buy it as an investment to let to the adjoining owner. Whilst none of these options would necessarily achieve a full price, by introducing the possibility of a speculative purchaser, the negotiations on price would be more likely to achieve a reasonable compromise of somewhere between the ‘‘restricted value’’ and ‘‘unrestricted value’’. What must also not be forgotten is that the adjoining owner has good reasons to want to purchase the annex. He is a special purchaser, and the vendor would know this, even if a discounted price was the full price reasonably to be expected.

For the above reasons it would not be unreasonable to expect a reduction in band(s) in these cases, but it will not always be band A.

Valuation of Dwelling (part) not subject to restriction (e.g. the house)

As indicated at paragraph 8 above the value of any dwelling which has arisen through disaggregation of a non-composite dwelling (hereditament) must have regard to how the remainder of the original dwelling was actually occupied as at AVD. Whilst in the case of a house and granny annex this might lead one to conclude that only those persons actually in occupation of the house at the AVD would have been interested in purchasing the house (i.e. because they were familiar with the occupant of the annex) it is important to note that any purchaser would have obtained the benefit of being able to bid for the annex and take legal occupation of it at some time in the future.

Accordingly, in cases where there would have been a significant difference between the ‘‘market’’ value of the adjoining annex and its value to the owner of the house (ie. due to enforcement procedures being rigorously applied) the value of the house at the AVD could well be ‘‘underpinned’’, helping offset any ‘‘nuisance’’ associated with the occupation of the annex. In other words, owner-occupation of the main house has the additional advantage of putting the owner in a ‘special purchaser’ position of the adjoining annex.

10.0 Subsequent changes in occupation – alterations to re-convert to a single dwelling

If an annex is subsequently vacated by its original dependent relative or occupant the family will often reoccupy it as part of the main family home, or the whole property is sold to a new taxpayer who also wishes to use the annex as part of an extended home, rather than a self contained unit. Where dependent relative’s relief is withdrawn triggering a proposal to delete the annex, it must remain in the list until such time as structural alterations are made to the property so that the annex is no longer self-contained.

Where structural alterations are made, each case will depend on its own facts as to the degree of physical alteration/adaptation carried out. Listing Officers should not give any specific advice as this could be construed as advising on tax avoidance.

Parliament intended that once part of a building has been adapted for use as separate living accommodation it should remain separately banded for Council Tax purposes if it remains self-contained.

11.0 Effective dates

Section 2, Appendix 2.3, of the CT Manual, sets out three separate scenarios for disaggregation.

Bearing in mind there are two different types of dwellings (see paragraph 1 of this section) it is very important when correcting a previous list alteration to distinguish whether a property should be banded as

a separate dwelling because it comprises a separate hereditament (effective date will be the date of the compiled list or, if later, the date when the new hereditament came into existence) or

because it came into existence as a self-contained unit under the disaggregation provisions of 1992 Council Tax (Chargeable Dwellings) Order SI No 549.

Practice note 5: appendix 1: case summaries relating to disaggregation

1.0 Article 2

A ‘self-contained unit’ is defined as:

“a building or part of a building which has been constructed or adapted for use as separate living accommodation”

1.1 Article 3

“Where a single property contains more than one self-contained unit, for the purposes of Part 1 of the Act (LGFA 1992), the property shall be treated as comprising as many dwellings as there are such units included in it and such unit shall be treated as a dwelling”

1.2 NB. Disaggregation only applies when there is more than one such unit within the hereditament. Separately occupied units are not the subject of Article 3, but are nonetheless dwellings because they are separate hereditaments. BEFORE considering whether a self-contained unit exists it is essential to first identify the extent of the hereditament. Only where a single hereditament [under the paramount control of one occupier] exists can the disaggregation principles apply. If parts of a building are separately let/occupied then Articles 2 & 3 of the Chargeable Dwellings Order do not apply and the parts should be banded separately as dwellings that are separate hereditaments and whether or not the parts are “self-contained” is irrelevant.

2.0 Part 2: General principles of disaggregation

Since 1993, the practical outworking of disaggregation legislation has been subject to clarification and refinement in practice and policy through adopting principles that have been confirmed in decided cases.

2.1 The Unit must have been constructed or adapted for use as separate living accommodation. This is purely an objective physical test, and it must disregard intention. It is irrelevant as to how or by whom or for what purpose the adaptations were carried out. (Jorgensen (LO) v Gomperts RA 2006 300, Coleman (LO) v Rotsztein RA 2003 152).

The decision in Corkish v Wright [2014] EWHC 237 (Admin) has also introduced a test of ‘reasonableness’, by reference to contemporary standards, when considering the presence of a separate self-contained unit, viz: “ relevant building or part of a building reasonably suitable for use as separate living accommodation,… because it makes clear that what matters is its fitness for that purpose by reference to contemporary standards of what is reasonable, not merely whether it might conceivably be used for such purpose however remote the possibility.”

2.2 The degree of communal living is irrelevant See (Batty (LO) v Burfoot, Batty (LO) v Merriman, Gilbert (LO) v Childs & Rodd (LO) v Ritchings 1995 RA 299)

2.3 Access & Egress: The meaning of separate was considered in McColl v Subacchi LO (2001 RA 342). Access and egress arrangements can be a material consideration. Here access to a flat was only possible via hall, stairs & landing shared with the house within which it was situated. This did not stop the flat being held to be separate. In Jorgensen (LO) v Gomperts (2006 RA 300) the attic flat was similarly accessed.

However, contrast this with Batty (LO) v Merriman where access to an annex was through the lounge of the main dwelling and in these circumstances the HC judge indicated that he was sympathetic to the tax payer’s case. These comments have been used to guide policy on identifying ‘separate living accommodation’.

2.4 The unit must be physically capable of use as separate living accommodation:

In the Batty cases the reasoning used in answering this question was based on an examination of the physical character and layout of the premises. This was examined in Beasley (LO) v National Council for YMCAs 2000 RA 429. The case involved a “foyer housing scheme” where homeless youngsters occupied flats comprising; bedsitting room, a kitchenette and shower room (shower WC & WHB). Apart from this, the residents had use of various communal facilities. The judgment focused on the physicality of the situation, the actual way it was used was unimportant, although this may be indicative of whether the building was constructed for use as separate living accommodation. The extent of the communal facilities were relevant, but only vis-à-vis the absence of such facilities within the separate units.

2.5 Provision of standard facilities:

A self-contained unit should usually have facilities for living, sleeping, preparation and cooking of food, and bathing facilities such as a bath/shower, whb and lavatory. However, in exceptional circumstances the lack of a facility does not prevent a unit from being self contained. For example a unit having, say, shared bathing facilities - Clement (LO) v Bryant and Others (2003 RA 133).

2.6 Physical identity

The accommodation of a self-contained unit should normally be contained within a single curtilage, and be capable of clear definition. If the unit’s boundaries cannot be clearly defined, despite there being, say an extra kitchen or an extra bathroom, this may provide a strong indication than there is no separate living accommodation.

2.7 Unit of sale

The fact that part of a property cannot be sold separately or occupied separately from the main dwelling, does not mean that it is not a self-contained unit within the meaning of Article 3. The test is an objective physical test. Planning considerations are subsidiary to, and will not override, the basic principles (see Ritchings case below).

3.0 Part 3: Summaries of High Court decisions in which above principles have been examined and clarified

Batty (LO) v Burfoot and others, Batty (LO) v Merriman, Gilbert (LO) v Childs & Rodd (LO) v Ritchings (1995) RA 299

(These were four separate disaggregation cases, from different parts of the country but heard together.)

3.1 Batty (LO) v Burfoot

It was argued successfully at VT that the disaggregated part should not be separately assessed because:

of its layout and integration it could not be sold separately

planning permission was granted for one dwelling only

if sold separately, outsiders would be reliant on a common entrance which would provide them with access to all other rooms (same key used for all locks and common services).

On appeal to the High Court, the Judge did not deal with the community of living aspect although it was arguable that the case could be quashed on that reason alone, in terms of his judgement on the Childs case. Instead he focused on the impracticality of sale aspect which was not a relevant consideration when deciding what comprised separate living accommodation. In the context of discussing the concept “willing vendor” the Judge said …“It is therefore fallacious to contend that this valuation provision, even if relevant to the exercise of definition, leads to the conclusion that if sale is, in fact, impracticable the premises cannot be treated as a self contained unit.”

Counsel for the taxpayer argued that the valuation assumptions assume that the dwelling is capable of separate sale, but this was rejected. This, however, may be relevant to valuation. On this basis the VT had misled itself and the decision was quashed.

3.2 Batty (LO) v Merriman

Factors considered at VT:

Practicality of separate sale

The rooms had no separate access; this was gained through the shared front door and then through the lounge and dining area of the main house

Community of living (rooms in main house often used by occupant of annex), shared services

Door between annex and main house left unlocked

The decision of the VT was quashed by the HC on the basis that the decision was made partially on impracticality of separate sale. However, the judge was sympathetic to the case as a whole, due to the other aspects:

“I am bound to say that were I to be judging the merit of the appeal on the particular facts I would have had a deal of sympathy with Mr Merriman’s contentions without, of course, giving any consideration to the practicability of sale. I think at the end of the day this appeal, along with that of Mr Burfoot, should go back to Kent Valuation Tribunal. If my observations are of any comfort to Mr Merriman then he may, of course, adopt them before the tribunal on the rehearing, so long as he understands that the decision must be exclusively the tribunals; it cannot be mine.”

NB: It is as a result of the judge’s comments in this case, that where access to the annexe is solely via a main room of the adjoining unit, it will not be considered separate living accommodation.

3.3 Gilbert (LO) v Childs

The annex comprised a garage conversion with connecting link. It had separate access, and access between the two units via a fire door, as required by regulation. The VT considered this as the main reason for aggregating the two, but also referred to aspects of communal living (shared services & the interconnection meant that the units could not be sold separately).

The Judge put the fire door issue to one side (and expressed no final conclusion) but quashed the VT decision on the basis that the aspects of communal living were considered irrelevant. The VT had confused the hereditament approach with the requirement of disaggregation. The starting point is a single hereditament, subject to a single (family) occupation. The VT was swayed by a commonality of living (a degree of community of access to services with the main house….participation in family life) and did not focus on the bricks and mortar.

“In this case, I believe the appellants’ submissions are well founded. In particular, it seems to me, that to give account to the level of communal living is to introduce a consideration which is outwith the relevant criteria required in order to test properly the definition in question. It will be obvious that the purpose behind the great majority of these annexes is to furnish separate accommodation for an older generation in such a way as to allow of mutual privacy, while at the same time allowing for the degree of community which gives peace of mind to both parts of the family. It follows that in most cases the actual degree of communal living will be, or probably will be, significant. But that cannot assist, in my judgment, in answering the question as to whether the annex in question was constructed or adapted for use as a separate dwelling. To that extent I agree that the tribunal misdirected itself.”

3.4 Rodd v Ritchings

The VT did not disaggregate as planning permission for the annex excluded occupation other than that which was incidental to the main house and at no time could it be used as a separate unit of accommodation.

The Judge (Ognall J) said:

“In my judgment, that approach was plainly an erroneous one. It may be that the terms of planning consent are a legitimate factor to be taken into account in the decision-making process in some cases. For my part, I can see force in the argument that if the mode of actual use of the annex in question is not legally relevant to the definition of a self-contained unit, then any planning restriction on the form of user is likewise irrelevant. To contrary effect, it is possible to envisage cases where the terms of a planning consent may afford legitimate assistance, for example, in throwing light upon other relevant considerations. It would be wrong for me, in this case, to express any conclusions on the question of the relevance, in principle, of the terms of planning consent to the liability of premises to be assessed separately for the tax. It is unnecessary for the purposes of this appeal and consideration of it must therefore await an appeal where it necessarily requires determination.

But I am quite satisfied that even were the question of planning consent and its terms to be a relevant factor, it would be wholly wrong to treat it as the sole one, as opposed to one of a number of factors sounding in the exercise. Whether in this case one construes article 2 of the regulations as meaning physically amenable to use as separate living accommodation (the appellants’ argument) or, on the other hand, intended to be used as such (the respondent’s argument), in neither event can the terms of a planning restriction of itself rule the day. The fact, were it to be the case, that an owner intended to make use of the annex in question in breach of planning consent could not, in my judgment, of itself afford him any answer to liability of assessment for the tax on the basis that it was a separate dwelling, if otherwise the evidence established that it fell to be treated as such under the regulations. The tribunal in this instance gave no other reason for its decision. There may have been others, I do not know. But in default of any recital of them, it is clear that the tribunal failed to apply its mind to any of the evidence, save for the restrictive terms of the planning consent, or to consider whether any of the other unrecited evidence featured in its consideration of the application of the regulations. This was a clear error of law and the decision must be quashed”.

3.5 McColl v Subacchi LO (2001) RA 342

This case concerned a flat and a house. Both dwellings had full facilities including bedrooms, living room, kitchen and bathroom. The only drawback was that access to flat was via the hall, stairs and landing of the house. The appellant argued that neither dwelling should be assessed.

The HC judge first reviewed the VT decisions. With regard to the flat, he noted that it had all the facilities necessary for separate living and that it was separated from the main house by a lockable door. On the precedents this was an objective test and did not depend on what it was used for, however, he noted that it had been separately tenanted in the past. It was therefore prima facie a separate dwelling in terms of the order. The question was whether the fact that access to the flat required passing through the main house defeated this separateness? (paragraph 25)

The judge noted that there was nothing in the order itself to compel that conclusion (paragraph 26). He was not persuaded that the circumstances deprived the flat of its character as a separate self-contained unit. The situation at Chieveley Drive (Merriman case) was distinguished (paragraph 27) as access was not required through a main living room.

Regarding the house, it had all the usual features associated with a self-contained unit. It is separated from the flat by a lockable door. It did not cease to be separate because the appellant had granted the tenant a license to pass through her hall stairs and landing. Nothing in the Order compels that conclusion (paragraph 29), although it may cause inconvenience.

The Judge then looked at previous precedents; the situation at Chieveley Drive, as featured in Batty v Merriman was considered, Butterfield v Ulm (unreported) and the YMCA case, but he did not find them helpful. He seemed to be particularly influenced by the lockable door and the requirement for the unit to be separate; “the flat has a lockable door which makes it separate” (paragraph 35).

Note: The lockable door issue was central to the 2006 case of Jorgensen (LO) v Gomperts. In this case it was pointed out by Counsel for the LO that even if the flat has a lockable door, the main unit is not secure to the passage of the tenant via hall stairs and landing. Mutual trust has to be assumed in such cases.

3.6 Joseph Rowntree Housing Trust v Speight (LO)(2002 RA 203)

The VT decided that the removal of cookers and refrigerators, and the capping of electricity supplies to the former kitchens of self-contained accommodation, now no longer used separately, did not mean that the rooms were no longer self-contained. This part of the decision was not reviewed by the High Court.

3.7 Clement (LO) v Bryant and Others (2003 RA 133)

This case concerned eleven bedsits, each comprising; bedsitting room, fully equipped kitchen, bathroom with WHB & WC, but no bath or shower, provision being made communally.

The High Court reversed the decision of the VT and held that bedsits should be disaggregated.

The Court disagreed with the VT’s decision on 4 counts:

The fact that bathing facilities were communal did not mean that the bedsits couldn’t be self- contained (reference was made to LT decision on unit of assessment, in connection with domestic rating).

The VT, in connection with the absence of exclusive bathing facilities, had been particularly taken by the fact that the actual occupiers were elderly.

The VT had had regard to the high degree of communality and dependency, “one is concerned with bricks and mortar, not with the characteristics of the occupiers”.

The fourth and final error was to have regard to the availability to the single access point which would have posed a difficulty if the units were to be sold.

3.8 R (on the application of Coleman (LO) v Rotsztein (2003 RA 152)

A granny annex comprised living room, kitchen, bedroom and combined shower and wc. There was an interconnecting interior door and an exterior door with its own gated side access. The VT decided that it was simply built as an extension to the family home.

The High Court held that the VT had erred in law as it had had regard to the intention of the occupier and not concentrated on what had been physically constructed. The accommodation had all the characteristics of a self-contained unit. The family alleged they used it as a simple extension to their home, this was supported by there being common services. The additional kitchen was designed to be used as a “Passover kitchen” as the family were orthodox Jews.

3.9 R (on the application of Williams (LO)) v Royal National Institute for the Blind (2003 RA 158)

A purpose built residential home for the blind or partially sighted, consisting of 36 residential units. The VO had accepted that the single person bed-sits were not self-contained units*(see below). This left 4 double units which were subject to contention.

The double units comprised of separate bedrooms, a kitchen/living area and a bathroom with shower, whb & wc. The VT held that they should not be disaggregated. This was based on 3 findings; the double units could be used for independent living but so could the other, single, units, the RNIB did not intend to create units for entirely independent living, and finally, as there was no difference between the single and double units and as the VO accepts that the single should not be disaggregated then the same should apply to the double.

Because of this misguided reasoning, the High Court quashed the decision and remitted it back to the VT.

It identified the factors that are relevant to a decision of this nature.

First, matters which should not be taken into account:

1) The actual use of the property (Batty v Burfoot & YMCA case)

2) The difficulty in selling part of the building (Batty)

3) The intention of the builder or developer (Rotsztein)

Secondly, the HC identified factors that should not be treated as decisive:

1) The terms of the planning permission

2) The absence of a bath or shower within the unit

Finally, as to matters that should be taken into account:

1) What has been constructed (Rotsztein)

2) The extent of facilities provided within the unit and the extent of the communal facilities provided externally

(NB. It was very shortly after this case that Article 3a of the Council Tax (Chargeable Dwellings) Order came into effect regarding the special rules for registered care homes.)

*This decision was taken on the facts of the particular case and is not a general principle to be adopted.

4.0 Jorgensen (LO) v Gomperts (2006 RA 300)

The LO contention was that there were two dwellings; a maisonette on the basement, ground and first floors, and a flat on the second. The ‘flat’ was 26m² in size and comprised two rooms; a bed-sitting room with facilities for cooking and a bathroom. The VT decided against the VO and found that there was no intention for the flat to be lived in separately. Lodgers who had occupied it were part of the household and the flat had no lockable door.

The judge reiterated both ‘Rotsztein’ and Clement v Bryant and set out reasons why these adopted the correct approach:

“ 15 In my judgment these passages from the foregoing authorities conclusively demonstrate that the test is an objective bricks and mortar test. Intention and use, actual or prospective, are not relevant……there are good policy reasons why an interpretation based on intention or purpose should not be adopted in this context. First, there may be real practical difficulties by reason of the passage of time or otherwise in ascertaining the intentions of an original constructor or later adaptor of the building. Secondly, a test based on intention might encourage taxpayers to devise strategies with varying degrees of ingenuity to persuade listing officers and/or the Tribunal that they had no deliberate aim to create separate living accommodation. Thirdly, administrative and judicial time would be employed in seeking to test the veracity of subjective claims of lack of the necessary subjective intention. This process would be costly and uncertain, with the probable result that success would depend more on the skill and resources of the advocate than upon the intrinsic merits of the claim. Inequality of treatment would be likely to occur. I do not believe that such consequences would be in the public interest or accord with the object of Article 2 of the Order.”

On “construction and adaptation”:

The Judge rejected a “strong test” for the concept of adaptation, which Mr Fookes (for the taxpayer) had put forward, whereby the LO is required to adduce some actual evidence of the acts (how when and by whom) that “construction or adaptation” took place, upon which he relies in a disaggregation case (paragraph 19). The approach is to simply do no more than “look at the present physical characteristics of the relevant building.”

On facilities:

In paragraph 22. “I therefore reject Mr Fookes strong test for the concept of adaptation. However, I do see considerable force in a rather weaker version of this argument, which Mr Fookes (for taxpayer) also deployed. He submits that whether a part of a building constituted separate living accommodation required close scrutiny of the precise physical characteristics of the building. He argued, for example, that nowadays in certain particular circumstances no reasonable person, would regard a part of a building as constituting separate living accommodation if nothing had been done of a physical nature to provide facilities for cooking. Drawing on some examples from his own experience, he contended that in certain situations it would be absurd to treat a particular area as constituting separate living accommodation by reason only that an a owner or occupier had made it possible to use a small microwave oven therein.”

In paragraph 23. Mr Fookes readily accepted that there could be no hard and fast rules in this area, but submitted that if it was contended in a specific case, for example, that the building had everything, including a kitchen, for separate accommodation, the Tribunal must consider, having regard to the particular circumstances of the case, what it was said there was that physically constituted such a facility. “In my judgment, Mr Fookes is right on this issue, for the reasons that he advanced. The Tribunal should consider whether, having regard to the particular circumstances of the case, the physical characteristics of the building do constitute separate accommodation.”

In paragraph 24. Mr Buley (for LO), in any event, did not really dissent on this question. He submitted that there was here something physically present sufficient to constitute kitchen facilities, namely the presence of a sink unit. “However, it seems to me that an evaluation of a matter of that kind is pre-eminently for the Tribunal to make, not for this court.”

On the relevance of a lockable door:

Counsel for LO submitted that the VT erred in law by relying on the corollary of the McColl case where a lockable door was material to the finding that a separate unit existed. The judge felt that McColl did not establish a rule of law and each case had to be decided on its merits. In paragraph 27 he concluded that;

“…in relying on McColl, undue weight was given to the absence of a lockable door in this case. Mr Buley accepted that in modern conditions some degree of privacy might not untypically be regarded as a significant element in deciding whether something constituted separate living accommodation. In my judgment, that was a correct concession to make. However, he submitted that in most cases (and this was certainly one in his contention) an objectively acceptable degree of privacy could be achieved without the presence of a door locking off one part of the building from another. He drew attention in particular to the facts of McColl where, although the occupant of the flat could lock himself off from the rest of the house, the physical configuration was not such as to allow the occupants of the rest of the house to lock themselves off from him, yet the rest of the house was found to be a separate self-contained unit.

In paragraph 28. “In my judgment, this is again a matter that must be resolved by the Tribunal on the particular facts of the given case. It is wrong in law to treat the presence of a lockable door as a necessary condition for the application of the Order. However, as I have said, there may well be particular circumstances where some degree of privacy could reasonably be regarded as a material element in determining whether something constituted separate living accommodation, and the Tribunal must then decide whether, having regard to the physical characteristics, the part of the building in question should be so treated. I stress again that the test is an objective one. It is emphatically not a question whether any particular occupant might believe that privacy required a locked door, and without it there was no separate living accommodation. It is for the Tribunal, looking at the physical characteristics of the building, to determine on an objective basis whether those characteristics are sufficient to make part of the building separate living accommodation.”

NB. The case was remitted to VT for reconsideration in light of guidance provided and on the basis that the correct tests are applied. There was insufficient detail in the evidence available on the kitchen facilities for the Judge to make a decision in the High Court. On rehearing at VT, it was shown that all that the kitchen facilities consisted of were a sink unit (with open shelving beneath) and a ‘plug in’ baby belling that had later been replaced with microwave oven sitting on a low table, and a small fridge. There were no fixtures other than the sink, such as worktops units or cupboards. The VT did not find these facilities sufficient to constitute that part of the building as having the physical characteristics of separate living accommodation.

