In a welcome move the Government is consulting over a proposed change to the law to prevent the Valuation Office Agency (VOA) from classing en-suite bedrooms in shared houses as the equivalent of Band A flats liable for council tax.

Typically this means that with a House of Multiple Occupation the landlord pays no longer pays one council tax bill for the whole property. Instead each en-suite bedroom is reclassed classed as a dwelling liable to council tax, regardless of the fact it is not possible to live in such a room independently. This pushes liability on to tenants, many of whom cannot afford to pay the council tax being  charged.

Over the last five years the VOA has summarily rebanded thousands of bedrooms in an attempt to try and make either occupiers or owners liable to extra council tax.

The policy of  randomly doing this  has  become popularly  known as ‘salami slicing’ in the HMO property industry and often has devastating financial implications, often causing some shared properties to close or tenants to move out.

  In many cases it amounts to bringing back an anaemic form of poll tax hitting the occupiers of these