4.1 Daniels v Aristides 2006

The VT had decided to re-aggregate a log cabin, which had all the features of a self-contained unit in the grounds of a new barn conversion, with the new dwelling itself. The log cabin of some 50m² had originally been conceived to be constructed as a games room and tool shed, and only later, was the decision taken by the taxpayer to adapt it as a studio for temporary living accommodation, whilst the main house was being constructed. The studio was mainly open plan, had a kitchen area, a wc and shower, and a gallery with a ladder/step access used as a bedroom area. It was occupied for three years whilst construction on the barn conversion took place and banded as A. On completion of the new dwelling, the cooker was taken out of the studio, the cooker point removed, and the building used as a games room, ancillary to the main house, as was the original intention. In amalgamating the band to ‘G’, the VT had regard to the original intention of the taxpayer; the ancillary use of the building; a previous (incorrect) decision of the LO to amalgamate; that its construction did not accord with building regulations; the temporary nature of its planning permission for residential use, and the factor of a missing cooker point (though they said this was of minor consideration). They did not, however, have regard to the one overriding essential, i.e. the physical features of the living accommodation.

The High Court judge felt there was no difference in approach regardless of whether the self-contained unit had been “constructed” or “adapted” for use as separate living accommodation, although the precedents dealt with property constructed as such (paragraph 19).

He referred to RNIB case which set out the relevant considerations (at paragraph 21):

“Matters which should not be taken into account at all include, first, the use to which a part of the building is actually put; secondly, the impracticability of the sale of part of a building; and thirdly, the subjective intention of the builder or developer. Matters which should not be treated as decisive include, first, the terms of the grant of planning permission, and secondly, the absence of a bath or shower (see paragraph 15 and 16 of the judgment). Mitting J went on to say that the question, here, had to be assessed objectively: and it seems to me that that accords with the other authorities to which he refers and is consistent with the language of the Order itself.”

Other cases such as Rotsztein and Gomperts made clear that the subjective intention was irrelevant (paragraphs 22 & 23) as was actual use (paragraph 24). “The VT had therefore significantly misdirected itself in law” (paragraph 25).

On removal of a cooker:

In the alternative (paragraph 26) the taxpayer submitted that in 2003 the removal of the “cooker and cooker unit” was an adaptation, (paragraph 27). This had been discussed in Jorgensen v Gomperts and the judge thought it depended on the particular circumstances of each case. Also in Clement, the lack of a shower or bath did not mean that property could not be disaggregated. The tax payer’s submission was rejected (paragraph 30):

“But it seems to me that that cannot be right. When one has regard to the actual original state of the building, as built in 2000 and as recorded by the Tribunal, that building remained in similar form in 2003 save and save only for the removal of the cooker and cooker unit. Still there was the kitchen area, still there were the shower and cloakroom facilities, still there were the bedroom facilities of the upstairs gallery. But it is unnecessary for me to say anything more than that because that point has, in effect, been decided by this particular Tribunal itself: in that it decided that the removal of the cooker and point have not changed the characteristics of the dwelling: because, as the Tribunal itself found on the facts of this particular case, it was considered to be of “minor consideration”.

“That being so, and taking the view that the decision of this Tribunal was wrong in law, I do not think it necessary or appropriate for me to remit this matter back to the Tribunal for further consideration. The only point outstanding would be the effect of the removal of the cooker and cooker point and this particular Tribunal has found on the facts of this case that that was a matter of minor consideration.”

4.2 Ramdhun v Listing Officer

[2014] EWHC 946 (Admin), Haddon Cave J. said at [20] , that “absent a patent error of law or findings of fact which simply cannot be justified on the evidence, the High Court will not interfere”

4.3 Corkish v Wright , Popplewell J Wright [2014]

EWHC 237 (Admin) , in considering the intention behind the construction or adaption was irrelevant; the test was addressed to the result of the building work , not its purpose. However he added:

“The question is whether the effect of the construction or adaption is such as to make the relevant building or part of a building reasonably suitable for use as separate living accommodation. I prefer the expression “reasonably suitable” for such use to “capable” of such use, because it makes clear that what matters is its fitness for that purpose by reference to contemporary standards of what is reasonable, not merely whether it might conceivably be used for such purpose however remote the possibility.”

Popplewell J. expressed concern about the potential narrowness of the “bricks and mortar” phrase, saying, at [5]:

“The question is to be answered by reference to the physical characteristics of the building. This is sometimes referred to as a “bricks and mortar test”, but the epithet does not accurately capture the wide range of physical characteristics which may be of relevance including services and fixtures…”

Popplewell J. also noted that the physical characteristics of the whole house must be considered not merely the potential self-contained unit under investigation. At [5] he said;

“If what is being considered is part of a building, the physical characteristics to be considered include those of the remainder of the building as well as the part being considered.”

4.4 Coll v Mooney [2016] EWHC 485 (Admin)

The property comprised a lower ground floor, ground and first floors. The property was listed and although originally built and occupied as one had for many years been occupied as two; the lower ground floor as one flat and ground and first as another. The property was assessed as two dwellings. The lower ground floor had separate access from the ground and first floor flat. The lower ground floor had an internal staircase that lead to the ground floor of the other flat but it had been blocked off. Building work had been undertaken to combine the two properties for use as one family home. The property being listed was limited in what alterations were allowed. The lower ground floor to ground floor stair case was unblocked, an additional stair case was added between lower ground and ground connecting the ground floor kitchen with the lower ground floor utility room formerly the kitchen and a bathroom to the lower ground floor flat. The resultant works produced on the lower ground new bathroom, bedroom, utility room, two stair cases to ground. On ground floor kitchen , sitting area, dining room, two bedrooms and a shower, on the first floor drawing room, study , bedroom and bathroom with dressing area. External entrances to lower ground and ground remained.

The LO contended two self-contained units one comprising the lower ground floor and one the remainder. The VT held that the property should be a single dwelling. Appeal to High Court made on basis that (a) the actual use of the building was considered by the VT in that the whole building only had laundry facilities supplied by the lower ground floor utility room thus offending the “bricks and mortar test” and (b) that the VT had considered the fact the property was listed and so could not be adapted for use as conventional living.

Lang J presided and reviewed previous case law concerning disaggregation. She had particular reference to Corkish v Wright. She found that it was not impermissible for the VT to have regard to the evidence that the house was in use as a single household so long as the VT considered the key question of had the building been “constructed or adapted for use as separate living accommodation”. In consideration of the planning aspect she considered the planning history to be potentially relevant part of the evidential background which the panel was entitled to take into account when examining the physical characteristics of the building and asking itself the question whether the building had been “constructed or adapted for use as separate living accommodation”.

Lang J built on the development of the “bricks and mortar test “undertaken by Popplewell J in Corkish v Wright, namely;

“During the course of submissions in this case, it appeared to me that the Listing Officer was giving the phrases “capable of use” or reasonably suitable for use” a broader meaning than the legislative wording “constructed or adapted for use” when she argued that, since the utility room in the lower ground floor had a sink and space for a microwave “it could be classed as a kitchen” and “therefore the lower ground floor had all the ingredients to be a separate self-contained unit”. In effect, she was submitting how the lower ground floor could have been differently constructed or adapted, and disregarding how it was actually constructed or adapted for use. The focus has to be on the physical characteristics of the building as presently constructed and adapted for use.”

Practice note 5: appendix 2 - disaggregation layout plans

Example 1

Example 1 (https://assets.publishing.service.gov.uk/media/5c5ab07440f0b676b08d5058/ct_man_pn5_app2_layout1.jpg)

The only access is through the main property front door and off the hall. The annex should be separately banded.

Example 2

Example 2 (https://assets.publishing.service.gov.uk/media/5c5ab08aed915d044d7f6700/ct_man_pn5_app2_layout2.jpg)

The only access to this annex is from a living room of the main house. When the only access is from a habitable room (e.g. living room, bedroom etc.) then the annex cannot be separately banded.

Example 3

Example 3 (https://assets.publishing.service.gov.uk/media/5c5ab09840f0b676ad16a6c9/ct_man_pn5_app2_layout3.jpg)

Although this is similar to the previous example there is an additional door from outside and consequently this annex should be separately banded.

Example 4

Example 4 (https://assets.publishing.service.gov.uk/media/5c5ab0b0e5274a317cc0eb35/ct_man_pn5_app2_layout4.jpg)

Although the only access to this annex is via the hall, stairs and landing of the main dwelling, the annexe should be separately banded. This annex could be located on any floor, the decision would be the same.

Example 5

Example 5 (https://assets.publishing.service.gov.uk/media/5c5ab0c1e5274a316a7b74d6/ct_man_pn5_app2_layout5.jpg)

This self-contained dwelling is physically separate from the main dwelling, however, its planning consent determined that it is ancillary to the main dwelling and cannot be sold separately from it. Despite this sales restriction it should be separately banded.

Practice note 6: premises in multiple occupation (aggregation of dwellings)

Introduction

Listing Officers (LOs) have powers to aggregate “multiple property” into a single band in some circumstances. The most common scenario is for houses in multiple occupation (HMOs) where several separate households share toilet, bathroom or kitchen facilities with other tenants. There can be other situations, for example cluster flats, where they are occupied separately, with less shared accommodation.

This Practice Note deals with the full legislative background and covers those areas of difficulty you are likely to come across.

The decision to aggregate, or not, has become more complex as the nature of multiple properties has changed. HMOs are now subject to registration by local authorities. Landlords are required to provide minimum facilities and encouraged to improve such dwellings. Tenants’ expectations have changed over time and they now generally require better facilities than were provided when Council Tax was first introduced. At one time most HMOs were former houses simply let as individual rooms with shared facilities. It is now more common for property to be purpose built as an HMO or be converted to an HMO from a different use. Over time, many older HMOs have been updated, although the LO is not aware of these changes.

Information on these types of dwellings is included as public information on the GOV.UK website on the CT page and is summarised and simplified under ‘Banding of multi-occupied homes’.

Legislative Background

Where a single unit is occupied by an individual or a household, that unit will usually form a hereditament for the purposes of section 115(1) of the General Rate Act 1967 (GRA67). The definition of a dwelling contained in section 3 of the Local Government Finance Act 1992 (LGFA92) means each unit would require a separate band in the valuation list even if it is not self-contained. The Council Tax (Chargeable Dwellings) Order 1992 (CDO92) has similar provisions to section 24 of the former GRA67 and allows LOs to aggregate bands in some circumstances.

The Council Tax (Chargeable Dwellings) Order 1992 (SI No 549)

Article 2 sets out essential definitions, two of which are especially relevant to aggregation.

The definition of a self-contained unit is ‘a building or part of a building constructed or adapted for use as separate living accommodation’. This applies to disaggregation within article 3 and to aggregation within article 4 of the Order.

The definition of multiple property is ‘property which would, apart from this Order, be two or more dwellings within the meaning of Section 3 of the LGFA 1992’

Article 4 states:

“(1) Where a multiple property -

(a) consists of a single self-contained unit, or such a unit together with or containing premises constructed or adapted for non-domestic purposes; and

(b) is occupied as more than one such unit of separate living accommodation, the listing officer may, if he thinks fit, subject to paragraph (2) below, treat the property as one dwelling.

(2) In exercising his discretion in paragraph (1) above, the listing officer shall have regard to all the circumstances of the case, including the extent, if any, to which the parts of the property separately occupied have been structurally altered.”

Making such a decision to treat more than one unit of separate living accommodation as a single dwelling is known as ‘aggregation’.

Interpretation and application of Article 4 – multiple property

Before deciding whether it is appropriate to aggregate or not, you must first correctly identify the hereditament or hereditaments. This is covered in more detail in Practice Note 1 but the chart in Appendix 1 sets out the thought process.

Where the LO finds multiple properties within a single self-contained unit, they must then consider if it is appropriate to aggregate. If the multiple property contains more than one self-contained unit, then Article 4 of the CDO92 will not apply and the LO does not have the discretion to aggregate.

There are several factors to consider when deciding whether to aggregate or not. A judgement will be needed in every case. The thought process and decision must be fully recorded as a record of the decision might be needed if there is a legal challenge.

The table below sets out some of the factors that can be considered as “all the circumstances of the case”, although other information may also be relevant.

IMPORTANT: The table is NOT a “tick box” exercise – each factor will have a different weight of importance and this will vary case by case. The table is to help you consider those issues that are usually relevant, but there may be others that are not included in the table.

Example 1. An old Victorian house has 5 separately let rooms, a shared bathroom and shared kitchen. The building was originally constructed as a self-contained unit, is now multi-occupied, but has had no adaptations. Some similar properties in the area are occupied by single households. From the circumstances in the case, it would be appropriate for the LO to aggregate.

Example 2. A guest house which has been converted into a 14 bed HMO. All the rooms have en-suite facilities, there is a shared kitchen and two shared living/dining rooms. All the rooms are let on ASTs. From the circumstances in the case, it would not be appropriate for the LO to aggregate.

Example 3. A large two storey Victorian house, which has been extended and adapted over many years. There are 8 letting rooms, and shared bathrooms and kitchens on the ground and first floors. As it is possible to identify two self contained units, Article 4 does not apply and the LO cannot aggregate.

The first two examples are at the extremes, where a decision is clear. For many properties between these examples, the LO will need to carefully consider all the circumstances to be able to decide to aggregate or not to aggregate. It should be remembered that the starting point in an HMO is separate bands on the section 3 dwellings. LOs should only aggregate where there is enough evidence to do so.

It must be understood that multiple property means the existence of multiple section 3 dwellings within what is clearly a self-contained unit. In deciding whether to exercise discretion under Article 4 to attribute a single band to premises in multiple occupation, you should consider the following:

a) The property as a whole must consist of a single self-contained unit and will probably have been originally built to be used in that way. The provisions would not allow the LO discretion to treat a purpose-built block of flats as a single dwelling for example, unless there had been very substantial conversion to make the whole building into a single self-contained unit.

b) If a self-contained unit exists within a larger property this must be separately banded as a dwelling. When exercising discretion, the LO cannot include any areas which are fully self-contained units in their own right. For guidance on what is a “self-contained unit”, see Practice Note 5. In multiple property cases, generally any self-contained unit which would be a separate assessment under the disaggregation provisions will be a separate hereditament that cannot be included in an aggregated Council Tax Band. If whatever accommodation is left over within the larger property can reasonably be said to consist of a single self-contained unit, within the CDO92 definition, then that part can also be considered for discretionary aggregation. These situations can be complex so you may need to ask for technical advice.

Sometimes improvements have been made to rooms, some even being fully self-contained. The remainder of the let rooms are scattered over the building without any real prospect of them being considered a self-contained unit in themselves. In these situations, it would not be appropriate to aggregate.

Aggregation is not a standard merger

Like disaggregation, aggregation is one of a limited set of circumstances where the normal rules of banding of dwellings do not fully apply. Aggregation under Article 4 must be clearly recorded as an aggregation. This is because it is different from a decision to merge two or more previously separately occupied dwellings or two previously self-contained units or dwellings, and the effective date will be different. In the case where works are carried out or where occupations change, the effective date will be the date the new circumstances arose. In a decision to aggregate, no changes of occupation or conversion works are involved.

For example, a family may occupy a pair of semi-detached or adjoining terraced houses which are separately banded. The taxpayer removes all bathroom and kitchen fittings in one house (including service pipework), creates internal doorways between the two houses and re-routes electrical and gas services so that they are connected to a common meter. A new single self-contained unit of accommodation is created, and the two existing bands are merged into a single band from the date when the alterations were completed.

When an aggregated dwelling comes into existence by the exercise of LO discretion, it is the exercise of that discretion which creates the ‘deemed’ dwelling, and the date appropriate is the date of exercise of that discretion. (See a full explanation below.)

Effective Date for aggregation cases

Where a multiple property is coming into the list as a new property or new properties, the effective date is the date they came into existence.

Under the Appeals regulations (reg 14 of the 1993 CT Appeals regulations for Wales and reg 11 of the 2009 regulations for England) the effective date for a post-compilation date dwelling is the date it came into existence.

For an existing multiple property, the effective date to be used is when the LO decides to exercise their discretion for aggregation under Article 4 or decides that aggregation is no longer appropriate.

A decision to aggregate (or not) cannot be made retrospectively. As it is unlikely there have been physical alterations to determine the effective date of any list alteration, any decision to aggregate (or not) can only apply from the date of schedule of the list alteration.

The words from the regulations “the day on which the circumstances giving rise to the alteration occurred” should be taken to include the action of the LO to use their discretion.

Student cluster flats

Cluster flats are a type of property where aggregation may be appropriate. The LO must consider the factors given in this Practice Note. Following a Judicial Review on a purpose built block of student cluster flats in Cardiff, the High Court found the LO’s approach was rational and dismissed the claim made by the owners of the block. See Howard Gardens JR decision (https://www.bailii.org/ew/cases/EWHC/Admin/2024/1112.html)

Valuation Tribunal’s powers

Once the LO has identified several section 3 dwellings within a self-contained unit, the power to aggregate in Article 4 is a discretion available only to the LO. It is not possible for a Valuation Tribunal to ‘step into the LO’s shoes’ and order the LO to aggregate.

This issue was considered by the VTE in Burtfield Estates Ltd v Dixon (LO) xx-xxxx-xxxx/254CAD). The case was heard by Mr M.F. Young (Vice President) sitting alone and both the LO and the appellant were legally represented. The case concluded that the Tribunal does not have jurisdiction to decide whether the LO was entitled to exercise his discretion, or not, under Article 4 Council Tax (Chargeable Dwellings) Order 1992. Mr Young also stated the VT does not have the jurisdiction to judicially review the reasonableness of that decision.

Appendix 1 to PN 6 – Flowchart for considering aggregation

Appendix 1 to PN 6 – Flowchart for considering aggregation (https://assets.publishing.service.gov.uk/media/6203a6358fa8f510a5711722/appendix_1.png)

Practice Note 6 appendix 2: Case Law relating to Aggregation

Appendix 2 to PN 6

Practice Note 6 Appendix 2: Case Law relating to Aggregation

Introduction

The following paragraphs set out key cases to support LOs in establishing the correct approach for houses in multiple occupation, where possible aggregation is an issue, under Article 4 of the Council Tax (Chargeable Dwellings) Order 1992

James v Williams (1973) RA 305

This was a domestic rating case, many years prior to the introduction of Council Tax, but where the same principles applied to the unit of assessment for taxation under S24 of the General Rate Act 1967 (GRA67). It related to a house in Cardiff which was converted to four flatlets. Three of the flats had a kitchen and living room, and one a kitchen within the living room. All four shared a bathroom/wc. The issue before the Lands Tribunal was whether the Valuation Officer was correct in not assessing the 4 flatlets as a single assessment. The VO had considered it was not appropriate to aggregate under the provisions in section 24 of the GRA67. These are similar to article 4 of the CDO92. The VO had considered 4 main points:-

(a) the degree of sharing common facilities – each having its own kitchen and each tenant having an external door key and use of the front door and door to the garden.

(b) the degree of adaptation and self-containment – apart from one flat, three of them had their own single entrance door internally.

(c) capability of accurate identification – all the flats being accurately identified.

(d) the degree of transience of occupation – a generally stable pattern of occupation was demonstrated.

It was confirmed as four separate assessments as there were four tenants and four identifiable hereditaments, it being stated “I find that the valuation officer has properly taken into account the four factors precedent to the exercise of his discretion under s24… I find that the valuation officer has correctly declined to exercise his discretion, and the appeal house therefore falls to be assessed in four parts…”

R v London South East Valuation Tribunal & Neale (LO) (2001) RVR 92

The Court of Appeal considered an appeal following the refusal for a judicial review of a Valuation Tribunal decision. The case considered whether it was correct for the LO to separately band a second-floor attic bedsit with kitchen facilities and shared use of bathroom/wc on the first floor. The Court of Appeal confirmed the approach taken by the VT. Brown LJ stated in para 9 of the decision:-

“…James v Williams (VO) (1973) RA 305 which lays down an approach that has stood the test of time and has been followed by the rating authorities and tribunals up and down this country ever since. This is the case upon which the listing officer relied and which satisfied the tribunal that this applicant’s flat should be separately rated, rather than aggregated with the rest of the property. I should also note that the occupiers of the various units in the house with which James v Williams was concerned also had to share a bathroom and wc.”

And in para 11

The tribunal in their decision set out the various factors established in James v Williams to be of critical importance in deciding the question of separate dwellings, and applied these factors to the undisputed facts of the present case… The applicant has sought to submit either that James v Williams was wrongly decided, or that this case is to be distinguished from it. Neither argument, I fear, can succeed. James v Williams has, as I repeat, stood the test of time and the distinction upon which principally the applicant relies, that he shares bathroom facilities with far more people than was the case in James v Williams, cannot serve to require a different result to be reached in the two cases”.

The application for a Judicial review was dismissed.

Smith v Turner (LO) VT Appeal No. xx-xxxx-xxxx/192C05 March 2009

This South Wales Valuation Tribunal case relates to a 2005 list appeal on 23 Denton Road Cardiff, a mid-terraced house occupied as 6 “bedsits”, each room having its own sink, fridge and baby belling cooker. Five rooms shared a bathroom/wc and the sixth room had en suite facilities. The Valuation Tribunal decided that each of the properties had been correctly, separately banded. Mr Hickman, a technical adviser, acting as advocate for the Listing Officer, contended that each of the rooms were a separate hereditament as the tenants had exclusive, beneficial and actual occupation of their room and, as the tenancy agreements were in excess of 6 months, they were not too transient. He also referred to the cases of James v Williams and R v London South East Valuation Tribunal & Neale (LO) (see above). The adaptations to the property in providing individual kitchen facilities to each room at the expense of a shared kitchen for the whole property meant it could not be aggregated as it was no longer a single self-contained unit occupied as more than one unit of accommodation.

In reaching its decision the Valuation Tribunal considered the following points:

each of the rooms was separately occupied by different tenants with each rooms’ boundary capable of clear identification. The six flatlets were, in fact, six individual hereditaments and, therefore, each was a chargeable dwelling requiring a Council Tax Band

each room was adapted to provide self-contained kitchen facilities, including cold running water. The Tribunal considered these structural alterations and adaptations changed the rooms from that of traditional bedsits, to self-contained flatlets, capable of being individually occupied. These adaptations had resulted in there being no communal kitchen for the tenants to share as each tenant had the use of kitchen facilities provided within their individual room

the licence indicated the minimum term for a tenancy was 6 months. Further, details of the length of tenancies that had taken place indicated that each of the occupations of the hereditaments had been non-transient in nature

The Tribunal decided the Listing Officer was correct in deciding that each of the hereditaments should have its own band.

Rawsthorne LO v Parr 2009 High Court

In the High Court, the judgement set aside a decision of the Valuation Tribunal, where a former semi-detached house had been converted for multiple occupation. The building included a self-contained garden flat on the ground floor and five bed sitting rooms let on shorthold agreements from the ground to second floor.

The VT had heard evidence from the LO that five bed-sits in a house were separately let on shorthold tenancies. They shared bathroom facilities but were adapted to the extent that each had a kitchenette. They were separate dwellings under Local Government Finance Act 1992 (LGFA92) section 3(2) defined by separate occupations, without a high turnover of tenants, adapted for separate occupation and should correctly be entered into the valuation list as separate bands. The case of James v Williams (VO) LT 1973 RA 305 had been cited as relevant case law on the subject. The owner, in contrast, had argued that, as the units were not self-contained, they should be treated as one dwelling.

The VT in its decision dated 26th January 2009 did not accept the evidence of the LO relating to separate hereditaments and did not accept that separate dwellings, defined by occupation, must be the primary basis of identifying the dwellings. They had gone straight to disaggregation legislation and were surprised that the LO had not referred to articles 2 and 3 of the Council Tax (Chargeable Dwellings) Order 1992 (CDO92) and looked for ‘self-contained units’ to define the dwelling. The case of James v Williams, as it pre-dated Council Tax legislation, was discounted as being out of date. On finding that no self-contained units existed, they concluded that one dwelling existed (despite their being separate hereditaments) and ordered that one band should apply.

In the High Court, Mrs Justice Dobbs, referred to articles 2, 3 and 4 of the CDO92 and the legislation defining a dwelling (LGFA92 section 3(2)), making a clear judgement setting aside the VT decision and finding that the VT had not addressed the legislation in the correct order. The hereditament question should be established first and then, and only then, should the question of disaggregation or aggregation be addressed. Her Ladyship said:-

“What is clear from the Valuation Tribunal’s decision, which I have already quoted- but I quote one particular part- is that the tribunal say they were surprised to note that the current legislation was not quoted. The Tribunal went to section 3(5)(a) and (b) of the Local Government Act 1992, as opposed to starting at section 3(2), and having done that they went straight to Article 3 of the Council Tax (Chargeable Dwellings) Order 1992.

“What they hadn’t determined, and should have determined, was whether indeed there were multiple hereditaments or whether there was – as Mr Parr submitted- a single one. It is clear that they failed to go through that process and in my judgement as a result, without making any observation on the merits of either case or the Valuation Tribunals decisions, the Valuation Tribunal fell into error in failing to determine preliminary and necessary issues. They jumped the gun and went straight to the Order without dealing first with the relevant provisions of the Act….”

Only if the property constituted a single hereditament would the relevance of looking for self-contained units been a paramount consideration. The judgement emphasises the need to consider the primary question of hereditaments, before applying the CDO92. Great care must be taken not to confuse article 3 of the CDO92 with circumstances outlined in article 4.

The VT decision was quashed and remitted back for a new VT hearing in which the separate bands were confirmed.

(Parr case second VT hearing: reference VT Appeal No. xx-xxxx-xxxx/165CAD Dec 2009)

Johnson LO v Callear 2012

This case was an appeal to the High Court from a VTE decision deleting the band on a large room in a house in multiple occupation. The flat had a kitchenette and shower but did not have a WC. The VTE decision took the dwelling out of the list because it was not, in their view, a fully self-contained unit. In the High Court it was argued as a point of law that the panel had fallen into the same error as in Rawsthorne v Parr. The tribunal failed to consider the hereditament question under section 3 of the Local Government Finance Act 1992 to firstly identify the dwelling. Secondly the panel had considered the degree to which the room was adapted with its own facilities as determinative of whether a dwelling existed. Judge Spencer confirmed an error in law by finding that tribunal had not addressed the question of whether a section 3 dwelling existed, but refrained from making that decision without further evidence. He went on further to state that they were in error in finding that a self-contained unit did not exist within the meaning given in article 2 of the CDO92, in this case merely because it did not have exclusive use of a WC.

At the remitted second hearing the vice president of the VTE accepted a statement of agreed facts confirming:
- the appeal property is a bedsit. It contains kitchen facilities, including a cooker and a fridge, a sink and a shower. It is located within a large Victorian terraced house which contains ten bedsits. The appeal property is on the first floor. Six of the ten bedsits have showers in addition to kitchen facilities and a sink. There are shared toilet facilities at various points within the house and a shared laundry on the ground floor
- the appeal property was let and occupied on an Assured Shorthold Tenancy from February 2003 to May 2012
- no-one other than (the tenant) had access to the appeal property for the period of his tenancy
- all the flats are let on a similar basis
The decision accepted the guidance given by Judge Spencer that the 4 tenets of rateable occupation are central to the question of whether a dwelling existed under section 3 of LGFA92, and concluded that the bed sit was such a dwelling and must be shown in the list.

Coll LO v Dhillon (Consent Order from the High Court 2013)

This case arose from a LO appeal against a VTE decision of an HMO in Hounslow. The VTE effectively stood in the shoes of the LO to aggregate rooms that had various degrees of adaptation and where the whole building did not form a single self-contained unit. The VTE decision had aggregated the rooms on the grounds that they were not self-contained units. This raised three matters of law:
- the tribunal had not asked first whether section 3 dwellings existed, as required by Rawsthorne v Parr
- that the tribunal did not have jurisdiction under Article 4 of the Chargeable Dwellings Order 1992 to exercise the discretion given to the Listing Officer to aggregate section 3 dwellings
- an incorrect application of the criteria to be taken into account when deciding on the concept of the self-contained unit or matters of aggregating multiple dwellings. The case was listed for High Court hearing in February 2013 but was settled by Consent Order of the High Court with solicitors acting for the respondent, in favour of the LO’s legal arguments
Burtfield Estates Ltd v Dixon (LO) VT(E) xx-xxxx-xxxx/254CAD).

The case was heard by Mr M.F. Young (Vice President) sitting alone and both the LO and the appellant were legally represented. The case concluded that the Tribunal does not have jurisdiction to decide whether the Listing Officer was entitled to exercise his discretion, or not, under Article 4 Council Tax (Chargeable Dwellings) Order 1992. Mr Young also stated the VT does not have the jurisdiction to judicially review the reasonableness of that decision.

Practice note 6: appendix 3: aggregation special cases - sheltered accommodation with high degree of communal facilities

Introduction

The purpose of this Appendix is to clarify some of the parameters where discretion can be exercised when considering the principles of aggregation in respect of semi-sheltered accommodation for the elderly within multi-occupied large houses. Readers will need to be fully acquainted with the legislation as set out in CTM PN1 appendix “Understanding the Chargeable Dwellings Order”, and be familiar with the principles of disaggregation set out in CTM PN5 and Aggregation as set out in CTM PN6. The definition of a self contained unit (SCU) for all cases covered by the Order is “a building or part of a building constructed or adapted for use as separate living accommodation.”

Article 4 of the Council Tax Chargeable Dwellings Order 1992 gives Listing Officers a limited discretion to aggregate separate dwellings comprising a single SCU. PN 6 and its appendices explain the principles, and a number of High Court Appeals have established the law in this area, which most frequently affects Houses in Multiple Occupation (HMOs).

Special cases

In some cases the following circumstances may exist:-
- periodic tenancies suggest separate dwellings exist
- rooms are not fully self contained, though they do have adaptations such as en-suite WC and showers
- a few communal kitchenettes exist but they do not have the facilities to function as kitchens to prepare main meals, nor are facilities within rooms capable of sustaining the room as an independent unit
- main meals are taken communally in the Dining room, as a condition of occupation, prepared by staff from the main kitchen
- additional communal living space comprises lounge, and sitting areas such as conservatories
Such a property will not qualify as a care home, unless all or part is registered as such. They come in various forms, either purpose built or converted from former living accommodation, and it is important to bear in mind when applying the advice, that every home needs looking at according to the individual facts.

The disaggregation case of Beasley (LO) v The National Council for YMCAs 2000 RA 429 considered whether the parts were SCUs under Article 3. The remarks of Judge Sullivan are considered to have relevance in deciding on the matter of SCUs. The Judge said “…I would be prepared to accept that in deciding whether a particular flat has or has not been constructed for use as separate living accommodation within a larger building, it will often be relevant to consider the extent of communal facilities which have been provided in the flat and the extent of the communal facilities which have been provided in the remainder of the building.”

When applying Article 4 the SCU must be the whole building (or part subject of aggregation), and the LO is required to consider “all the circumstances of the case” as well as the degree of structural alteration within the individual rooms. Thus the nature and use of the building including the extent of communal facilities and services is a relevant consideration, though it is not so under Article 3 which purely looks at the physical state of the building (bricks and mortar) in deciding whether individual SCUs exist. A ‘multiple property’ in Article 4 is defined as two or more Section 3 dwellings in Article 2, so ‘hereditament’ is not the sole criteria to consider when applying discretion.

In some cases there may be difficulty or difference of opinion on the number of hereditaments, whether one or many where significant shared areas exist within the house, and where the rooms fall short of having sufficient accommodation or facilities to be considered as self contained units. In such cases it is considered possible to arrive at the same result in terms of dwellings whether applying Article 3 or Article 4 discretion.

In applying the principles of Article 4 CDO to individual cases involving sheltered accommodation within large houses, LOs may exercise discretion where all of the following elements apply:

The whole house has recognisable features of a single SCU despite its multi-occupation. (e.g. one main front door, one kitchen, one communal dining room, communal sitting areas, communal laundry).

The individual rooms (which form part of the multiple dwelling which may be separate hereditaments) would not have sufficient structural adaptation to be considered SCUs for disaggregation should we be applying Article 3.

There is significant communal accommodation e.g. lounge, conservatory, dining room and Kitchen provided specifically and compulsorily for the provision of main meals to the occupants.

There are no, or insufficient, cooking facilities within the rooms and where the occupants, as a consequence, have no option but to take their main meals communally.

“All the circumstances of the case” under Article 4 CDO will take into account the nature of the occupants, the level of dependency on the housing providers by way of provision of communal accommodation and extent of residential services provided.

Some homes will fall into this category, whilst others may not. It is acknowledged that there may be some circumstances where the individual room or rooms will constitute SCUs. In this case aggregation would not be possible. There may be circumstances where part of the building only can be aggregated, where a group of rooms forming part of the building can reasonably be viewed as a single SCU for aggregation purposes.

If there is any difficulty in understanding the application of this advice in individual circumstances, you are advised to contact your Technical Advisor or CT Technical Head for central advice.

Practice note 6A: Houses in Multiple Occupation (HMO) - England only

Introduction

This Practice Note applies to England only.

From 1 December 2023, Parliament legislated to change the way that HMOs are assessed for Council Tax so both licensed and unlicensed HMOs will have one band. See the section below on identifying the HMO

The Council Tax (Chargeable Dwellings and Liability for Owners) (Amendment) (England) Regulations 2023, brings in a definition of HMO:

““HMO” means a building or part of a building which is a “house in multiple occupation” as defined by section 254 of the Housing Act 2004 but as if subsections (1)(e) and (5) of that section were omitted;”

The order requires that a property in England consisting of separate hereditaments, which meets the above definition must be aggregated into a single band. HMOs which are considered a single hereditament are also affected and must no longer be disaggregated into separate self-contained units.

Properties which are HMOs under S257 (see here (https://www.legislation.gov.uk/ukpga/2004/34/section/257)) are specifically excluded from this change. The definition of S257 HMOs is summarised in the Definitions section of this Practice Note.

This change to the regulations is not retrospective. This means that where a new HMO comes into existence before 1 December 2023, it must first be assessed following the guidance in Practice Note 6: premises in multiple occupation (aggregation of dwellings). If you decide that aggregation is not appropriate, the case should be cleared on that basis and a second report raised to subsequently aggregate the property from 1 December 2023.

Legislative Background

The Council Tax (Chargeable Dwellings and Liability for Owners) (Amendment) (England) Regulations 2023 SI No 1175 (https://www.legislation.gov.uk/uksi/2023/1175/contents/made) amends The Council Tax (Chargeable Dwellings) Order 1992 SI No 549.

Article 2 is amended to include a definition of an HMO:

“”HMO” means a building or part of a building which is a “house in multiple occupation” as defined by section 254 of the Housing Act 2004 but as if subsections (1)(e) and (5) of that section were omitted.”

Articles 3 and 4 are amended (in relation to England only) so that an HMO must be treated as a single dwelling.

Interpretation and application of amended Articles 3 and 4

All HMOs, whether they are a single property (hereditament), or a multiple property (hereditaments), must be treated as single dwellings from 1 December 2023.

Identifying the HMO:

If an HMO is licensed, then the HMO has been identified by the Local Authority and the accommodation in the licence (and associated plan if necessary) will be a single HMO and treated as a single dwelling with one band. Please note that any properties which are licensed as an HMO under S257 should not be aggregated.

For other properties:

A building or a part of a building is a “house in multiple occupation” if it meets “the standard test”, “the self-contained flat test” or the “converted building test” as set out in S.254 of the Housing Act 2004.

1) Standard test

A building, or part of the building is an HMO if,

1. It consists of one or more units of living accommodation not consisting of a self-contained flat or flats,

2. a. It is occupied by two or more households,

b. it is occupied by those people as their sole or main residence, and

c. their occupation of the living accommodation is the only use of that accommodation

3. Rent must be paid in respect of at least one of those persons in occupation of the living accommodation

4. Two or more of the households share one or more basic amenities, or the living accommodation lacks one or more basic amenities.

2) Self-contained flat test

A part of a building meets the self-contained flat test if it consists of a self-contained flat and points 2,3 and 4 of the standard test above also apply.

3) Converted building test

A building or part of the building meets the converted building test if
- it is a converted building (or part of a building),
- it contains one or more units of living accommodation that do not consist of a self-contained flat or flats (whether or not it also contains any such flat or flats);
- a. It is occupied by two or more households, b. it is occupied by those people as their sole or main residence, and c. their occupation of the living accommodation is the only use of that accommodation.
- Rent must be paid in respect of at least one of those persons in occupation of the living accommodation
Definitions:

These are the definitions from the 2004 Housing Act:

“basic amenities” means
- A toilet
- Personal washing facilities, or
- Cooking facilities
“self-contained flat” means a separate set of premises, which forms part of a building, of which at least part lies above or below some other part of the building. It must contain all 3 basic amenities and those amenities must be for the exclusive use of its occupants.

“household” is defined in S258 of the Housing Act 2004.

A household must consist of all members of the same family. This includes:
- couples (married, civil partners or living together as if they were a married couple or civil partners), or
- people who are relatives to each other, or to one of the members of a couple.
- Relative means parent, grandparent, child, grandchild, brother, sister, uncle, aunt, nephew niece or cousin. A stepchild of a person must be considered as the child of that person.
S257 HMO – means a building or part of a building which,
- has been converted into self-contained flats and
- the conversion works did not comply with the appropriate building standards (appropriate building standards are defined in S257 (3) of the Housing Act 2004 here (https://www.legislation.gov.uk/ukpga/2004/34/section/257)), and
- still does not comply with them and
- less than two thirds of the flats are owner-occupied.
Please Note:
- S257 HMOs may be licenced by the Local Authority. This does not mean that the block should be aggregated.
- An individual flat in a S257 HMO, may be an HMO in its own right, under S254 of the Housing Act 2004. So where the persons occupying it are at least two separate households, sharing one or more basic amenities, as their only or main residence, that flat should be treated as single dwelling and have one band.
Licensing
- Statutory Licensing – HMOs which meet a certain set of criteria as set out in housing legislation, must have a licence from the Local Authority. This is known as mandatory licensing. The accommodation covered by the licence will be a single HMO.
- Additional licensing – Local Authorities have the option to implement local licensing schemes for properties that do not meet the criteria for statutory licensing. These schemes may only apply to certain areas and are time-limited. They are usually used because the Local Authority has identified an issue associated with those HMOs they wish to address.
- S257 HMOs – these may be licensed by the Local Authority. S257 HMOs are specifically excluded from the regulations, so even if a S257 HMO has a licence, it must not be aggregated.
Please be aware that the “HMO” is not the same as the “building”, and this is reflected in the definition in the Housing Act (see here) (https://www.legislation.gov.uk/ukpga/2004/34/section/254). So part-only of a building may be an HMO. A building may include more than one HMO.

Student Accommodation

The majority of student accommodation is included in the 2023 regulations. Student accommodation will meet the definition of an HMO where it is occupied by persons “as the person’s residence for the purpose of undertaking a full-time course of further or higher education” and will be considered as their only or main residence. S 259 “HMOs: persons treated as occupying premises as only or main residence” sets out where people should be treated as occupying in this way, even if they have a residence elsewhere. Students are included under S259 (2)(a).

Where the accommodation is for persons undertaking a course that is not full-time, or is not deemed to be further or higher education, then the property will not meet the definition of an HMO.

Student accommodation which is operated and controlled by a specified Education Establishment (as identified in Housing Regulations) will not be subject to statutory licensing. Private providers will be subject to statutory licensing if the accommodation meets the relevant criteria.

Effective Date

The effective date for aggregating to a single band will be 1 December 2023, or the date that the HMO came into existence, whichever is the later.

Examples

Example 1

A guest house which has been converted into a 14 bed HMO. All the rooms have en-suite facilities, there is a shared kitchen and two shared living/dining rooms.

There is one HMO in the property and the property should be aggregated into a single band.

Example 2

A large two-storey Victorian house, which has been extended and adapted over many years. There are 8 letting rooms, and shared bathrooms and kitchens on the ground and first floors. It is possible to identify two self-contained units.

There is one HMO at the property – all the tenants have access to all the shared bathrooms and kitchens. The Local Authority has issued a single HMO licence. The regulations require that the property be treated as a single dwelling and so the property should be aggregated into a single band.

Example 3

A large two-storey Victorian house, which has been extended and adapted over many years. There are 8 letting rooms,
- 4 rooms, a bathroom and kitchen on the ground floor
- 4 rooms, a bathroom and a kitchen on the first floor.
There are separate accesses to each floor and the tenants only have access to their room and the shared facilities on their floor.

The property consists of two HMOs, both of which meet the self-contained flat test. Neither of the flats are large enough to be required to be statutorily licensed (as at 1 December 2023). As there are two HMOs, each HMO should be aggregated into a single band. This means that there will be two bands at this property.

If there was one HMO at the property, like example 2, then it would require to be statutorily licensed.

Example 4

A two-storey detached 1930’s pub has been extended and converted to provide HMO accommodation. The building has been separated down the middle. There are two separate accesses, on either side of the building. This has in effect created a pair of semi-detached properties.

The left side of the building has 11 ensuite rooms and shared kitchens on the ground and first floor – two self-contained units can be identified in this part. The right side has 8 ensuite letting rooms and a shared kitchen on the ground floor. Tenants only have access to the basic facilities in their side of the building, but the outside garden and car parking is shared. The Local Authority has issued two HMO licences.

There are two HMOs so each HMO should have a single band.

Example 5

A large, detached mansion, which had been used as a nursing home has been converted into an HMO. There are 35 bedrooms, 25 of which are ensuite. There are 3 shared bathrooms and 7 kitchens in the property. It is possible to identify 7 self-contained units.

All the residents have access to the shared bathrooms and the shared kitchens. The Local Authority has issued one HMO licence for the property. As the property is a single HMO, it should be aggregated into a single band.

Example 6

A former shop and living accommodation has been converted to provide 6 letting rooms. All the rooms are ensuite and there is a shared kitchen/living room.

There is one HMO at the property and the property should have a single band.

Example 7

A four-story terraced house has been converted into a basement flat and individual ensuite rooms, sharing two kitchens on the upper floors.

The basement flat is entirely separate to the HMO and should remain as an assessment in its own right. The upper floors consist of a single HMO and should have a single band.

Example 8

A 1950’s five-storey office block in a town centre has been converted into 20 self-contained flats in 1995. It was a poor quality conversion and did not meet the building standards of the time. The necessary remedial works have not been carried out. All of the flats are occupied by short-term tenants. The Local Authority has issued a licence on the block, as the block meets the definition of an HMO under S257 of the 2004 Housing Act.

The property is an HMO under S257 of the Housing Act 2004. This type of HMO is specifically excluded from the regulation change. The assessments must not be aggregated.

Example 9

A large detached Victorian house has been converted into 6 self-contained studio and one-bedroom flats. The property did not meet the building standards at the time the house was converted. All the flats were sold on long leases, so no additional works have been carried out. Since June 2021, 3 of the flats have been occupied by tenants on Assured Shorthold Tenancies (AST). There is no HMO licence. The freeholder has requested that the property is aggregated as an HMO.

The property meets the definition of a S257 HMO only. S257 HMOs are excluded from the regulations change, so the property must not be aggregated.

Example 10

‘Student Accommodation Limited’ has a purpose-built block of 325 rooms in 60 cluster-flats. All the students are studying full time at A City University. All the flats have a large shared kitchen/ living room and they have between 2 and 14 ensuite bedrooms in each cluster flat. There are communal facilities for the whole block – a gym, a study room, cycle sheds and a launderette.

Each cluster flat will meet the definition of a self-contained flat in the Housing Act 2004 and will be an HMO. Each cluster flat should be aggregated into a single band. This block will have 60 bands on it.

Example 11

‘Student Accommodation Limited’ have another block in the same town, for full time students at A City University. This time, the block has 55 rooms in 40 flats. 25 are self-contained studio flats. The other 15 are 2-bedroom flats that share a bathroom and kitchen.

The self-contained studio flats are not part of an HMO and should each continue to have a separate band. The 2-bedroom flats are self-contained flats within the meaning of the Housing Act 2004 and will be HMOs and should be aggregated. The block will have 40 bands on it.

Practice note 7: application of Council Tax to caravan pitches and moorings

1. Introduction

1.1 This Practice Note explains the law and the circumstances which will require:

(a) The pitch for a caravan or the mooring for a boat to be banded for Council Tax purposes; and

(b) The value of the caravan or boat itself to be reflected in the Council Tax band.

1.2 Appendix 3 and 4 contains a number of examples which are referred to in the text. 1.3 A caravan is defined in section 66(7) LGFA 1988 by reference to Part 1 of the Caravan Sites and Control of Development Act 1960. This definition is attached at Appendix 2 of this Practice Note. There is no definition of “boat” for the purposes of this legislation.

2. The Definition of dwelling

2.1 In order to be subject to Council Tax, property must conform with the statutory definition of a dwelling contained in Section 3 of the Local Government Finance Act 1992 (LGFA 1992).

2.2 A dwelling is defined in Section 3(2) as:-

Any property which - (a) By virtue of the definition of hereditament in section 115(1) of the General Rate Act 1967, would have been a hereditament for the purposes of that Act if that Act remained in force; and (b) is not for the time being shown or required to be shown in a local or central non-domestic rating list in force at that time; and (c) is not for the time being exempt from local non-domestic rating for the purposes of Part III of the LGFA 1988.

2.3 This means that, in order to be treated as a dwelling and assigned a Council Tax band, a pitch or mooring must: • be a hereditament, and • be domestic property

2.4 Domestic property that is part of a composite hereditament will also be subject to Council Tax (Section 3(3) LGFA 1992).

3. What is domestic property?

3.1 Domestic property is defined in Section 66 LGFA 1988.

3.2 The Rating (Caravan and Boats) Act 1996 amends Section 66(3) & (4) with effect from 1 April 1990 so as to clarify when a caravan pitch or a boat mooring comprises domestic property. A copy of the relevant sections of the Act is attached to this Practice Note as Appendix 1.

Broadly, a caravan pitch or boat mooring is domestic property when either:
- is occupied by a caravan or boat that is a sole or main residence of an individual, and therefore treated as a dwelling; or
- is an appurtenance enjoyed with other living accommodation (which is itself a dwelling) and is not a separate hereditament.
- a constructed or established pitch or mooring becomes occupied by a boat or caravan used as a sole or main residence, then the pitch or mooring will constitute domestic property ie a dwelling from that date.
3.3 Caravan pitches and boat moorings which when next in use will be domestic property

S.66(5) of the LGFA 1988 provides that, “Property not in use is domestic if it appears that when next in use it will be domestic” Therefore a pitch or mooring which has no caravan or boat situated on it will not constitute domestic property, unless:

it forms part of a larger hereditament which itself is domestic property i.e. house and grounds

it is clear that when next in use this will be as the pitch for a caravan, or mooring for a boat, which is a sole or main residence.

The most obvious instances when this is likely to occur are in the cases of marina and canal bank moorings occupied by mobile residential boats, a showman’s winter quarters or a gypsy caravan site.

If a caravan and pitch which has been occupied as a sole or main residence becomes unoccupied it will nevertheless continue to be classed as domestic property (and therefore a dwelling) if, when next in use, it will form the sole or main residence of an individual. Accordingly, where a caravan sited on a residential caravan park is vacated and placed on the market for sale the entry should usually remain shown in the Council Tax Valuation List. The same will apply to mobile residential boats sold on their moorings when the status of domestic/non domestic property may need to be re-examined.

It is not considered that a caravan brought to a pitch or a boat to a mooring should be regarded as a dwelling unless it is clear that its use will be as a sole or main residence. If not a sole or main residence, the property should be regarded as non-domestic and liable to be included as a separate hereditament in the rating list or as part of a larger hereditament.

4. What constitutes a hereditament?

4.1 A hereditament is defined in Section 115(1) GRA 1967 as:-

“property which is or may become liable to a rate being a unit of such property which is or would fall to be shown as a separate item in the valuation list.”

4.2 Therefore the question to be considered is:

“would a pitch for a caravan or mooring for a boat fall to be shown as a separate item under the old rating law ?”

A formal pitch or formal mooring, constructed or laid out, perhaps with the provision for services, will constitute a hereditament. This should be distinguished from a temporary wayfarer’s pitch eg roadside or a mooring on a mudflat or natural river bank which would have to be occupied for a sufficient length of time for it to constitute a hereditament. (see para 5 below)

4.3 The identification and definition of a hereditament has been considered by the Courts on a number of occasions (see Rating Case Index Part A Section 2) and reference can usefully be made to Field Place Caravan Park Ltd and Others v Harding (VO) 1966 CA RA 293 and Gilbert (VO) v S Hickinbottom & Sons Ltd 1956 CA 49 RIT 231 in particular.

Although a mooring or caravan pitch may not be self contained because of shared services or facilities, it may still comprise a hereditament which would have been rateable under the General Act 1967. The issue of ‘self-contained’ arises from the disagreggation/aggregation provisions of the Council Tax (Chargeable Dwellings) Order 1992 (see below).

4.4 Land, which comprises either the pitch of a caravan or the mooring for a boat, may constitute a separate hereditament in its own right, with or without the caravan or boat. If the caravan or boat is not treated as part of the hereditament then the pitch or mooring alone is the “dwelling” and is banded accordingly. If the caravan or boat is included because it is regarded as sufficiently permanent, then both the pitch and caravan or the mooring and boat are included in the valuation for banding. (See para 5 below).

4.5 In the case of a mooring the hereditament will comprise the precise area of land (whether covered with water or not) occupied by the boat and to which the root of the mooring is actually attached together with the “mooring gear” itself (ie piles, weights, chains, pontoons etc) if this fulfils the requirements of rateability. (See Rating Manual 5:670:4). The pitch or mooring will include any garage yard, outhouse or other appurtenance belonging to or enjoyed with them as domestic property.

4.6 There must be actual beneficial exclusive and non-transitory occupation of the caravan pitch or mooring but in some cases where there is prima facie evidence of rateable occupation it may not be easy to discern who is the occupier for council tax purposes, and accordingly what the correct unit(s) of assessment should be. Investigation will be necessary to determine whose occupation is paramount.

4.7 Paramount occupation is a question of fact in terms of the nature of the occupation and it is important that as much information as possible is obtained. Guidance as to the general principles to be observed is to be found in the House of Lords decision in Westminster City Council v Southern Railway Co (1936) (dealt with in Ryde on Rating and the Council Tax B (113) et seq).

In Lord Russell’s words in that case “The effect of the alleged control upon the question of rateable occupation must depend upon the facts in every case; and in my opinion in each case the degree of control must be examined, and the examination must be directed to the extent to which its exercise would interfere with the enjoyment by the occupant of the premises in his possession for the purposes for which he occupies them, or would be inconsistent with his enjoyment of them to the substantial exclusion of all other persons.”

This was approved in the Field Place Caravan Park case.

4.8 In certain cases arguments have been put that occupation is not exclusive because licences are not stated to be exclusive and/or contain clauses requiring moorings to be vacated upon the occurrence of certain events. What is important, however, is what happens in practice. Occupation will be exclusive if the character of the occupation is such that it does in fact exclude others from using the land in the same way (and it doesn’t matter that in some remote circumstances another person might also use the land). Unless there is substantial interference with the enjoyment of the land by the occupier for his or her own particular purposes that occupation will be sufficiently exclusive. In a small minority of cases the degree of control exercised by the owner (eg the actual frequent moving of moorings in a marina) is such that the owner will be in paramount occupation. Mere statement of a right in a licence will be insufficient unless that right is exercised. In such a case a composite will exist, where the hereditament comprises domestic and non-domestic elements.

It should not be accepted that after a boat has left the mooring legal possession of that mooring (invariably) rests with the owner of the mooring. This will depend on the terms of the licence and the circumstances in each case.

4.9 From a practical point of view it will often be the presence of a caravan or boat on a sufficiently permanent basis which will enable the pitch or mooring to be identified as a separate hereditament. If that hereditament is occupied as a sole residence, then it will constitute a dwelling.

See Appendix 4 for examples.

4.10 If the caravan or boat does move away from time to time but the pitch or mooring is reserved for its return this could constitute a seasonal occupation as in Gage v Wren (1903 67 JP 32) and Southend on Sea v White (1900 65 JP 7) and provided the other tests of rateability are fulfilled then the pitch or mooring may still constitute a separate hereditament. See Appendix 3 example 2.

5. Wayfaring sites - establishing a hereditament

In the case of a piece of undeveloped natural riverbank or un-established pitch, that a boat or caravan may use, the question of establishing a hereditament may be relevant. The examples of case law below concerning transience may be relevant precedents to follow in such cases, to determine whether the occupation of the land is merely temporary or transient. A gypsy caravan on a byway or roadside verge may well have to be in place for say 12 months to establish the pitch. Similarly, a houseboat anchored to a riverbank or resting on a mud flat. These situations should not be confused with recognised pitches or moorings, which are already hereditaments.

In the High Court on the facts of the case in Reeves LO v Northrop 2012 the Judge confirmed that a boat which had been moored on a mud mooring for 2 years with no services had established itself as a dwelling, and the VTE had been incorrect in not giving sufficient weight to the duration of the occupation, though other factors were relevant considerations. A relevant extract of the decision dealing with transience appears in paras 30 &31 “the Appellant and Respondent accepted that three of the four conditions for rateability were established. That means that it was common ground before the Tribunal that the Respondent had been in actual occupation of The Cannis and that The Cannis had occupied an area of the riverbed; that the Respondent’s occupation of the boat was exclusively for his purposes and that the occupation had been of value and/or benefit to the Respondent. It was also common ground that for practical purposes The Cannis had remained in essentially the same position since 11 December 2008 except in the circumstances described at paragraph 29 above. That meant that it had been in its position on the river for more than a year by the time that it was first entered in the Council Tax Valuation List and it had been in the same position for approximately 2 years by the time of the hearing before the Tribunal. It seems to me to be clear in the light of the authorities that such a period of occupation was, at the very least, a very significant factor militating in favour of a finding that the occupation “had not been too transient” or was “sufficiently permanent”.

6. Whether the value of the caravan or boat is to be included with the mooring in the Council Tax Valuation for Banding Purposes

6.1 Technically the boat or caravan is a chattel which will only become part of the hereditament if its presence has a sufficient degree of permanence to the land.

6.2 In London County Council v Wilkins (VO) 1954 (HL) the question of whether a chattel was rateable was considered. Lord Kilmur said that the test of rateability was whether there is evidence that the structures were enjoyed with the land and enhanced its value. He concluded that, “A chattel to be rateable must be rateable with the land on which it rests”.

6.3 The rateability of a caravan was specifically considered in Field Place Caravan Park Ltd v Harding (VO) 1966 (CA) when Lord Denning said,

“Although a chattel is not a rateable hereditament by itself, nevertheless it may become rateable together with land, if it is placed on a piece of land and enjoyed with it in such circumstances and with such a degree of permanence that the chattel with the land can together be regarded as one unit of occupation.”

The Court of Appeal held that the caravan and its pitch were rateable as a separate hereditament notwithstanding the fact that the caravan was a chattel on wheels (and could be moved within half an hour) because it was placed on and enjoyed with land and with such a degree of permanence that the two could together be regarded as one unit of occupation.

6.4 The boat or caravan does not have to be annexed to the land, it is sufficient for either to rest on the land or water by its own weight (see Ryan Industrial Fuels Ltd v Morgan (VO) 1965 RA 327). Nor is it essential for a boat to be attached vertically to the land under the water on which it rests.

6.5 There have been a number of cases in recent years which have considered whether floating hereditaments used for commercial purposes should be assessed (notably Woodbury (VO) v The Yard Arm Club Ltd LT 1989 RA 381 and Westminster City Council v Woodbury (VO) and The Yard Arm Club Ltd CA 1992 RA 1), but the main issues in these cases have focused on the adequacy of the description/exemption rather than rateability of the vessel.

6.6 For a chattel to be part of the hereditament it must be enjoyed together with the land. Land can include water eg above a river bed, canal or dock basin or a lake as in Thomas (VO) v Witney Aquatic Co Ltd 1972 RA 493.

6.7 Whether a boat has its own means of propulsion or has to be towed into position does not affect whether it forms part of the hereditament and is to be included in the Council Tax valuation banding.

6.8 Accordingly where a caravan or boat is enjoyed with the land, and this enjoyment is of a non-transitory nature, the two together form a single hereditament (as defined in Section 115 of the General Rate Act 1967).

6.9 Other Case law on transience

LCC v Wilkins [1957] AC 362 [1956] IRRC 88

Four builders huts, three in position for 18 months and the fourth for 20 months were rateable.

Bradshaw v Davey [1952] 1 All ER 350. Mooring for a yacht put down in summer and taken up in winter was not rateable.

Tavell and Sons v Buckingham (V)) (1963) 10 RRC 123 LT. 1 year was sufficiently permanent for the rating of a caravan site.

Moore v Williamson (VO) [1973] RA 172 LT. 4/5 months too transient for the occupier of the caravan to be rated in respect of his occupation - owner in paramount and permanent occupation.

Summary of Policy

The policy that the legislation is intended to achieve can be summarised as follows. Although this specifically refers to boats and moorings the same principles apply to caravans and their pitches.

a) If a boat which is someone’s sole or main residence is moored “permanently” at a mooring, then the mooring is domestic property, and both the mooring and the boat are subject to Council Tax.

b) If a boat which is someone’s sole or main residence stops at a mooring and moves away for a sufficiently long period (see 6.2), and it seems that when next in use that mooring will be used by that same boat or another boat which is someone’s sole or main residence, then the mooring is domestic but the mooring only is subject to Council Tax.

c) If a boat which is someone’s sole or main residence is moored at a mooring and moves away, and it seems that when next in use the mooring will be used by a non-sole or main residence boat, then the mooring is non-domestic and subject to non-domestic rates.

d) If there is a mooring with no way of telling what sort of craft will be moored at it, then it is non-domestic and subject to non-domestic rates.

Whether the value of the boat or caravan can be included with the pitch is a matter of fact and degree. As a general rule, where a dwelling boat or caravan occupies a mooring or pitch for a substantial period of time - such duration would usually be for 12 months or more - it should be included in the band value, even if it moves away for brief periods of say 2 to 4 weeks, provided it then returns to its original mooring or pitch. The question to be asked is whether the occupation can be characterised as that of a ‘settler’ or a ‘wayfarer’. If the latter, then only the mooring or pitch should be valued.

To be clear, this paragraph refers only to the treatment of the chattel value, not to establish whether a dwelling exists – that is the established mooring or pitch. A caravan does not have to be in place on a recognised pitch for 12 months to establish the pitch as a dwelling, nor does a boat have to be moored on a recognised mooring for 12 months to establish the mooring as a dwelling.

Even if the sole or main resident of a caravan or boat does not have exclusive rights to a particular pitch or mooring if, in practice, the caravan or boat occupies the land with sufficient permanence it will be included with the mooring as domestic property, and the value included in the Council Tax banding.

7. Disaggregation provisions

7.1 Usually whether a pitch or mooring constitutes a dwelling will depend upon it being a separate hereditament under the General Rate Act 1967 definition. Therefore, even if the value of the caravan or boat is not included, providing the pitch or mooring is occupied by a caravan or boat which is the sole or main residence of an individual it will fall to be separately banded and entered in the valuation list.

7.2 The Disaggregation provisions concerning the necessity to band self contained units within a hereditament do not apply to caravans and boats post 1st April 1997.

Article 2 of the Council Tax (Chargeable Dwellings) Order 1992 was changed to exclude reference to caravans and boats with effect from 1st April 1997, by the Council Tax (Chargeable Dwellings, Exempt Dwellings and Discount Disregards) Amendment Order 1997 SI 1997/656, so that “self contained unit” now means

“a building or part of a building which has been constructed or adapted for use as separate living accommodation”.

There is no mention of caravans or boats, which are not in any event buildings or part of buildings.

7.3 Where, therefore the pitch or mooring forms part of a larger hereditament, e.g. where a caravan is situated within the curtilage of a house and used for domestic storage or overspill accommodation for family and friends, the pitch will still be domestic property. This is because, whilst the caravan is not a sole or main residence of an individual, it is an appurtenance to other living accommodation. Thus boats and caravans in a curtilage of domestic property cannot be disaggregated and could only be banded if there was a separately identifiable hereditament i.e. there is a separate occupation.

7.4 If it is necessary to consider circumstances prior to 1 April 1997, eg when dealing with a proposal made before that date to aggregate or disaggregate, reference should be made to CTM:PN5.

8. Multiple moorings and composite Hereditaments

8.1 If there are a number of adjacent moorings, some of which are used by boats which are sole or main residences and some of which are used by pleasure boats, but no boat owners have exclusive possession of any particular mooring, this would indicate a composite hereditament occupied by the owner of the moorings.

In marinas the berth holder will not have exclusive possession and hence not have paramount control or rateable occupation, as a general rule. However in some instances exclusive possession sufficient to create separate rateable occupation ,may have been granted to individuals, (British Waterways grant on occasions such agreements). Where this occurs each berth will be a separate single hereditament within a marina.

This is the key principle in determining whether a composite hereditament , or separate hereditaments are present. The determination of this is a practical question of evidence. In instances where the berth holder takes the boat out for limited periods and until the boat returns, the marina operator uses the berth to moor other boats, this intervening use can on the facts be considered de minimus and so exclusive possession and hence rateable occupation , if already in existence, will not be broken. The berth should be subject to separate assessment to CT,

Where the time period is more than de minimus, then this would break the single assessment. An absence of 6 months would indicate the cessation of domestic occupation. This is a matter of fact and degree. All cases must be considered on their factual merits.

9. Caravan in grounds of building project – temporary sole residences

9.1 Where a caravan is brought on site specifically to provide temporary accommodation as a residence whilst a new building project is in progress, the pitch should be entered as a new dwelling only if the existing building fails the hereditament test. In these circumstances the caravan will be the sole or main residence during the construction period, and therefore its pitch liable to banding as domestic property. The pitch (and caravan if sufficiently permanent) should be identified and valued. The address identification should include the words “Pitch for caravan at……”

9.2 The building project will not be considered part of the hereditament providing it is incapable of beneficial occupation and effectively ‘in builder’s hands’. The caravan pitch hereditament will exclude that part of the site sterilised by building activity.

9.3 On completion of the project, the new hereditament will be different, and the pitch should be taken out of the list because it has ceased to exist as a sole or main residence, and the newly completed dwelling banded.

9.4 Where the dwelling is a pitch for a caravan, the a new building being constructed to make a separate permanent dwelling will not fall into the definition of material increase as envisaged by the legislation. A ‘material increase’ necessitates ‘…a building engineering or other operation carried out in relation to the dwelling’ (LGFA S24(10). The works are not carried out in relation to the pitch for a caravan.

It should also be noted that the pitch will cease to be a separate chargeable dwelling immediately it ceases to be a sole residence, and should be deleted from the list.

9.5 Where a BA has granted a Class A exemption under the Exempt Dwellings Order 1992, difficulties may arise if the BA also asks for a caravan and pitch to be entered into the list, located within the curtilage of the dwelling.

The dwelling has been treated as an exempt dwelling for charging purposes, and any occupation on site is a matter for the BA to decide. The difficulty should be pointed out to the BA. It will not be appropriate to band the caravan and pitch separately unless the original property fails the hereditament test or the caravan has a defined curtilage of its own. This is because the dwelling still exists and is assumed to be in reasonable repair. A pitch occupied by the owners within the curtilage of a dwelling cannot be disaggregated because a caravan and pitch does not fit the definition of self contained unit in the Council Tax (Chargeable Dwellings) Order 1992.

Where the dwelling is judged to still exist, band reduction is precluded under regulation 3(3) of the appeals regulations . Any improvements should be treated as material increases, and await a relevant transaction before a band review is possible.

10. Basis of Valuation

10.1 The valuation of a pitch or mooring is to be made in accordance with regulation 6 (or 7 if composite) of The Council Tax (Situation and Valuation of Dwellings) Regulations 1992. The valuation will reflect the (deemed) freehold interest with vacant possession and will also include the capital value attributable to the caravan or houseboat if the two together would have formed a single hereditament for the purposes of s.115 of the General Rate Act 1967 (see 5 above).

Practice note 7: appendix 1 - Rating (caravans and boats) Act 1996

1.

(1) Section 66 of the Local Government Finance Act 1988 (definition of “domestic property” for the purpose of exclusion from local rating lists) is amended as follows

(2) For subsection (3) of that section (pitches for caravans) there is substituted -

“(3) Subsection (1) above does not apply in the case of a pitch occupied by a caravan, but if in such a case the caravan is the sole or main residence of an individual, the pitch and the caravan, together with any garden, yard, outhouse or other appurtenance belonging to or enjoyed with them, are domestic property”.

(3) For subsection (4) of that section (moorings) there is substituted -

(4) Subsection (1) above does not apply in the case of a mooring occupied by a boat, but if in such a case the boat is the sole or main residence of an individual, the mooring and the boat, together with any garden, yard, outhouse or other appurtenance belonging to or enjoyed with them, are domestic property”.

“(4A) Subsection (3) or (4) above does not have effect in the case of a pitch occupied by a caravan, or a mooring occupied by a boat, which is an appurtenance enjoyed with other property to which subsection (1)(a) above applies”.

Footnote:

1. The Act came into effect on 29 April 1996.

2. Section 1(6) provides rules for the effective date of alterations arising from the Act.

3. The Alteration of Lists Regulations will apply to deletions and insertions in consequence of this Act with the exception of the rare occasion of a restoration of a hereditament to a non-domestic list which was previously deleted as domestic under the former provision of Section 66(1)(a). In this case the effective date is limited to 29.4.96.

Practice note 7: appendix 2 - definition of caravan

A caravan is defined in section 66(7) of the LGFA 1988 by reference to Part I section 29(1) of the Caravan Sites and Control of Development Act 1960. That Act provides that:

“Caravan” means any structure designed or adapted for human habitation which is capable of being moved from one place to another (whether by being towed, or by being transported on a motor vehicle or trailer) and any motor vehicle so designed or adapted, but does not include:-

(1) any railway rolling stock which is for the time being on rails forming part of a railway system, or

(2) any tent,

Section 13(1) of the Caravan Sites Act 1968 Act further adds to the definition as “13 Twin-unit caravans (1) A structure designed or adapted for human habitation which—

(a) is composed of not more than two sections separately constructed and designed to be assembled on a site by means of bolts, clamps or other devices; and

(b) is, when assembled, physically capable of being moved by road from one place to another (whether by being towed, or by being transported on a motor vehicle or trailer),

shall not be treated as not being (or as not having been) a caravan within the meaning of Part I of the Caravan Sites and Control of Development Act 1960 by reason only that it cannot lawfully be so moved on a highway when assembled.

(2) For the purposes of Part I of the Caravan Sites and Control of Development Act 1960, the expression “caravan” shall not include a structure designed or adapted for human habitation which falls within paragraphs (a) and (b) of the foregoing subsection if its dimensions when assembled exceed any of the following limits, namely—

(a) length (exclusive of any drawbar): 65.616 feet (20 metres);

(b) width: 22.309 feet (6.8 metres);

(c) overall height of living accommodation (measured internally from the floor at the lowest level to the ceiling at the highest level): 10.006 feet (3.05 metres).”

Note that these dimensions were amended by SI 2006/2384 and that pre 01/10/ 2006 the prescribed limits were: length excluding drawbar 60 feet (18.288 metres), width 20 feet (6.096 metres), internal height 10 feet (3.048 metres)

Comment: The legislation must be read carefully as it is easy to misunderstand. In particular it must be noted that a structure defined under (13)(1)(a)&(b) is only excluded if it exceeds the size limits. Otherwise it will qualify as a caravan.

Further guidance and interpretation of the requirements of these statutory provisions can be obtained from reading the decision of the Lands Tribunal in Atkinson (VO) v Foster and Others 1996 RA 249

Practice note 7: appendix 3 - is a caravan part of the dwelling?

The following examples illustrate circumstances where caravans may or may not be regarded as rateable together with the pitch.

Example 1

A family live in a “residential” caravan (ie. one with small wheels which is transported by road on a low loader of a lorry rather than being towed) on a mobile homes park. The caravan has been in place for several years.

The pitch is occupied by the caravan and as it is the sole or main residence of the family the requirements of s.66(3) LGFA 1988 are satisfied and the pitch will be domestic property. The caravan can be regarded as enjoyed with the land in such circumstances and with such a degree of permanence that it can together with the land be regarded as one unit of occupation. The value of the caravan should therefore be included in the valuation.

Example 2

A showman owns a pitch which he uses as the winter quarters for the caravan he lives in. Half the year he tours the country towing the caravan behind his lorry. For the rest of the year the caravan is on the pitch.

During the winter months the pitch will constitute a dwelling because it satisfies the requirements of the General Rate Act 1967 to be a hereditament, and is “a pitch for a caravan” which is “occupied by a caravan which is the sole or main residence of an individual”. The caravan will not however satisfy the permanency test and therefore the pitch alone is valued to determine the appropriate band. On the facts it appears that when next in use the pitch will be used for siting a caravan which is a sole or main residence and therefore it will be domestic by virtue of s.66(5) LGFA 1988 for the whole year.

Example 3

A family own a touring caravan which they store in the drive way of their house when not taking it away for weekends and holidays.

The caravan will not satisfy the permanency test and its value should not be included when banding the house. The pitch, i.e. part of the drive, will be included in the banding of the house as will the rest of the drive and gardens because it is an appurtenance enjoyed with the living accommodation.

Example 4

A family own a residential caravan which at list compilation date* they had kept in the grounds of their house for several years. It is used as overspill accommodation for family and friends. The caravan has a kitchen, wash basin, shower and WC connected to mains drainage.

The pitch is occupied by a caravan and as the house and grounds are the sole or main residence of the family, the requirements of s.66(3) are satisfied and the pitch will be domestic. The caravan can be regarded as enjoyed with the land in such circumstances and with such a degree of permanence that it can together with land can be regarded as one unit of occupation and the value of the Caravan included in the banding of the main house and ground. Given the self containment of the caravan, disaggregation would have been appropriate under the (Chargeable Dwellings Order) 1992 but with effect from 1 April 1997 disaggregation is no longer possible by virtue of the Council Tax (Chargeable Dwellings, Exempt Dwellings and Discount Disregards) Amendment Order 1997.

*NB. The introduction of a residential caravan as additional accommodation occupied with an existing dwelling will be treated a material increase.

Practice note 7: appendix 4 - is a mooring or a boat and a mooring a dwelling?

The following circumstances help to identify the council tax implications for the boat and its mooring where a boat is the sole or main residence of an individual.

Example 1

Purpose built living accommodation based on a flat bottomed barge. The structure is moored to the bank by mooring lines and provided with affixed water, electricity and sewage connections. It may or may not have its own propulsion or engine.

At intervals commonly but not exclusively every 2 - 3 years the structure is moved away for condition surveys and general maintenance. The mooring is a separate hereditament because it is occupied exclusively by one boat for a period of more than 12 months. This provides rateable occupation. The mooring is also domestic property by virtue of s.66(4) because it is occupied by a boat which is someone’s sole or main residence.

The flat bottomed barge together with its living accommodation is a chattel. As the boat is permanently located on the mooring and only moves away every 2-3 years for maintenance, it can be considered to be enjoyed with the land. The value of the boat should therefore be included in the valuation for banding purposes.

Example 2

A family lives on a barge and pay rent to the riparian (‘of river bank’) owner for a mooring on the river bank. Water is supplied to the river bank. At times during the year, the barge goes cruising leaving the mooring vacant until its return. The mooring is a separate hereditament because it is used exclusively by one boat during the year. When the barge is present, the mooring is domestic property by virtue of s.66(4) because it is occupied by a boat which is someone’s sole or main residence. When the barge is absent, the mooring is domestic property by virtue of s.66(5) because it appears that when next in use the mooring will be domestic. However, the barge is insufficiently annexed to the land to be regarded as part of the hereditament, and the mooring only should be valued to determine the appropriate band

Example 3

Where a marina with berths contains both moored pleasure boats and boats whose occupants use them as sole or main residences the outcome may on the facts be either a composite hereditament, a combination of composite hereditament and separate domestic hereditaments or indeed separate domestic hereditaments leading to separate bands .

The presence of a composite hereditament may be indicated by identifying the following features;
- Where boats that are occupied as an individual’s sole or main residence do not have a permanent right to any specific mooring
- Evidence that boats which are an individual’s sole or main residence are actually physically moved on at least two occasions a year.
- The boat that is an individual’s sole or main residence must be moved to a different berth not merely out and shortly afterwards returning to the same berth.
The presence of separate domestic dwellings within the boundary of the marina but not included in the composite hereditament would be indicated by ;
- A boat that is the sole or main residence of an individual remaining on the same mooring for more than 12 months. If in that time it left for a few days , then it returned to the same mooring the few days away would be considered de minimus and by virtue of sec 66 (5) it would be domestic.
- If while the boat is away the marina operator temporarily puts another boat on the mooring; but the berth holder always returns to his original berth, this would indicate a separate hereditament by virtue of the boat owners ability to exclude others and hence rateable occupation.
- Where a marina operator reserves the right to move boats to different moorings but actually does not exercise the right.
It is possible on the facts to find both a composite hereditament and one or more separate domestic hereditaments in the same marina. The final decision to find a composite or not must rest with the specific facts of each case.

Example 4

A boat is beached on a high tide onto an estuary bank. The boat is the sole or main residence of an individual so satisfying the requirements of both a hereditament and domestic. The access to the boat is by way of a raised walkway on stilts which are driven into the mud. The walkway is physically fixed to the boat. To support the boat timber has been driven into the mud which forms a cradle which is attached to the boat and used to support the boat. The extent of attachment to the ground is such that the boat can be said to be enjoyed with the hereditament and forms part of it. For the valuation both the boat and the mooring are considered in the value.

Example 5 - Central List

In the case of waterways where Canal & River Trust are the occupier and a composite assessment is appropriate, the NDR entry will be made in the non-domestic rating list. Canal & River Trust are assessed in the Central NDR List. If the waterway is in their occupation, and thus included in the Central List, any composite assessment will form part of that entry.

In the case of waterways occupied by a different body, a composite assessment would need to be made as appropriate.

Practice note 8: Domestic / non-domestic borderline

1. Introduction

CTM PN 1 details which properties constitute dwellings. CTM PN 2 gives general advice on composite properties including the approach to valuation. This practice note deals with individual types of properties, which are on the borderline between domestic and non-domestic property.

Where necessary advice on the rating aspect of borderline questions can be found in the Rating Manual. In particular:

RM Section 2, Part 2 (https://www.gov.uk/guidance/rating-manual-section-2-maintaining-the-rating-list)

2. Meaning of Dwelling

Any property which meets the definition of dwelling contained in the LGFA 1992 or is a dwelling under The Council Tax (Chargeable Dwellings) Order 1992 (SI No 549) (as amended) is to be given a band and shown in the Valuation List.

S.3(2) of the Act provides:

“(2) Subject to the following provisions of this Section, a dwelling is any property which -

(a) by virtue of the definition of hereditament in Section 115(1) of the General Rate Act 1967, would have been a hereditament for the purposes of that Act if that Act remained in force; and

(b) is not for the time being shown or required to be shown in a local or a central non-domestic Rating List in force at that time; and

(c) is not for the time being exempt from local non-domestic rating for the purposes of Part III of the Local Government Finance Act 1988 (“the 1988 Act”);

and in applying paragraphs (b) and (c) above no account shall be taken of any rules as to Crown exemption.”

So, unless a hereditament is non-domestic and is shown or required to be shown in the local non domestic or central rating list or is exempt under Schedule 5 of the 1988 Act, it will, subject to the other provisions of Section 3, be a dwelling, which is to be banded.

The “other” provisions of Section 3 are:

S.3(3) - which sets out that most composite hereditaments, whilst shown in the non-domestic Rating (http://voaintranet.voa.gpn.gov.uk/manuals-and-guides/council-tax-manual-and-practice-note/ct-manual-_-practice-notes/ct_man_pn8) List, are also dwellings (see CTM:PN 2).

S.3(4) - which sets out that certain appurtenances such as garages, whilst defined in S.66 of the 1988 Act as domestic property, are not to be treated as dwellings where they are on their own (see CTM:PN 1).

and S.3(5) - which allows the Secretary of State to make an Order that properties which would otherwise be treated as single dwellings are to be treated as more than one, and properties that would otherwise be multiple dwellings can, at the Listing Officer’s discretion, be treated as one dwelling (see CTM:PN 5 and CTM:PN 6).

Where a single composite hereditament is treated as more than one dwelling (i.e. disaggregation occurs) each entry in the Valuation List should have the letter ‘C’ next to it, to show that it is part of a composite hereditament.

3. “Exempt Dwellings” and Dwellings in the Ownership of the Crown

The Council Tax (Exempt Dwellings) Order 1992 (SI No 558) as amended by the Council Tax (Exempt Dwellings) (Amendment) Order 1993 SI 150 and the Council Tax (Exempt Dwellings) (Amendment) (England) Order 2000 SI 424 defines those dwellings which are exempt from liability to Council Tax. This does not stop them from being dwellings and they must be banded and shown in the Valuation List in the same way as non-exempt dwellings.

Dwellings owned by the Crown are also to be banded and shown in the List. Where a Crown dwelling is unoccupied, occupied by HM The King or HRH The Prince of Wales, or is owned by the Secretary of State for Defence for the purposes of armed forces accommodation, a contribution will be made in lieu of Council Tax, based upon the band which is shown in the Valuation List (http://voaintranet.voa.gpn.gov.uk/manuals-and-guides/council-tax-manual-and-practice-note/ct-manual-_-practice-notes/ct_man_pn8).

Most dwellings owned by the Crown will be banded by local offices. Where inspections are needed, these will be undertaken by property inspectors who have security clearance to undertake inspection of sensitive properties.

The Industrial & Crown Valuation Team which is located within the National Valuation Unit, can be contacted, where absolutely necessary, if a local office doesn’t have sufficient details to accurately band any Crown dwelling, and doesn’t have sufficient security clearance to make an inspection.

The Crown Valuation Team is responsible for dealing with most properties occupied by the Ministry of Defence, and all properties occupied by HM Prison Service, Royal Palaces occupied by Members of the Royal Family and other security sensitive Crown occupations.

4. Properties on the Domestic/Non-Domestic Borderline

For those properties on the domestic/non-domestic borderline, colleagues need to identify the extent of the domestic part and reflect this in the valuation banding for Council Tax. When doing this, colleagues need to consider the definition of a dwelling as outlined in 2 above and the definition of domestic in s66 of the LGFA 1988.

When considering the non-domestic borderline, colleagues should consider whether the provisions of Section 66 the LGFA 1988 are met.

Domestic property is defined as ‘..used wholly for the purposes of living accommodation..’ in section 66(1) of the Local Government Finance Act 1988.

However, section 66 of the Local Government Finance Act 1988 does provide some exceptions to a property being classed as domestic.

Section 66 (2) Property is not domestic property if it is wholly or mainly used in the course of a business for the provision of short-stay accommodation, that is to say accommodation—

(a) which is provided for short periods to individuals whose sole or main residence is elsewhere, and

(b) which is not self-contained self-catering accommodation provided commercially.

[See 4.13 below]

Section 66 (2B [England]) and (2BB [Wales]) set out the requirements for self-contained property.

[See 4.14 below]

Section 66 2(E) sets out the provisions for timeshares.

4.1 Homeworking

Where a building within the curtilage of a dwelling, or a room(s) within a dwelling, is used exclusively for working at or from home, such accommodation may be treated as non-domestic for rating purposes. If a room is not just used for work purposes, there are no physical changes to the property to make it suitable for work purposes, and where a person working at home uses furniture and equipment of the type that are often found in domestic property, the use will normally be considered living accommodation under section 66(1)(a) of the LGFA 1988. If the accommodation is constructed or adapted so that it no longer appears domestic or where equipment of a non-domestic sort is used to a great extent, the accommodation may be rateable. If employees or clients come to the premises, this is not a domestic use. The question will always be one of fact and degree in each case and all the facts need to be considered to decide whether the use is still for the purposes of living accommodation. Guidance on the meaning of “living accommodation” was given by the President of the Lands Tribunal in Tully v Jorgensen ( VO ) 2003 RA 233 . In this case the taxpayer used a former bedroom for the purpose of her full-time employment.

That part of the property which continues to be used wholly as living accommodation will remain as domestic property, and the hereditament will be treated as a composite within section 64(9) of the LGFA 1988.

The attached appendices (PN8 : Appendix 1 and Appendix 2) give guidance on how to deal with home working for Council Tax and rating purposes. Colleagues should also refer to RM Section 2, Part 5 (https://www.gov.uk/guidance/rating-manual-section-2-maintaining-the-rating-list) of the Rating Manual.

4.2. Live/Work units

There is a distinctive class of property that is purpose designed and built for live/work units. These dwellings will normally have specific purpose finished areas designed for workspace, often in the form of an office/studio. Where these purpose designed areas are occupied as workspace, the dwelling will be a composite and a rateable value given to the non-domestic space. The domestic use will be given a banding based on an apportionment of the whole property’s value.

It may be difficult to decide where the division is between domestic and non-domestic, e.g. in an open plan layout. Each situation must be judged on its own merits and advice sought from the Technical Adviser if needed.

Where the amount of non-domestic use is different for identical units, then the RVs should be set according to ‘notionality’ as explained in the Rating Manual Section 2, Part 5 (https://www.gov.uk/guidance/rating-manual-section-2-maintaining-the-rating-list) paragraphs 6.2 and 6.3. This requires that the property should be valued “vacant and to let” reflecting its present physical state, but ignoring any distribution of domestic and non-domestic uses which are clearly out of line with the normal pattern for accommodation in that locality. Where identical or similar units in the area show a pattern of occupation, or expected occupation, then this should be followed to give consistency, and the RV and the band will match the typical occupation balance to be expected. Where there is no obvious pattern, VOs are likely to follow actual patterns of occupation to a greater extent. The notional approach to the valuation of composite property, which follows the usual “vacant and to let” rule, will mean disputes at the margins can be settled, e.g. where a taxpayer argues an unreasonable occupation for domestic purposes just to minimise the non-domestic element. Where there is no non-domestic use at all, and all the space is being used as living accommodation, (and not simply vacant) the property will not be composite, and the whole will be banded for council tax. If the wholly domestic occupation of a live/work unit is in breach of planning permission, and the planners have an active enforcement policy, then that factor may need to be reflected in a banding.

4.3 Halls of residence

A hall of residence is defined as an exempt dwelling in Class M of The Council Tax (Exempt Dwellings) Order 1992 (SI No 558). As detailed in para 3.1 above this does not affect the requirement to band and include these properties in the Valuation List.

Halls of residence will often form part of a larger composite hereditament (dwelling) e.g. a university or college. In the majority of instances each physically separate building or block will contain sufficient cooking and washing facilities to form a self-contained unit which should be disaggregated from the larger composite hereditament.

Each case is to be treated on its own merits following CTM:PN 5. Where the LO decides a building or block is self-contained it is to be given a single band, unless individual units of occupation within it are self-contained, in which case each self-contained part should be given a band. This might occur where there are separate flats for the warden and/or other members of staff. It is likely to be rare where individual rooms are separately banded and CTM:PN 6 should be followed when deciding whether to exercise discretion to have one banding on what is several hereditaments and would normally be separate dwellings. For England only, parliament legislated to change the way HMOs are assessed for Council Tax. These changes are effective from 1 December 2023 and are not retrospective. For full details please see PN6A: Houses in Multiple Occupation (HMO) - England Only.

To be self-contained a building or part of a building has to be “constructed or adapted” for use as separate living accommodation. The test is not whether exceptionally it could be used as separate living accommodation but whether it was “constructed or adapted” for that use. A stair (“stair”, or “staircase” is a term often used for a unit of accommodation within colleges and universities) or part of a hall might consist of the usual common room, study bedrooms, bathrooms, together with a kitchen but in practice, as intended in the designing of the hall, the kitchen may only be used for preparing coffee and snacks with the students generally dining together in the hall’s refectory. In this circumstance the accommodation would not have been ‘constructed or adopted for use as separate living accommodation’ and should not be separately banded. A stair or part of a hall intended to be self-catering which has the necessary facilities and layout to be self-contained would be disaggregated and banded separately.

Where a hall of residence is a hereditament in its own right (e.g. where separated from the main campus) but is not self-contained accommodation, e.g. because it does not have its own cooking and dining facilities, it will be given a single band.

Halls of residence are often also used for holidays and conferences, mainly during vacations. Where halls are used in this way, and remain composite throughout the year, colleagues will have to decide the extent of the non-domestic use of each hall during any typical year for non-domestic purposes. No alteration is made to the Rating List just because of a change of use occurring within any hall. In these cases, the band given to any hall of residence must reflect the view which has been taken for NDR purposes, i.e. the band should be derived from the following basis:

[Tot. beds x (365 minus No. of Non-Domestic Bed nights) ÷ Total beds x 365] x Capital Value of hall (as part of composite)

There will be some halls which are non-domestic or composite hereditaments for part of the year only, e.g. halls situated away from the main campus which are used wholly by students as living accommodation during term time, but which are wholly or partly used for holiday or conference purposes during vacations.

When the use of such halls changes it will be necessary to review the band ascribed to reflect this change. Where a hall which is wholly domestic property during term time becomes wholly non-domestic during a vacation it needs to be removed from the Valuation List, and reinstated it when domestic use resumes.

Where a hall becomes a composite hereditament during vacations its band should be reviewed as set out in para 4.8 and altered for as long as the holiday/conference use lasts before being restored to its original level when its use becomes fully domestic again.

4.4 Boarding houses in schools

Most school boarding houses will be part of a larger hereditament (the school) which remains a composite hereditament throughout the year. Boarding houses which would have formed a hereditament in their own right for the purposes of the General Rate Act 1967 are expected to be relatively rare.

As in the case of halls of residence there will be cases where each separate boarding house will contain sufficient cooking and washing facilities to form a self-contained unit which should be disaggregated. However, it is anticipated that in most cases dining arrangements will be such that several blocks will be banded together.

When banding any boarding house(s) which is not self-contained, any other property used by the boarders which constitutes domestic property and is also not self-contained, is to be included in the banding. For example if a school which takes only full time boarders has two boarding houses (one of which is self-contained), two common rooms, a dining room and a sports hall, it is likely that two bands would be given:- one to the self-contained unit and one to the non-self-contained unit, the two common rooms and the dining room. The sports hall would not be reflected in any band as, whilst it might be used for recreational purposes, its main use would be one of sport and training, which is a non-domestic use. If the common rooms and dining room were used by both boarders and day pupils, and the use by day pupils was anything other than de minimis, they would not constitute domestic property.

4.5 Property situated within the hereditament which is shared with non-residents

In many larger composite hereditaments, there will be property which is used both by people residing within the hereditament (often as part of their living accommodation) and by people who live elsewhere. For example, common rooms and dining halls will invariably be used by students living on campus and by those living elsewhere.

Where the use of any property is shared and the use by people living elsewhere is more than de minimis, the property will not be domestic property as defined by S.66 of the 1988 Act. Under S.24(10) of the LGFA 1992 such a use will not be a domestic use and will not be banded. However, when banding any domestic use which is to be valued, the valuation should reflect the existence or availability of the shared facilities (see CTM:PN 2).

4.6 Barracks

Barracks owned by the Secretary of State for Defence for armed forces accommodation are exempt under Class O of The Council Tax (Exempt Dwellings) Order 1992 (SI No 558). As with other exempt dwellings, they must still be banded and shown in the Valuation List.

Barrack blocks will generally remain wholly domestic property throughout the year and, as is the case with school boarding houses, it is expected that the dining arrangements will often result in several being banded together.

4.7 Long stay wards, convalescent homes

Property is domestic if it is used wholly for the purposes of living accommodation [LGFA 1988 s66 (1)(a)].

Following a review of the legal principles around what may be domestic property within a healthcare setting it is unlikely that ward accommodation within mainstream hospitals will qualify as domestic. This is because of active treatment being administered to patients within hospital wards which means that the accommodation is not used wholly for domestic purposes.

“Treatment” means treatment in its normal sense and includes, but is not limited to, any medical intervention, diagnostic care or observation undertaken by professional staff in hospitals designed to improve or modify patients’ physical and/or mental abilities and social functions. Professional staff will include doctors, nurses, midwives, therapists and psychologists. Treatment includes, but is not limited to, nursing, aiding convalescence, psychological interventions, physiotherapy and other sorts of therapy including habilitation and rehabilitation.

Accommodation where stays are 60 days or less are normally considered to be ‘short stay’ accommodation. Therefore, for hospital ward space to qualify as domestic property within s66 of the Local Government Finance Act 1988 it is necessary to establish that patient stays are greater than 60 days while not receiving “treatment” for that period. This is extremely unlikely.

There may be some exceptions within specialised institutions, such as psychiatric hospitals, where treatment is not administered in certain areas such as a patient bedroom. Where that patient’s stay is in excess of 60 days, then the bedroom area should be taken as domestic and the hereditament will be composite. The domestic use may be extended to kitchen, dining, or lounge areas provided that any non-domestic use of such areas is not more than de-minimis.

Mental health half-way houses are similar to convalescence homes, where patients have been discharged from a psychiatric hospital but are not yet ready to go home. Any services provided are more likely to be assisted living rather than treatment and so stays in excess of 60 days should be considered as domestic.

Mental health crisis houses are used to assist patients through a mental health crisis period and this normally involves some form of treatment and so both short-term and stays of more than 60 days will be non-domestic. However, colleagues have to consider the fact and degree of any treatment given and whether treatment is not given in certain areas, such as bedroom areas, which may result in a domestic use if a patient’s stay is over 60 days.

If, having regard to the above paragraphs, domestic accommodation within such a hereditament is identified colleagues need to consider disaggregation into separate dwellings. Each self-contained unit will form a separate dwelling. Where there is a central kitchen in the hospital any domestic accommodation within the wards is unlikely to be capable of disaggregation and will only require a single banding. Any permanent staff accommodation which meets the test of self-containment should be disaggregated and banded as a separate dwelling. (N.B. “on-call” accommodation should be regarded as non-domestic).

See RM Section 5a, section 840 (https://www.gov.uk/guidance/rating-manual-section-6-part-3-valuation-of-all-property-classes/section-840-hospitals-and-healthcare) for more information.

4.8 Hospices for the terminally ill

Traditionally the hospice movement was intended solely to ease the suffering of those who were in the last stages of terminal illness. In recent years the nature of hospice care has changed so that the emphasis in adult units is to control the symptoms of the illness and send people home to lead a more normal life where possible. The process may be repeated several times during the course of the illness, and increasingly hospices are used for respite care. Such hospices are more in the nature of short-stay accommodation within the meaning of section 66 (2) of the LGFA 1988, and therefore colleagues must consider whether the circumstances mean the property should be treated as non-domestic.

When deciding whether any accommodation is domestic colleagues must consider whether any treatment is being provided to long-stay patients, see paragraph 4.8 above.

Greater change has taken place with children’s hospices and the new sector of young adults because medicine has moved on so that seriously ill children are more often surviving into adulthood. Provision is usually respite care and in the nature of short-stay.

Where there is a clear physical distinction made between parts of a hospice used for respite care and temporary visits, and that reserved for longer-term stay where the hospice is effectively the sole or main residence of the occupants who are not receiving treatment, it should be treated as a composite hereditament. Borderline cases should be referred to your Unit Technical Leads and then on to CVG Technical Advisers for advice if required.

The changing nature of respite care means each case must be dealt with on its own facts, and every effort made to find out the nature of the care provided, and to whom, before a final decision is made on whether the property is domestic or non-domestic.

4.9 Old people’s homes/children’s homes/orphanages

These premises will often consist of wholly domestic property and so will not be composite dwellings. Where any part of a property is self-contained it is to be disaggregated in accordance with CTM:PN 5.

Regulation 6(2)(h) of The Council Tax (Situation and Valuation of Dwellings) Regulations 1992 (SI No 550 as amended) assumes that use is restricted to that of a private dwelling and so care must be taken when using PD evidence for old people’s’ homes. Payments for goodwill are to be ignored because they reflect a business element which is inconsistent with the Regulation.

4.10 Care homes

The term “care home” is defined in the Care Standards Act 2000 and covers a wide range of establishments all of which offer accommodation and care at any given time.

Residential care homes, including psychiatric community care homes, often provide some form of treatment such as administering blood pressure medication or visiting therapists. However, this “treatment” is more like supported living and is less than that received in a hospital; more specialised treatment would require a hospital visit. Residents do not have a main residence elsewhere. Normally, care homes are regarded as domestic accommodation.

Residential nursing homes often provide more “treatment” than in a care home, but this is still less than in a hospital. Residents do not have a main residence elsewhere. Normally care homes are regarded as domestic accommodation but colleagues need to consider the fact and degree of treatment provided as some are more like community hospitals and would be considered as non-domestic.

Generally, accommodation in care homes will be domestic except where it caters for occupants who have their main residence elsewhere and do not occupy for longer than a “short period” (see 4.7)

4.11 Hostels

Hostels provided for the rehabilitation or refuge (e.g., hostels providing accommodation for substance abusers or victims of domestic violence) will often form the main or sole residence of the occupants. In cases where a property will continue to be used by the occupants for the purposes of living accommodation it is domestic and requires banding. Conversely, hostels occupied for short periods of time by people who generally regard their main residence as being elsewhere will be rateable (as such property is not treated as domestic under S.66(2) LGFA 1988). Typical examples will be YMCA and YWCA hostels or accommodation run by the Youth Hostels Association.

Hostels for homeless persons will usually constitute domestic property. Whilst such property is occupied by people on a daily basis the property occupied is living accommodation. As the homeless, by definition, do not have a ‘sole or main residence’ elsewhere the criteria of S.66(2) LGFA 1988 for short term accommodation are not satisfied and such property is not excluded from being domestic.

4.12 Prisons

Prisons are composite hereditaments comprising both domestic and non-domestic property. In addition to all staff living accommodation situated within the curtilage the domestic part will include the prison cells and any kitchens, canteens, games rooms or libraries which are wholly used by, or provided for use by the inmates. None of the living accommodation used by inmates will be self-contained and so a single band should be ascribed - this will invariably be band “H”.

There may be accommodation used for both domestic and non-domestic purposes and the use will have to be apportioned accordingly. Such accommodation may include sports halls and grounds, and works departments, including works offices, stores, workshops and groundmen’s huts which are used for the maintenance of the whole composite property.

Where staff accommodation is self-contained it is to be disaggregated and a separate band given to each self-contained unit. When valuing staff accommodation its proximity to the non-domestic part must be reflected but only to the extent that it is seen to affect the value of the accommodation as part of the larger composite.

Staff accommodation situated on the outer edge of a prison may form separate hereditaments under s.115 GRA 1967. They will therefore constitute dwellings in their own right and not form part of the composite prison.

All areas dedicated to prison administration and management, such as security rooms and governor’s office etc., are to be treated as non-domestic.

4.13 Guesthouses (6 persons rule), self-catering accommodation (140-day rule)

Section 66(2A) of the LGFA 1988 provides that where there is an intention to provide short stay accommodation within the hereditament (http://voaintranet.voa.gpn.gov.uk/manuals-and-guides/council-tax-manual-and-practice-note/ct-manual-_-practice-notes/ct_man_pn8) for more than 6 persons simultaneously then it shall be treated as non-domestic. Where the letting accommodation does not exceed the 6-person rule, it can still be rateable if the use of the non-domestic part is not subsidiary to the domestic use of the provider’s sole or main residence. Further guidance on bed and breakfast accommodation and section 66(2A) is given in RM Section 5a: Valuation of all Property Classes - Guest and boarding houses.

4.14 Self-Contained, Self-Catering Accommodation and Holiday Lets

During 2022 both the English and Welsh Governments amended Section 66 of the LGFA 1988 in respect of self-catering accommodation and changed the criteria which needed to be met to qualify as non-domestic from 1 April 2023.

England

In England, section 66(2B) of the LFGA 1988 sets out the requirements which must be met so a self-catering property in England is not domestic.

Prior to 31 March 2023, a self-catering property in England will not be domestic where there was an intention for the whole building or self-contained part to be available for letting commercially, as self-catering accommodation, for short periods totalling 140 days or more.

From 1 April 2023, a self-catering property in England is not domestic if
- It is available for short periods for at least 140 days in the following 12 months (looking forward)
- It was available to let for at least 140 days in the previous 12 months (looking back)
- Actually let, and not simply booked, for 70 days or more in the previous 12 months (looking back)
- The lettings are to be on a commercial basis
- Each self-contained part must meet the tests in its own right to be considered for entry into the Non-Domestic Rating List.
Wales

In Wales, section 66(2BB) of the LFGA 1988 sets out the requirements which must be met so a self-catering property in Wales is not domestic.

Prior to 31 March 2023, a self-catering property in Wales will not be domestic if
- It was available to let for 140 days or more in the preceding year (looking back)
- It had been let for at least 70 days in that year
- There was an intention to continue making it available for short periods for at least 140 days in the following year (looking forward)
- Where the self-catering property consists of more than one self-contained part within a building or in close proximity on a site and operated as a single business, then the time so let must amount to at least 70 days on average for each self-contained part
From 1 April 2023, a self-catering property in Wales is not domestic if
- It is available for short periods for at least 252 days in the following 12 months (looking forward)
- It was available to let for at least 252 days in the previous 12 months (looking back)
- Actually let, and not simply booked, for 182 days or more in the previous 12 months (looking back)
- The lettings are to be on a commercial basis
In Wales, where a self-contained part fails to achieve 182 days in the previous 12 months it may be considered under the averaging principle.
- The self-contained part must be part of a business which also comprises other self-catering lets
- The self-catering lets must be at the same location or within very close proximity of each other
- Each self-catering let must have been available to let for 252 days in the previous 12 months
- If, when considered alongside lettings of other nearby self-catering lets in the same business, it achieves on average at least 182 days of letting it may be considered Non-Domestic. n.b. a self-catering let can only be included in one averaging calculation.
Further guidance on self-catering and holiday accommodation and section 66(2B[England]/2BB[Wales]) is given in RM Section 6, Part 3, Section 480.

The Lands Tribunal in Godfrey v Simm (VO) decided that there needs to be an intention to make the property available for 140 days during the year in question, before the property can be treated as non-domestic. It is open to an operator to advertise a property as “available” from January to December but if the operator has made a conscious decision not to accept bookings within that period for a total of more than 139 days, the property will not be a non-domestic hereditament and must be entered in the Council Tax Valuation List instead.

It is assumed that letting “for short periods” means 28 days or less, to different individuals on each occasion.

Colleagues are reminded that the definition of Self-Contained in terms of Council Tax and Non-Domestic Rating differ and they should not conflate these when considering movement between the Council Tax and Non-Domestic Rating Lists.

The effective date of movement from Council Tax into Non-Domestic Rating is when all tests are met. Should a self-contained, self-catering let fail to meet all tests it will fall to be domestic. For guidance on the relevant effective date for domestic purposes please see Council Tax Manual, Section 2, Appendix 2.3: Effective Dates for Council Tax purposes - England and Wales (https://www.gov.uk/guidance/council-tax-manual/section-2-maintenance-of-council-tax-lists-billing-authority-reports-and-altering-lists).

4.15 Former living accommodation over pubs or shops

Where vacant living accommodation exists, a judgement must be made on whether the next use of the accommodation is likely to be domestic or non-domestic under S66(5) LGFA 1988 which provides that ‘Property not in use is domestic if it appears that when next in use it will be domestic’. Where no structural alterations have been made and all the facilities are still available, then vacancy alone is unlikely to alter the status of the living accommodation as being domestic.

The domestic/non-domestic test is a use test under S66, so if the rooms are actually used for storage in connection with the shop or pub, then that is a non-domestic use. It is important to establish that there is a clear and real use for storage purposes and not just some slight use, or apparent ‘use’ just as a device to avoid CT liability. A few boxes scattered around a flat would not amount to a genuine non-domestic use of the living accommodation. It is unlikely they will constitute a use of the whole living accommodation and because it is necessary for all the property comprising the hereditament to be used for non-domestic purposes (or likely when next in use to be non-domestic) then if part is vacant and unused, but likely when next in use to be domestic e.g. the kitchen and bathroom, then the hereditament will be composite and the notionality test (see below) will apply.

In a composite hereditament, if only part of the living accommodation is used for a non-domestic purpose, this would need to be viewed from a ‘notionality’ perspective. This requires the VO to determine the reasonable expectation of the hypothetical tenant’s occupation of the whole hereditament, taking into account other nearby similar units to establish a pattern. See paragraph 6.3 of RM Section 2, Part 5 (https://www.gov.uk/guidance/rating-manual-section-2-maintaining-the-rating-list) for examples of the practical application of notionality regarding living accommodation over shops.

There may be situations where there is no demand for living accommodation over a pub. This may be evidenced by other pubs in a town centre being mainly in the nature of “lock ups” or perhaps where there is evidence that the former living accommodation over shops is mainly being used for storage purposes. In these instances where some of the vacant rooms are used for non-domestic purposes, such as storage, it may be reasonable to conclude that the next likely use of the other parts of the living accommodation will also be non-domestic.

As regards minor disrepair the statutory assumptions will apply.

4.16 Living accommodation occupied by staff who have their main residence elsewhere

Where accommodation is provided for short periods to people who have their sole or main residence elsewhere it is treated as non-domestic property (S.66(2) LGFA 1988) if that accommodation is not self-contained self-catering accommodation provided commercially. There is no statutory definition of short period but for rating the view has been taken that letting “for short periods” means letting for periods of 28 days or less, to different individuals on each occasion.

For self-contained accommodation see para 4.14.

4.17 Living accommodation in hotels occupied by long term residents

Any hotel room or suite occupied for an indefinite period by a resident who uses it wholly for the purposes of living accommodation will be domestic property which should be banded for Council Tax. In most cases this accommodation is unlikely to have sufficient cooking facilities so as to be self-contained for the purposes of disaggregation. Accordingly all units of such accommodation situated within a hotel are likely to be treated as forming the domestic element of a composite hereditament requiring a single band to be ascribed.

Where there is living accommodation within the hotel used by staff which is not self-contained this will also be reflected within the same band.

4.18 Living accommodation in monasteries/convents

Living accommodation within a monastery or convent will form the domestic part of a larger composite hereditament. As detailed in CTM:PN 2 when putting a band on the domestic use of any part of a composite hereditament a sale of the whole as one unit is to be assumed. Care must be taken when banding any monastery or convent not just to attach the band which would have been appropriate if the domestic property had been sold in isolation.

Whilst much of the living accommodation found within some monasteries and convents may be in demand for the purposes of conversion, Regulation 6(2)(i) of The Council Tax (Situation and Valuation of Dwellings) Regulations 1992 (SI No 550 as amended) prevents such demand being reflected in the band ascribed.

4.19 Stately homes, historic houses, castles etc

Premises falling within this category of property will often comprise composite hereditaments because the main building itself consists of both domestic and non-domestic property, being used both as living accommodation and as a “showroom” for non-rateable chattels.

Where the main building is used wholly for the purposes of living accommodation but is situated within a larger hereditament, the remainder of which is non-domestic property, it will form the domestic part of a composite hereditament. An example of this would be a house occupied with substantial grounds which are open to the public all year round, subject to a charge being made.

When closed to the public any area used by the occupier will only become domestic property if it is used “wholly” for living accommodation. If such areas are not in use they will only constitute domestic property if, when next in use, it appears likely that they will be used wholly for the purposes of living accommodation. In most cases areas temporarily closed to the public will constitute non-domestic property to be opened to the public at a later date, part of which is used only occasionally as living accommodation. They will not fall to be banded although their presence will be reflected in the band given to the domestic part as part of the larger composite hereditament.

Because of the continued existence of non-domestic property, the majority of these homes will remain composite hereditaments throughout the year.

Where there is more than one self-contained unit of living accommodation within the hereditament they will require to be disaggregated and separately banded (CTM:PN 5).

4.20 Communal facilities used for domestic purposes

A communal facility which is enjoyed solely by those people occupying adjoining units of living accommodation will not generally require a band to be ascribed to it if it falls within the meaning of an ‘appurtenance’ belonging to or enjoyed with property used wholly for the purposes of living accommodation. Typically, this will occur with such facilities as car parking areas, gardens, communal lounges etc. at a block of flats or sheltered housing development. These facilities should be reflected in the market values of the individual units.

In each case it is a question of fact and degree whether such premises belong to or are enjoyed with the adjoining units of living accommodation. There needs to be some clear indication that the premises are provided and used as a facility for a specific property or group of properties so that the occupiers have the right (e.g. given in the leases) or would regard themselves as having some proprietary rights in the premises.

Cases have arisen with retirement ‘villages’ or residential accommodation provided by organisations for children and young adults suffering from mental illness or disability, where communal facilities are provided on a scale which goes beyond the normal meaning of ‘appurtenance’ (see RM4:2B). These may include such facilities as a shop, bakery, classrooms, medical centre, and restaurant. It is not considered that such buildings are domestic property, and therefore separate entries should appear in the rating list, possibly as part of a composite hereditament depending on the facts in each case.

Standalone facilities such as a gym or pavilion situated within developments where occupiers of that development have the sole rights to use the property and pay for its upkeep through a service charge may constitute an appurtenance. The facility must be within an identifiable curtilage of the development as a whole and used solely by residents of the development or estate. If these conditions are met the property may be considered a domestic appurtenance and therefore not appear in the rating list. The value of the facility should be reflected in the bandings of those dwellings on the development which benefit from the facility.

In Head (VO) v LB of Tower Hamlets [2005] RA 177 premises which housed a district heating system (DHS) that provided heat and hot water to multiple dwellings within a block of flats were held to be appurtenant to the dwellings, because the DHS was an integral part of the building. In The Collection (Management) Ltd v David Jackson (VO) [2013] RA 311 an office used by concierge staff within a high-end gated development of apartments was held to be appurtenant to the whole development, although the office was contiguous to the adjoining flats only.

In the case of Allen (VO) v Mansfield District Council and another [2008] RA 338 district heating systems outside of the curtilage of the housing estates on which the dwellings were situated, were found on the facts not to be appurtenances. HHJ Huskinson held as a matter of law it was possible for a congregation of buildings in the nature of a housing estate to have a curtilage for the purposes of s.66(1)(b) within which a DHS might lie: i.e. whether a building or piece of land fell within the curtilage of another building or buildings was a matter of fact and degree.

Where a facility is used by both owners of adjoining living accommodation, as a right of occupation of their respective hereditaments, and individuals living elsewhere (provided that the latter use is not de minimis) it is to be treated as non-domestic property. This might occur with leisure facilities at a luxury development, for example. However the value of the right to use any facility is properly to be reflected in the band ascribed to the adjoining living accommodation as provided for by Regulation 6(1) of The Council Tax (Situation and Valuation of Dwellings) Regulations 1992 (SI No 550 as amended).

The value of facilities on an estate or a flat development (e.g. a community centre or swimming pool) which would be separate hereditaments under the definition in S.115(1) General Rate Act 1967 should not be reflected directly in the value of individual dwellings, but their presence in the locality and their likely availability for use should be taken into account.

Facilities which are appurtenant exclusively to individual dwellings but which would be separate hereditaments under the definition in S.115(1) General Rate Act 1967 (e.g. garages and reserved parking spaces) are not separate dwellings because of S.3(4) LGFA 1992 and are not to be banded separately (see para 2.3 above). Their presence in the locality and the prospect of them being available for purchase should be reflected in the value of the individual dwellings.

4.21 Residential caravans and boats

As indicated in CTM:PN 7 a caravan and its pitch and a boat and its mooring will together be a dwelling where the caravan or boat is the sole or main residence of an individual and the tests of rateable occupation are met. All caravans and boats which satisfy these criteria are to be banded. When considering whether the tests of rateable occupation are met, particular attention should be given to the transient nature of some boats and caravans before a pitch or mooring is banded to include the caravan or boat.

4.22 Caravans and temporary agricultural workers

Introduction:

The question is a complex one, involving ‘borderline’ issues as to whether property is domestic or non-domestic, and defining the unit of occupation (the hereditament). The liability for council tax for migrant agricultural workers will depend on the type of accommodation they occupy, the nature and duration of their stay, their employment contract and their status, and sole or main residence issues. Living accommodation cannot be treated as being exempt under the non-domestic agricultural exemption provisions.

Defining the occupier:

It is unlikely that a seasonal worker will be the rateable occupier of a caravan despite living in it. Usually the farmer/owner will retain paramount control and be the rateable occupier and the pitch will form part of the owner’s hereditament.

If the seasonal workers stay in chalets or permanent dwellings the nature and duration of their occupation will determine which list is applicable and who pays. If the owner of the units retains control then the ‘paramount occupier’ will be the employer/owner. For longer occupations control may remain with the owner where the workers occupy accommodation as part of their employment conditions in relation to their work on the farm.

Rates or Council Tax ? - factors to be considered
- If a caravan and pitch is a sole or main residence, this defines it as domestic property under S66(3) LGFA 1988 but this does not define the unit of assessment.
- If the owner is the ‘rateable occupier’ of caravans occupied by seasonal workers of farms the caravans will be treated as domestic property if they are the sole or main residence of an individual. In this case multiple vans will be amalgamated and one band shown in the Valuation List. Disaggregation does not apply to caravans and pitches as explained below.
- If an individual has a main dwelling elsewhere, which may be abroad, and is only occupying the caravan on a short term basis, the pitch will not be domestic and will be assessed for non-domestic rating as part of the owner’s hereditament.
- If the caravan and pitch is within paramount control of the farm worker, not subject to conditional occupation, and is a sole or main residence occupied on a permanent basis it will be domestic. In that case the pitch and caravan would be banded as a separate dwelling, and the occupier will receive a separate bill. A cottage or chalet occupied as a sole residence will be treated in the same way.
- Caravans that do not fulfil the criteria of the above paragraph, will be deemed to be in the occupation of the owner, and under the Non-Domestic Rating (Caravan Sites) Regulations SI 1990 No 673 the value of the pitches will be amalgamated and form a single non-domestic assessment. The rental value of the pitches (together with the caravans if permanently located on the farm) would form the basis of the assessment entered into the Rating List. Individual billing would not occur. It would be up to the owner to adjust the rent paid, if any, for the units by way of service charge, and individuals may contribute to the business overheads in that way.
- Property to be excluded from the Valuation List is also covered by sub sections 2, 2a, and 2b of Section 66 in the LGFA 1988. See section 4.15 above for the test to be applied to self-catering, self-contained accommodation let commercially for short periods. This legislation normally applies to the letting of holiday cottages and flats but must also be considered in the context of the farm lettings.
- The precise nature of the occupation, its length and terms, and the nature of the construction of the accommodation itself will determine the correct answer as to in which list the units should appear for local taxation according to the circumstances.
4.23 Council Tax and ‘disaggregation’ - The distinction between permanent buildings and caravans

If the occupation of buildings used as living accommodation is for longer than short periods, then they are domestic and entered into the Council Tax List. All self-contained units will be treated as separate dwellings under the disaggregation provisions under the Council Tax (Chargeable Dwellings) Order 1993 articles 2 and 3.

In the case of caravans where the employer/owner is in occupation because of his master/servant relationship with his employees, and they are not short-term residents, the caravans cannot be treated as separate dwellings, as they are not ‘buildings’. Only buildings are subject to the ‘disaggregation’ provisions. As from 1 April 1997 the definition of self-contained unit was changed to mean “a building which has been constructed or adapted for use as separate living accommodation”.

The definition of a caravan is “any structure designed or adapted for human habitation which is capable of being moved from one place to another….”, subject to certain size limits, and it must not be in more than two main parts when fitted together. There is no requirement for a caravan to have wheels. The full definition is in Part 1 Caravan Sites & Control of Development Act 1960 as amended by Caravan Sites Act 1968.

Summary & Conclusion

The accommodation of migrant workers could be entered in either the local Valuation List or the rating list, according to the facts of each case as follows:

Rating list
- Where the owner/employer is in occupation of the whole, and the units are not sole or main residences, then there should be one non-domestic assessment, described as part exempt, if part of an agricultural unit.
- Where the accommodation can be viewed as wholly or mainly provision of short stay, for business purposes.
- Where lettings of permanent buildings are short term, not sole residences, and not self-contained, e.g. lodging barn.
Valuation list
- Where the caravans are sole or main residences of individuals, but the owner is in paramount control: one amalgamated band.
- Where the caravan is a sole or main residence, and the worker is in paramount control, separate bands.
- Where a building is a sole or main residence of an individual, regardless of paramount control: separate bands.
- Where the residential units are not self-contained and are in the occupation of the owner: one amalgamated band.
- Where buildings are in the occupation of the owner/employer, each self-contained unit, having necessary standard facilities for self-contained living, would be disaggregated: separate bands.
4.24 Showhouses

Showhouses are non-domestic property and do not require to be banded for Council Tax. See RM Section 5a: Valuation of all Property Classes - Showhouses (https://www.gov.uk/guidance/rating-manual-section-6-part-3-valuation-of-all-property-classes/section-921-showhouses).

4.25 Beach huts

Any beach hut not shown or required to be shown in the non-domestic rating list will need to be banded separately, unless it is an appurtenance to domestic property (S.66(1)(b) LGFA 1988 and S.3(4)(a) LGFA 1992). To be an appurtenance it will need to fall within the curtilage of the dwelling in question.

A beach hut will not be “private storage premises used wholly or mainly for the storage of articles of domestic use” within section 66 (1)(d) of the LGFA 1988. (See unreported Lands Tribunal decision in Alford v Thompson (VO) 1998).

Where a beach hut is wholly used for the purposes of living accommodation in that it provides sleeping and other facilities for living, with or without mains services, it will be treated as a cabin or chalet used as a holiday home and hence ‘Domestic Property’, falling to be assessed for Council Tax with a banding shown in the Valuation List under Section 66(1)(a), unless it is let as holiday accommodation within Section 66(2B).

Most beach huts will be purely day huts which cannot be used for overnight stays and offer only the most basic of facilities and generally do not have mains services connected. Day huts such as these should appear in the non-domestic rating list.

4.26 River gardens

A garden separated from a dwelling is non-domestic property. The case of Aylett v O’Hara VO (2001 RA 526) in the Upper Tribunal (Lands Chamber) concerned a river garden used for leisure purposes. The plot comprised a riverside plot accessible by footpath with a slipway a shed and a summerhouse. It was contended by the appellant ratepayer that the leisure garden, which he owned and occupied with others, was domestic property being living accommodation, under LGFA S66 para 1(b) but not a dwelling (and so should not appear in either list). This interpretation of S66 did not meet with the UTLC President’s view and it was clear that if it had been the case the property would have been treated as a dwelling. The written judgment confirmed the VO position that the leisure garden was non-domestic, it being not appurtenant to any dwelling, and the summer house used for storage of domestic items, tables chairs, microwave oven etc. was simply ancillary to a non-domestic use. In the previous river garden case of Turner v Colman VO (1992) RA228 the VO had made a concession referring to storage of articles of domestic use, which clearly the member did not agree with. His comment on Turner clarified the correct view on the use of the summerhouse at para 10:

“In my judgment premises used for storing articles of domestic nature do not fall within paragraph (d) where they are part of a hereditament that is otherwise non-domestic and where the storage use is ancillary to the non-domestic use”.

In Lewis v Christchurch (a High Court CT judgement) it was held that 341 beach huts each on their own plots were dwellings and were wholly used for living accommodation. The facts in that case were distinguished, there being nothing in the subject facts which constitute the principal activities in the summerhouse as anything other than storage. He found that the summerhouse was part of a larger occupation ancillary to the open garden area.

4.27 Micro power generation & Council Tax: England only

In April 2013 Section 66 of the Local Government Finance Act 1988 was further amended to address small-scale energy production. A new paragraph 6(1)A and (1)B was added by The Non-Domestic Rating and Council Tax (Definition of Domestic Property and Dwelling) (England) Order 2013 SI No 468) as follows:

(1A) Property in England is also domestic if –

it is used wholly or mainly for the activity mentioned in subsection (1B), and

it is situated in or on property which is –

(i) used wholly for the purposes of living accommodation, or

(ii) a yard, garden, outhouse or other appurtenance belonging to or enjoyed with property used wholly for the purposes of living accommodation.

(1B) That activity is the generation of electricity or the production of heat by a source of energy or a technology mentioned in section 26(2) of the Climate Change and Sustainable Energy Act 2006(a), where – the majority of the electricity or heat is generated or produced for use by such persons as may be in the living accommodation, or the plant or equipment used to generate the electricity or produce the heat has a capacity not exceeding 10 kilowatts or 45 kilowatts thermal, as the case may be.

Under S.66 all small-scale domestic generators, such as solar panels and domestic scale wind turbines under sub 10 Kilowatts or where most of the power is used in the home are domestic property.

Also S3 of the LGFA 1992 definition of a dwelling has been amended to the effect that the above applies to all equipment within the curtilage of a dwelling and anything not within the hereditament. This new category of domestic property is not to be treated as part of the dwelling, unless it is part of the hereditament itself.

Summary of guidance

Where domestic-scale solar panels or other installations are subject to 3rd party leases of the roof or land they occupy, they will not form part of the dwelling because they have a separate occupier and therefore would be separate hereditaments.

However, as they are outside the dwelling/hereditament comprising the living accommodation they will not be subject to CT because they are not themselves dwellings. Like domestic garages separate from living accommodation, they are not required to be banded, neither are they subject to non-domestic rating because they are domestic.

Where the panels are owned by the householder and no 3rd parties are involved, they will form part of the dwelling, and so might constitute a potential ‘material increase’. However, their presence in practice will not affect the banding in current valuation lists, as there is no evidence that in the 1991 market in England the value of such equipment would have materially increased the freehold or leasehold value of properties.

For the above reasons CT bands should not be altered on account of the presence of any small-scale energy generating equipment within the terms of the amended legislation.

4.28 Micro power generation & Council Tax: Wales Only

Whilst the amendment to s.66 does not currently apply to Wales it is similarly considered very unlikely in the 2003 market in Wales that the value of such equipment would have materially increased the freehold or leasehold value of properties. The following background information is still relevant in Wales but must be read with the foregoing principle in mind.

Micro power generation by small wind turbines and domestic type combined heat and power boilers, are likely to be installed with increasing frequency in the future. Energy conscious householders will be prepared to invest small to medium sums in such equipment to comply with the current body of opinion on ‘green’ issues, energy consciousness, and reducing CO2 in the environment.

As far as dwellings are concerned such adaptations are not entirely new, as solar heating panels on roofs are not uncommon, and some savings in the longer term to the investor will no doubt be made. The same principle will apply to investments in power generation equipment. In the long term, there may be a price advantage, though that will depend on the cost and efficiency of the particular unit. Many people will be put off by the initial cost or will not be convinced of the economic investment.

Dwellings: In most cases the answer will be straightforward. Just in the same way as power plant is currently reflected at the moment, like oil and gas boilers, providing the plant is within the curtilage of the dwelling, serves the dwelling and ‘belongs to’ and is ‘enjoyed with’ the dwelling it falls to be valued as part of the dwelling (S 3(3)&(4) LGFA1992. If any new equipment installed causes a material increase in value, then it would only be included in the banding value after a relevant transaction. It would be an ‘engineering or other alteration carried out in relation to the dwelling’ (see definition of material increase under S 24(10) LGFA1992. There is insufficient evidence that such equipment would have materially affected property values at the AVD.

Oversupply: Often micro-generators will be designed to have the potential to feed back into the grid any surplus electricity generated, which saves the cost and space dry cell storage batteries. Provided the unit is primarily designed and engineered to supply the particular domestic property which it serves and to which it is appurtenant, any small potential for oversupply will be considered de minimis and will not attract a non-domestic status. Most domestic type generators will not be supplying the dwelling’s full energy requirements, instead being a supplementary source. The existing instructions concerning de minimis non-domestic use are found in RM Section 2, Part 5 (https://www.gov.uk/guidance/rating-manual-section-2-maintaining-the-rating-list) paragraphs 8.1 to 8.4 and it is considered the principles outlined there are relevant in this context. Where a generator is no longer considered of domestic scale, no longer designed primarily to serve the dwelling, but is a mini power station in its own right, this should be obvious by the scale and nature and specification of the plant. If there is any doubt advice should be taken from team leaders, technical advisers or allocated over to specialists in the Utilities Team for assessment.

The curtilage test: Where generation plant is within the natural curtilage of the dwelling, the plant will be treated as domestic. Where the equipment is clearly well outside the curtilage of the domestic property, it will be treated as non-domestic, and to the extent that its value is significant will appear in the local rating list. Sometimes the situation will occur where the turbine is on a composite dwelling such as a farm or smallholding, where the land and buildings outside the domestic curtilage are exempt as agricultural. Again, a judgement will have to be made as to the size and scale of the generation plant, as it is possible that part of the power will supply the farm, and so the value would fall to be apportioned between the dwelling and the non-exempt, non-domestic element. Bearing in mind the low return on capital that such equipment may produce, if its primary purpose is supplying energy to a domestic dwelling, its apportioned rental value for non-domestic rating may be small. It all depends on the size, scale and output of the generating equipment.

5. Vehicle parking in domestic driveway

Companies exist which advertise private driveways that are available for letting out to commuters for daily parking of vehicles. These would normally be near railway stations. This demand reflects the parking restrictions around stations, creating such demand.

Whilst there could be circumstances where allowing a commuter to park on a driveway in exchange for a fee might be non-domestic, in general, such situations will come within de minimis parameters, in terms of establishing a non-domestic portion of a composite hereditament. Such parking could be compared with other comparatively minor non-domestic or business uses of dwellings such as the use of a bedroom to work at home or undertaking some shirt ironing for payment, that will not result in a home being given a rating assessment as well as a council tax band. It will depend on the facts of the case and the degree of the non-domestic use.

Where a parking space separate from the home, e.g. on piece of land or a defined space associated with a block of flats, is let for parking then this may result in the parking space being assessed for rates.

6. Dwellings with stables: Factors governing appurtenance

This is a particularly difficult area, and the following guidance is designed to assist caseworkers to understand the problem and the main principles to be applied.

The legislation applicable is primarily the application of the domestic test in LGFA S66(1)
- Domestic property.
(1) Subject to subsections (2), (2B) and 2E below], property is domestic if—

(a) it is used wholly for the purposes of living accommodation

(b) it is a yard, garden, outhouse or other appurtenance belonging to or enjoyed with property falling within paragraph (a) above, (emphasis added)

(c) it is private garage which either has a floor area of 25 square metres or less or is used wholly or mainly for the accommodation of a private motor vehicle, or

(d) it is private storage premises used wholly or mainly for the storage of articles of domestic use.

The question to be decided is whether the stable block can be considered appurtenant, belonging to or enjoyed with the dwelling.

Stables are not agricultural: Unless used for agricultural purposes on adjoining land, the stabling of horses is not an agricultural use of buildings and would fall to be non-domestic. A manège (exercise/training area) is not grazing land and so not agricultural either. In contrast, grazing land for horses does qualify as agricultural land. It is only where stables are in close proximity to, and occupied with living accommodation in a principal dwelling, that the question of appurtenance arises. If they are considered appurtenant to a dwelling, then they are domestic and should be reflected in the council tax band.

Leisure use of stables: In many cases stable blocks with manèges have previously been riding schools or livery stables occupied for business purposes and therefore clearly non-domestic. Because many of these hereditaments are rather marginal in their viability, or because when sold the new owners have several horses used for private leisure purposes, the business ceases as a commercial operation and it is therefore claimed that the stable must be domestic. This may or may not be the case, depending on the nature and location of the stables. In principle it is important to bear in mind that the “living accommodation” within 1(a) does not have a restrictive meaning and it is possible for it to embrace leisure uses and hobby uses.

Appurtenant or not? The following are factors to be weighed up

(i) Defined curtilage: For a building to be considered appurtenant it must be within a defined curtilage that includes the living accommodation. Where the house and stable block can be reasonably considered as being within the natural garden or yard area, or ‘normal’ domestic curtilage, otherwise reflecting domestic type use, then it may be considered appurtenant. It is impossible to define the degree of closeness, and each case will have to be decided on its own merits according to the relationship and layout of the buildings. Where the stable block together with any manège becomes domestic, either a new hereditament will have been defined or if previously composite, there will have been an increase in the domestic use and the dwelling band should be revised accordingly.

This curtilage test is considered to be the main test.

Relevant factors will include, separate vehicular access, direct access to garden/curtilage, distance from main living accommodation, or whether the buildings were constructed together originally with the dwelling and the degree of historic attachment. Separately metered services may be a relevant factor but might simply be an historic legacy from a previous occupation.

If the stable block is in a paddock outside the domestic curtilage and thus remote from the house, it will not be considered appurtenant. Any grazing land separating the house from the stable will be indication that it is not within the curtilage. Grazing land itself will qualify for non-domestic exemption under Sch. 5 (2)(1)(a) LGFA “land used as arable, meadow or pasture ground only”.

(ii) Size and scale - is it ancillary? Where the scale of the stabling is out of all proportion to the size and character of the living accommodation, this would weigh against appurtenance, e.g. a mobile home with 20 stables would suggest the home is appurtenant to the stables rather than vice versa. There is no hard and fast rule in this area arising from Tribunal decisions and each case must be decided on its facts.

(iii) Close physical relationship: The appurtenance must be close to the principal property. There must be a close connection between the occupation of the house and stables for it to be considered “belonging to or enjoyed with”. Any livery use or letting of stables to others, which is not de minimis, would weigh heavily against appurtenance.

(iv) Passing in a conveyance: Related to all of the above is the proposition that has come out of case law that an appurtenance must have been capable of passing in a conveyance (in a pre-registered title world pre 1925) together with the principal property without further words of identification or express mention. This test is difficult for a caseworker, rather than a conveyancer, to judge in isolation, but is really a natural conclusion to the application of all of the above principles. If a building is clearly remote then it would need to have separate mention to clarify its status and would not be appurtenant.

The above factors were considered in the Upper Tribunal decision of Andrew Corkish (VO) v Fiona Bigwood (RA/52/2017). The UT decided that a very substantial purpose-built equestrian complex used by an Olympic rider fell within the Council Tax band of the adjoining modern country house.

The regard given to conveyancing practice [(iv) above], was mildly criticised as an approach in the Upper Tribunal decision which considered it of little practical use given modern conveyancing practice:

“40. While a Victorian conveyancer might immediately have appreciated what would or would not be taken to be included with a house even though it was not expressly mentioned in a lease or conveyance, the explanation leaves something to be desired in the twenty-first century when modern conveyancing practice includes digital mapping and compulsory land registration. In Methuen-Campbell v Walters Roskill LJ suggested at 539E that the meaning of “appurtenances” depended on the context in which it appeared. The general concept is clear enough, namely that an appurtenance is something which is so closely associated with the principal subject matter of a lease or conveyance, physically and functionally, that it can be regarded as “part and parcel” of it, so that a reference to the principal subject would be understood as including the appurtenance…”

In Corkish the UT went on to use terms such as “intimately associated” and “part and parcel” to describe the relationship between the stable block and indoor arena with Bourne Hill House. The UT decided the stable block and the indoor arena were other appurtenances.

Based on the facts of the case it was certainly arguable that the stable block and indoor arena were within the curtilage of the house. It is not considered that this decision should cause a change of practice for VO’s when attempting to identify the curtilage of the domestic property. It is important to note that there may be no precise answer and it will depend on the facts of each case.

Conclusion: It is acknowledged that no two situations are identical, and each case must be judged on its own merits weighing up the factors for and against. This can be a grey area, but the caseworker/team leader should decide, with advice from the Technical Advisers as necessary, the appropriate action in each case.

7. Property guardians

Vacancy in non-domestic buildings of all kinds poses a security risk for owners who may be waiting for the economy to improve or for a redevelopment opportunity at some future date. A modern trend is for agent companies to provide ‘property guardians’ by placing multiple ‘caretakers’ in the buildings which may well form their sole or main residences. The argument is that by having a building domestically occupied, usually by multiple licensees after basic domestic adaptations have taken place, will help to reduce vandalism, prevent squatting and reduce costs of traditional security and even generate a small income for the owner. Occupiers will probably be on short term contracts, but may well not have residences elsewhere, and hence proposals will seek domestic status.

Another driver for installing property guardians is also seen as the potential to mitigate a liability to non-domestic rates. The proper treatment of property occupied by guardians was considered by the Court of Appeal in the case of Ludgate House Limited v Ricketts (Valuation Officer) & Another (Ref C3/2019/3084) in the autumn of 2020. The Court found that the owner had retained possession of the building and that the guardians lived there for the owner’s specific purpose of providing property guardian services and they did not have exclusive possession. As general control remained with the owner, the guardians were occupying as lodgers and only a single hereditament existed.

The decision confirms the need to carefully consider the facts in every case to determine whether the owner has parted with possession to the individual guardians for use as living accommodation. The normal purpose of deploying property guardians is to provide security for a building pending redevelopment or re-occupation for its non-domestic purpose and so it is likely that the owner will have retained general control.

8. Matters requiring clarification to be submitted to the CVG Technical Adviser

Due to the different ways in which many of the properties mentioned in the sections above are used, it is not possible to address specifically how to treat them for Council Tax in every instance.

Listing Officers will encounter situations where further clarification is required. Where such instances occur, Technical Leads should submit details for advice to Technical Advisers.

Practice note 8: appendix 1 - working at or from home: the domestic / non-domestic borderline

1. Introduction

A tradition of working at home goes back many years from taking in washing and sewing to selling insurance, repairing cars or offering services such as an osteopath or chiropodist. In more recent years with the development of e-commerce and communication by computer and the Internet, many more people are working at or from home, using the employer’s office as a base only for meetings and downloading/picking up work. With video conferencing even meetings can be conducted away from the workplace and at home.

This new trend of office work migrating to the home has highlighted the need for the VOA to have a defined policy regarding the rating of rooms used exclusively for business purposes within homes. An increasing number of inquiries are being received from potential ratepayers who want guidance prior to them taking a decision with their employer to change their traditional pattern of working.

2. Relevant statutory provisions

Section 64(9) LGFA 1988 “a hereditament is composite if part only of it consists of domestic property”.

Section 66(1) LGFA 1988 to be domestic property it has to be “used wholly for the purposes of living accommodation.”

Section 67(4) provides that a hereditament is a relevant composite on a particular day if it is a relevant composite immediately before the day ends.

Section 67(5) - for the purpose of deciding the extent (if any) to which a hereditament consists of domestic property on a particular day, the state of affairs existing immediately before the day ends shall be treated as having existed throughout the day.

This means that it is necessary for the VO to consider the use made of the particular room in the house at ‘a minute before midnight’, and if not in use, when next in use it is for a non domestic purpose, then prima facie that room should be subject to an entry in the rating list.

3. Practical difficulties

The problems in practice occur when a person uses a room during the day as an office and in the evening it is used for domestic purposes. If the room is separated from the rest of the dwelling physically, for example by conversion of an integral garage to an office, then this situation is less likely to occur. If the person working from home just uses the dining room table and a filing cabinet, a non domestic use cannot be established at ‘the end of the day’.

Where a room (possibly one designed as a bedroom) is used as an office, it is equipped with a desk, filing cabinet, computer and dedicated telephone/fax line, but in the evening it is used to complete the accounts of the local hockey club or catch up with the payment of domestic bills, and retains its domestic character, following the decision of the President of the Lands Tribunal in Tully v Jorgensen ( VO) 2003 RA 233, this type of mixed activity will fall within the definition of “ living accommodation “ in section 66(1)(a) of the LGFA 1988 and therefore should not be rated. If structural alterations are made to the property or there is a change in the intensity of use so that part of the dwelling loses its residential character then a case can be made for a non domestic rating assessment for this part of the dwelling.

Rooms used by members of the public who visit the premises for consultation, whether for treatment or to discuss a matter with the ratepayer in a professional capacity, or by an employed member of staff such as a typist, will usually be non domestic unless it can be clearly shown that they are used regularly for domestic purposes at other times of the day and at weekends.

In Fotheringham v Wood (VO) [1995] RA 315 it was held that 2 rooms in a dwelling used for the purposes of the taxpayers business as an accountant were rateable, and the appeal hereditament was not wholly domestic property because it was not used wholly for the purposes of living accommodation.

Room 1 had a desk and computer terminal and the adjoining study contained a desk, word processor, business books and files. Files relating to former clients were stored in a bedroom on the second floor.

Three or four clients visited the appeal hereditament each week, and one or possibly two weekly consultations took place in the study or dining room. Seventy hours of office work were carried out at the appeal hereditament in October 1992, and on the material day the appellant had about 70 clients. A part-time secretary was employed at the property, together with a temporary student accountant. There was no planning consent for office use. This case illustrates the difference between working at home, which often results in one room at least being dedicated to business use as an office, and working from home when the intensity of use of otherwise domestic accommodation is likely to be far less.

Bell v Rycroft (VO) [2000] RA 103 concerned a day nursery established in part of a semi detached house. A garage adapted and converted internally with a connected building constructed in 1989 with adjacent wc and shower room were held to be rateable. Parts of the main house used concurrently with its continued use for living accommodation were regarded as de minimis. Planning permission for the nursery use had been given subject to a daily time limitation, and a maximum of 10 children under 5 years of age could be accommodated at one time. A minimum of 3 staff on duty was required at all material times. Outside nursery hours the ratepayer and his family used the whole premises, including the nursery, at their discretion. The extended garage building (nursery space) was fitted, and furnished for that use.

Having carefully considered the evidence and the submissions of the ratepayer as to “the state of affairs existing immediately before the day ends” the Lands Tribunal decided that the use and occupation of the nursery space could not reasonably be considered as other than non domestic. Any domestic use was found to be minor or ancillary, and therefore insufficient to displace the principal use, it was therefore held to be non-domestic.

4. Guidance

The first step is to identify the hereditament as required by section 115 of the General Rate Act 1967 - the normal rules of rating apply. It is then necessary to consider whether the whole or part of the dwelling is domestic property. To pass this test the property must be

1. “used wholly for the purposes of living accommodation” (Section 66(1)(a) LGFA 1988)

2. “a yard, garden, outhouse or other appurtenance belonging to or enjoyed with the living accommodation” (section 66(1)(b))

3. “a private garage having a floor area of 25m2 or less or used wholly or mainly for the accommodation of a private motor vehicle” (section 66(1)(c))

4. “private storage premises used wholly or mainly for the storage of articles of domestic use” (section 66(1)(d)).

The important word in section 66(1)(a) is “wholly”. It is therefore necessary to look at the use of the dwelling. If it is clearly domestic in character, and the non domestic use is de minimis, then the whole of the hereditament is domestic property and a dwelling for Council Tax purposes. If part is clearly used for a business as its main purpose and the domestic use is minor - perhaps occasional use in the evening - then that part should be treated as non domestic in the rating list. No express definition has been included in s66 or elsewhere as to what comprises living accommodation and “de minimis” use, and each case will vary according to its own facts.

Statements about the degree of non-domestic use which might be permissible before rateability is triggered were made during the Parliamentary and consultative processes and these guidelines are to be followed . During the House of Lords Report Stage of the Local Government Finance Bill, on 4 July 1988, Lord Caithness said:-

“Where the use of domestic property for a non-domestic purpose does not materially detract from the domestic use, that should not result in that property being rated”.

In the Consultation Paper “Proposed Amendments to the Boundary between Domestic and Non-Domestic Property” issued in December 1988, the issue of Minor Non-Domestic Use was considered in paragraph 4.2. In considering the point at which the level of non-domestic use would become material and therefore liable to be rated, the suggested guidelines were:-

“The question of whether the use of a domestic property for non-domestic purposes is material is to be decided having regard in each case to:

The effect of the extent and frequency of the non-domestic use, and

Any modifications made to the property to accommodate that use”

Combining those statements, non-domestic use of part of a dwelling should only be considered to be rateable when it occurs within the curtilage of, or when it belongs to or is enjoyed with, a domestic property, when that use materially affects the enjoyment of the residence as a residence, having regard to the extent and amount of use, and taking account of any structural changes that have been made to the property to facilitate that use. The Tully decision in 2003 supports this reasoning, but put a wider emphasis on what is meant by “living accommodation”. Mrs Tully was an employee of the Inland Revenue who worked almost fully from home using a spare bedroom. She used the room for family purposes at other times. She received no business visits from clients or work colleagues, and no physical alterations had been made to the property.

The caseworker will need to determine whether the room or the property generally been specially adapted or extended for its ‘business’ use, as in Bell v Rycroft, and decide if there is any special equipment e.g. couch or sun lamps that would not be associated with normal domestic and recreational activities.

Are any staff employed at the property? Is the occupier visited at home by clients or business associates? If so what is the frequency and intensity of such employment or visits to the property?

How many hours are worked at home during a normal week and at the material day?

Is the business use advertised to the public by means of a sign at the property or in the telephone directories/newspapers?

Has planning consent been obtained for the non domestic use? This is not conclusive but if there is a planning consent it will help to establish that the predominant use of part of the dwelling is not domestic.

The fact that Income Tax allowances or Capital Gains Tax relief have been given by the Inspector of Taxes does not affect the treatment for rating purposes, but standard tax planning advice in all “business use” situations is to ensure that the home office is actually used for residential purposes in ways that are verifiable, and that appropriate records are kept of such use. These may be of assistance in dealing with an appeal for rating and Council Tax.

Each case will be dealt with on its own facts, and the benefit of any doubt must always be given to the occupier.

Practice note 8: appendix 2 - examples of domestic / non-domestic property - homeworking

1. A detached Edwardian dwelling in a residential area owned and occupied by a self employed solicitor who practices from the property, specialising in Matrimonial Law. The front room on the ground floor is furnished with sofa and comfortable chairs, has a TV set, and ornaments/photos of a personal nature displayed around the room. It is used on an occasional basis as a waiting room for clients during week days, and as the lounge by the occupier during evenings and weekends.

The former dining room is used as an office equipped with computer, dedicated fax and telephone line, filing cabinets, desk and shelving stocked with law books. No domestic use is made of this room. It is used by a part time secretary when the solicitor is visiting clients or attending Court.

The ground floor kitchen is used for preparation of family meals, but also to make tea or coffee for clients. The first floor accommodation of bedroom and bathroom is wholly used for domestic purposes.

Answer: The office is the only non-domestic part. Principal purpose of the front room is to serve as a lounge and non domestic use is de minimis.

2. An integral garage of an estate house is converted to an office with plastered walls, electric power points, solid front, suspended ceiling and floor screed suitable for carpeting. A separate telephone line has been installed. Access is through the hallway of the house. All toilet facilities are in the main house.

The occupier claims that the room is used by the family in the evenings and occasionally at weekends. During the day the occupier designs computer software. He is employed by a major company to work at home, because of a physical disability. All of the equipment has been provided by his company and is specially adapted for his needs. He visits his former office on an occasional basis.

Answer: The former garage is rateable and no longer domestic property. Remainder is domestic.

3. The occupier is employed as a site finder by a major building company, and travels across most of the southern part of the country, using his home as a base, but calling into the company office once a week to pick up new instructions, for meetings, and to leave completed work.

He has a 4 drawer cabinet in the corner of a dining room, which also functions as an ‘office’ for the family computer, and there is no dedicated telephone line for business purposes.

The occupier is out visiting sites 4 days a week, and does ‘writing up’ at home on the dining room table in the evenings and at weekends.

No clients or members of the public visit the house for business purposes.

Answer: The whole of the dwelling (hereditament) is domestic property, and should be banded for Council Tax.

4. A doctor uses a room in his house as a consulting room three days a week. The main practice surgery is situated some 3 miles away near the town centre. The house is more convenient for patients who live locally.

A concrete ramp has been added to the front door and the door opening to the hall and the consulting room has been widened to accommodate a wheelchair. No one in the doctor’s family is disabled.

In the room itself there is an examination couch which is essentially a single bed with a cotton sheet thrown over it. A paper sheet is added and removed after use by each patient.

There is no office desk as such but there is a computer, table and chair in a corner of the room, which are used by the doctor during his consultations.

No patients records are held at the house, nor are there any medicines. Basic medical equipment is kept in the doctors medical bag or stored in a drawer after use.

There is planning consent for use as a branch surgery and part of the front garden has been surfaced to accommodate 2 to 3 extra private vehicles. There are parking restrictions in the street.

On the walls of the consulting room the doctor has attached pictures painted by his young children, and there are toys in the corner of the room which belong to his children but can be played with by young patients. There is a brass sign outside the front door to advertise surgery hours.

The remainder of the week the doctor attends surgeries at the main premises, and in the afternoons he makes house calls. Other than for consultations the room is often unused, but when friends come to stay it can be pressed into use as a spare bedroom at weekends, and some evenings the doctor uses the room to read professional papers or watch a portable TV away from the children.

Answer: The principal use of this room is as a doctor’s surgery, and occasional use for domestic purposes is incidental. The room should be separately rated, and the remainder of the dwelling banded for Council Tax as a composite hereditament.

5. A teleworker formerly employed by a large national company in a call centre now works for the company 5 days a week at home, using a small bedroom to house an office desk, telephone consol, computer terminal and chair, all supplied by her employer. Her hours are flexible but generally the room is used for the purpose of work at least 40 hours each week. During evenings and weekends it is used by other members of the family for leisure and recreational purposes, and by the taxpayer for doing domestic chores such as ironing. No physical alterations have been made to the property other than the installation of new telephone lines, and no members of the public or work colleagues visit the house for business purposes.

Answer: Rateability will not arise unless equipment of a non domestic sort is installed or the property is physically adapted for the non domestic use. This is because the character of the room remains as domestic living accommodation, and the purposes of living accommodation may include recreational and leisure use and work. The taxpayer uses furniture and equipment of a kind that is commonly found in domestic property and there is no interference with domestic use of the remainder of the property.

Practice note 9: cross boundary dwellings

1.0 General

Part II of The Council Tax (Situation and Valuation of Dwellings) Regulations 1992 as amended by The Council Tax (Situation and Valuation of Dwellings) (Amendment) Regulations 1994 contains rules for treating a dwelling which falls within the area of more than one Billing Authority. It also contains rules for ascertaining the particular part of a billing authority’s area within which a dwelling is to be treated as situated.

Examples are shown in Appendix 1

2.0 Dwellings within the area of more than one Billing Authority (Regulation 3)

2.1 Where a dwelling falls within the area of two or more billing authorities it is to be treated as situated in the billing authority in which the greater part of the dwelling is located. This is calculated on the sizes of the relative parts of the actual “structure” i.e. building (see paragraph 4 below). The proportion of the plot in each billing authority is irrelevant. See Appendix 1, Example 1.

2.2 Where a dwelling is part of a ‘single property’, i.e. where disaggregation provisions apply (see CTM:PN5), which falls within the area of two or more billing authorities it shall be treated as situated in the billing authority in which the greater part of the property is located. So even if the annex is situated wholly within a single billing authority if the greater part of the “main” house is in the other billing authority both will be treated as being in that area. See Appendix 1, Example 2.

2.3.1 Where a dwelling is a composite hereditament, or part of a “single property” which is a composite hereditament, each dwelling shall be treated as situated in the area in which the composite hereditament is situated for non-domestic rating purposes (see RM: 4:2 s10). See Appendix 1, Example 3.

2.3.2 In a case where a composite hereditament is wholly exempt from non-domestic rating (e.g. majority of farms) each dwelling shall be treated as situated in the area in which the part of the hereditament having a domestic use of greater value than any other part is situated (for the valuation of domestic see CTM:PN 2).

2.3.3 Where a dwelling or composite dwelling falls to be disaggregated, all the disaggregated dwellings will be treated as situated within the billing authority area in which the ‘single property’ is treated as being situated. This will be the case even where a physically distinct unit, say a farmworker’s cottage, forming part of a composite is itself actually situated within a different BA area from that in which the whole composite is treated as being situated.

3.0 Dwellings in more than one part of a Billing Authority’s area (Regulation 4)

Where a dwelling falls within two or more parts of a billing authority’s area, it should be treated as being situated in the part in which the greater or greatest part of the dwelling is situated (see 4 below).

Where a dwelling is part of a single property which falls within two or more parts of a billing authority’s area, it shall be treated as being situated in the part which the greater or greatest part of the single property is situated (see 4 below).

(NB.A single property means any dwelling which, but for aggregation/disaggregation, would have been a single dwelling).

4.0 Rules for ascertaining situation of dwellings (Regulation 5)

4.1 In determining the “greater or greatest part” of a dwelling or single property it is the superficial extent (size of the footprint) of the structure of the dwelling/single property which is being looked at. So the billing authority where the larger proportion of the structure of the dwelling/single property is situated will be that in which the dwelling/single property is classed as being located in. Appendix 1 sets out examples for clarification.

4.2 For this purpose “structure” does not include any structure which is not contiguous with the principal structure on the premises. See Appendix 1, Example 4.

4.3 Where the greater part of the “superficial extent” of a caravan, houseboat or other structure cannot be determined then:-

(i) where the dwelling falls within more than one billing authority it will be determined by agreement between the respective billing authorities.

(ii) where the dwelling falls in more than one part of a billing authority’s area it will be determined by the authority itself.

5.0 Dwellings associated with formula-rated hereditaments

The regulations described above still operate in respect of dwellings associated with formula-rated hereditaments, but care must be exercised in deciding whether or not the dwelling forms part of a composite hereditament, and if so, the extent of that composite hereditament. The situation will always resemble that illustrated in Appendix 1, Example 3, but the treatment is less straightforward.

5.1 Central Rating List hereditaments. These are defined in the Central Rating List Regulations 1989 (SI 1989/2263). The Regulations treat the hereditaments of different ratepayers in different ways, but the important feature to remember is that domestic property is not included in any of the classes. The consequence of this is that in these circumstances any house or flat will not normally be part of a composite hereditament, even though it might at first appear that it is.

In Appendix 1, Example 3, if “W/S” were a power station in the occupation of National Power, and the house a caretaker’s residence within the curtilage, then the house will not be composite with the power station but a wholly separate hereditament, ie dwelling, and accordingly be treated as falling within “Y”.

Where a domestic property is composite with non-domestic property forming an excepted hereditament (ie part of a formula rated occupier’s land which is not treated as coming within the formula hereditament) under the Regulations, for example living accommodation attached to a shop located within a British Waterways canal basin, then no difficulty should arise since the shop will be shown in a local rating list, but the composite hereditament will be only the shop and living accommodation, not the whole canal basin.

5.2 Formula assessed hereditaments in local rating lists

These will consist either of power stations assessed in accordance with the Electricity Generators (Rateable Values) Order 1989 (SI 1989/2474) (as amended) (i.e. occupied by anybody other than National Power plc, Powergen plc or Nuclear Electric plc), or of statutory docks and harbours assessed in accordance with the Docks and Harbours (Rateable Values) Order 1989 (SI 1989/2473).

In the case of power stations, there are no special provisions as to the extent of the hereditament, and the advice set out in paragraphs 1 to 4 should be followed exactly as for any other composite hereditament.

In the case of formula assessed docks, Reg 5 of the Non-Domestic Rating (Miscellaneous Provisions) (No 2) Regulations 1989 (SI 1989/2303) makes special provision both as to the extent of the dock hereditament and in which local rating list it is to be entered.

The Regulation takes each hereditament occupied by the dock undertaking (there may be many of them) and where it consists of both operational and non-operational land, divides the hereditament into two. The operational land (the “new hereditament”) is taken into the cumulo, the remainder being entered separately in the local rating list. Any domestic property (e.g. a lock keeper’s cottage) will always be part of the remainder. In applying the advice set out in paragraphs 1-4 above Listing Officers should only have regard to the location and value of the remainder, and not to any land comprised in the “new hereditament”.

Practice note 9: appendix 1 - Examples of the treatment of cross boundary dwellings

Example 1

A house and garden where the boundary between billing authorities “X” and “Y” passes through part of the house.

Treat the dwelling as being in “X” because, whilst the greater part of the plots is in “”Y”, the greater part of the “structure”, i.e. the building, is in “X”.

A house and garden where the boundary between billing authorities (https://assets.publishing.service.gov.uk/media/5faa8be2e90e07306a402e28/Example1.jpg)

Example 2

A house and granny annex which are disaggregated into two dwellings under the Chargeable Dwelling’s order (see CTM: PN5). The boundary between billing authorities “X” and “Y” passes through part of the house.

Treat both dwellings as being in “X” because, whilst the granny annex is wholly within “Y”, the greater part of the whole property’s “structure”, i.e. the building, is in “X”. This is determined ignoring the disaggregating into two dwellings.

A house and granny annex which are disaggregated into two dwellings (https://assets.publishing.service.gov.uk/media/5faa8e698fa8f5789559ac58/Example2.jpg)

Example 3

A house with a small car repair workshop at the bottom of the garden. The property is a composite. The boundary between billing authorities “X” and “Y” passes between the house and the workshop.

Treat the dwelling as being in “X” because composite dwellings are treated as being situated in the BA area for which the non-domestic hereditament is treated as situated under the Non-Domestic Rating (Miscellaneous Provision) Regulations 1989. For rating, hereditaments are treated as situated in the BA’s area which actually contains the part of the hereditament with the greatest rateable value attributable to it. In this case only “X” has any RV attributable to it.

A house with a small car repair workshop (https://assets.publishing.service.gov.uk/media/5faa8ea88fa8f57899630d00/Example3.jpg)

Example 4

A house and a garden with a detached garage, has the boundary between billing authorities “X” and ”Y” passing down exactly down the middle of the house.

The existence of the garage in “Y” will not affect the decision because the calculation is made by reference to the superficial area of the “principal structure”, i.e. the house and not any structures which do not touch the main building.

As no part of the superficial extent of the house can be reasonably be ascertained to be greater that the other, the billing authorities and not the LO must decide within which area the dwelling is to be treated and situated.

A house and granny annex which are disaggregated into two dwellings (https://assets.publishing.service.gov.uk/media/5faa8e698fa8f5789559ac58/Example2.jpg)

Practice note 10: hospitals – the identification of domestic property and how to band it

1. Background

The VOA has reviewed its policy on the identification of domestic assessments with hospitals and has received legal advice that;

A domestic assessment would only arise within a hospital hereditament if a person was in hospital for 60 days or more and was not receiving treatment. The new policy co mes into effect on the 1st October 2015.

Separate self contained units requiring disaggregation and separate bands may be present on the geographical site of a hospital such examples may include, staff accommodation where the hospital is in paramount control.

Where the occupant is in paramount control each dwelling may constitute its own separate hereditament and hence attract its own council tax banding.

These two categories require separate assessment and banding.

2. Council Tax, hospitals and composites

Hospitals that are exclusively non domestic will fall to be assessed only in the non domestic rating list. Where they contain a proportion of domestic property, they will form a composite hereditament.

3. Identification of domestic areas

The LO / VO will receive FORs from hospitals, which will give details of the non domestic / domestic split.

The identification of domestic and non domestic areas within a hospital is based on the number of days which patients spend in hospital either in a domestic capacity or a non domestic capacity, as a proportion of the total number of bed days in the hospital. A bed day is the number of days each bed is occupied by a patient, so the total number is multiplied by the total number of beds in the hospital.

The proportion of domestic patient days is then applied to the area of the hospital deemed to have domestic use, and this area is deducted from the total area used to determine the non domestic assessment. The domestic area is then valued in accordance with the valuation basis described below to arrive at a capital value as at 1 April 1991 for England and 1 April 2003 for Wales. The capital value will fall within the usual banding ranges and this will determine the band. .

The test for domestic use is whether active treatment is being administered in hospital wards, if it is then that part of the hospital does not meet the definition of domestic at s66(1) . If patients in hospital are not receiving active treatment , their stay is domestic unless it is non domestic due to the application of s66(2) ( short stay, taken as less than 60 days.)

4. Guidance as to what constitutes treatment;

The following is intended to be a guide as to what treatment is for the purposes of ascertaining domestic property,

“Treatment” means treatment in its normal sense and therefore includes, but is not limited to, any medical intervention, diagnostic care or observation undertaken by professional staff in hospitals, including doctors, nurses, midwives, therapists and psychologists, designed to improve or modify patients’ physical and/or mental abilities and social functions. This definition includes, but is not limited to nursing (which includes aiding convalescence), psychological interventions, physiotherapy and other sorts of therapy including habilitation and rehabilitation.

5. Practical valuation or banding application

The VOA has received legal advice that a split between non domestic and domestic could be carried out on an apportionment of the number of patient days falling into or outside the definition of domestic above.

It is recognised that the split between domestic and non domestic will be fluid. In order to provide certainty the operational approach is to review the banding in conjunction with the identification of non domestic that occurs at the AVD for each Non Domestic Rating List.

To find the domestic portion of a hospital the number of patient days fulfilling the domestic definition should be divided by the total number of patient days. This will provide a fraction which is then applied to the area of the hospital deemed to have domestic. For practical purposes a fraction less than 2.5% is considered de minimis and would not trigger a domestic apportionment.

Unlike traditional domestic dwellings like houses there is no market to derive the valuation from in order to reach a band. In the case of hospitals the application of the contractor’s basis is used where cost is treated as being equivalent to value.

If a hospital has a domestic proportion, this will be translated into a band by use of the contractor’s basis of valuation using the appropriate building costs for the appropriate Valuation List. For England the appropriate date tor the ascertainment of building costs is 1st April 1991 and for Wales 1st April 2003. This calculation is applied where there is only one “dwelling” identified , where more are found please see below.

Tables of building costs are shown at Appendix 1 .

6. Process for banding, using contractor’s basis of valuation

For an English hospital, the contractor’s basis stages are

Stage 1 - Build Costs:

Multiply domestic a rea of hospital(calculated as a nominal proportion of the whole) by the unit build cost for 1991 (price per square metre) from table supplied by Building Surveyors

Stage 2: Apply age and obsolescence allowances provided by Building Surveyors and taken from the NDR valuations.

Stage 3: Add Land

Land is added as a percentage of the stage 2 building costs (ie after the application of the age and obsolescence allowance)

To find the Band

The total cost based on the above process will be treated as being equivalent to capital value and the band will be taken from normal band ranges.

7. How to deal with Disaggregation of domestic dwellings within the composite.

Where a hospital hereditament contains both domestic and non domestic its will be a composite hereditament.

There are specific rules that determine the identification of dwellings within domestic accommodation. Like other composites, d omestic accommodation in hospitals can, on the specific facts, be required to be treated as separate dwellings under Article 3 of the CT Chargeable Dwellings Order 1992 . This process is known as “disaggregation”.

Statute requires that where a single domestic hereditament contains a , “building or part of a building constructed or adapted for use as separate living accommodation” then it shall be classed as a “self contained unit” (SCU) and form a dwelling in its o wn right

Where a SCU is found, there will always be a counter-part so in the example of a simple house with annexe there would be two SCU’s; the annex and the remainder. Both parts need to be self contained units , the presence of one cannot prevent the residue from being a self contained unit.

8. Disaggregation – practice

For a SCU to be identified within the domestic part of a hospital there must be specific physical accommodation that fulfils the following criteria;

100% domestic usage AND

Physical characteristics

In relation to (b) , for detailed guidance on what constitutes a self contained unit see CTM link …

Council Tax Manual _ Disaggregation of dwellings

The main characteristics of an SCU are;

Self contained

All living functions possible, including washing , toilet , food preparation and eating and sleeping.

(There is case law showing that the absence of one element of an SCU may not prevent an SCU from existing)

Typical hospital examples of SCUs are ;

(i) A block containing all living functions possible; washing , toilet , food preparation and eating and sleeping. Where each of these elements are available on each floor of a block then each floor will comprise a SCU.

(ii) A self contained flat for use by medical staff provided it does not constitute a separate hereditament. If it did, it would comprise a separate dwelling in its own right and require separate assessment.

Where two or more SCU s are found, each must be banded . The dwelling disaggregated from the notional apportioned area of the hospital will be banded specifically on its physical characteristics , primarily its area. In the case where there is only one disaggregated dwelling the remaining domestic accommodation calculated by reference to the notional apportionment less the disaggregated area, becomes the physical extent of the accommodation to be banded .

9. Disaggregation if no domestic entry in Valuation List

The legislation requires that a SCU must be identified from an existing dwelling. This therefore requires the presence of an existing dwelling.

Where the Valuation List shows an entry reflecting the domestic part of a composite hospital, the SCU can be disaggregated so the existing entry would be split into two or more entries in the Valuation List.

However, if two or more dwellings should be shown in the list following the application of Article 3 “disaggregation”, but there is no existing entry in the Valuation List, then an entry reflecting a “notional” single dwelling (comprising both areas to be disaggregated) should be inserted first. Once this entry is in the Valuation List then it can be disaggregated from date of schedule (DOS) to reflect the SCU determined by the LO and its counterpart entry.

10. Example of application of disaggregation of domestic area within composite hereditament.

A hospital hereditament has an area of 10,000m2 which contains an element of long stay where no treatment occurs. The notional apportionment of the domestic patient days shows 10% domestic. This gives an area of 1000m2 to be treated as domestic. Within the hospital a block has been identified that satisfies the conditions of a SCU. This block is 300m2.

There are therefore two dwellings to be banded. The first is the disaggregated block of 300m2. The second is the “counterpart” SCU identified as the remainder ( 1000m2 less 300m2) giving 700m2.

Two bandings are therefore required using the contractors basis described above.

11. Effective dates - practice

For composite hereditaments effective dates are derived from the specific event.

If a hospital becomes a composite, then the date of the event is taken as the effective date for the introduction of the domestic element into the List; likewise if a hospital ceases to have any domestic use. If the balance of the domestic / non domestic use within the composite changes, then the date of the change, if evidenced, becomes the effective date. In practice this will generally be the date indicated in the FOR..

12. Effective dates and disaggregation

Under the The Council Tax (Alteration of Lists and Appeals) (England)

Regulations 2009

(6) Subject to regulation 3(2), where an alteration—

(b) the inaccuracy was to show as one dwelling property which should have been treated as

two or more dwellings by virtue of article 3 of the Council Tax (Chargeable Dwellings)

Order 1992(a),

** “the alteration shall have effect from the day on which the alteration is entered in the list.”**

This has the effect that effective date for disaggregation will be the date of the next schedule (DOS)

If there is no existing domestic entry in the valuation list and disaggregation appearsto be appropriate then it is more complex. In this situation a notional dwelling needs to be created that runs from the same effective date as the domestic was first evidenced to have existed and this may be back to the beginning of the Valuation List if appropriate. Then the notional dwelling needs to be disaggregated from DOS.

Wales - Effective dates and “ 6 year rule”

In Wales the above formulation of effective dates applies but there is intervention of the “6 year rule “ This (Reg 14(6) of 1993/290 applies) prevents the reduction of a band where the alteration occurs 6 or more years ago in terms of the effective date. So for example, if the band of domestic part needed to be reduced from C to B, then the effective date of the alteration to B can only occur from a point 6 years before the schedule that carries out the alteration.
- Other institutions and facilities
Residential care homes

Residential nursing homes

Rehabilitation centres

Convalescence homes/centres

Mental health half-way houses

Mental health crisis homes

Maternity homes/centres

Respite care homes/centres

The non domestic / domestic approach for these categories is set out in RM vol 5 section X Practice Note 1 which can be accessed here.

Appendix 1 - build costs – England 1 April 1991

Brief General Specification: Units generally brick built with hole –in-the-wall windows, traditional pitched roof, typical apartment specification, LPHW radiator heating, lighting & power, TV point and smoke alarms, carpets, ensuite bathrooms. Rehabilitation unit with common nurses station/warden bed hoists are excluded since manual handling (1991)

Having assessed the notional age for the individual block, the following age related allowances are recommended. It should be noted that physical and functional obsolescence are not directly related to age and that an older building, especially after recent refurbishment, may operate as efficiently as a newly constructed block, and with no greater running costs; in such cases VOs should ascribe a minimal age to the older building and apply little or no obsolescence.

Appendix 2 - build costs Wales 1 April 2003

Brief General Specification: Units generally brick built with hole –in –the wall windows, traditional pitched roof, typical apartment specification, LPHW radiator heating, lighting & power, TV point and smoke alarm, carpets, ensuite bathrooms. Rehabilitation unit with common Nurses Station/warden. Bed hoists are excluded since manual handling (2003)

Appendix 3 – worked example

A hospital in England has an area of 20,000m2. The FOR information tells us that 15% is domestic but does not specify which areas Applying 15% domestic gives 3000m2. Hospital built in 1970 in SE England. This area is required to be converted into a capital value by the contractor’s basis of valuation

Stage 1 – Build Costs

3000m2 @ £858.96/m2 = £2,576,880

Add kitchens 3000m2 & £17.61/m2 = £ 52,830

Sub total = £ 2, 629,710

Stage 2 – Apply Age and Obsolescence Allowance

Deduction Say 10%

£2,629,710 @ 90% £2,366,739

Stage 3 Add Land

£2,366, 739 plus 7.5% = £2,544,244

Stage 4 – compare with band ranges

This is a Band H (greater than £320,001)

Appendix 4 – worked example

A hospital in England has an area of 20,000m2. The FOR information tells us that 15% of a specified area is in domestic use. The specified area is 3000m2 in total. Hospital was built in 1970 in SE England. This area is then required to be converted into a capital value by the contractor’s basis of valuation

Stage 1 – Build Costs

15% of the specified area of 3000m2 is 450m2

450m2 @ £858.96/m2 = £386,532

Add kitchens 450m2 & £17.61/m2 = £ 79,245

Sub total = £ 465,777

Stage 2 – Apply Age & Obsolescence

Deduct Say 10%

£465,777 @ 90% = £419,199

Stage 3 Add Land

£419,199 @ 7.5% = £450,639

**Stage 4 – compare with band ranges ** .

This is a Band H (greater than £320,001)

Appendix 4 –band levels

England 1993 List

Wales 1993 List

Wales 2005 List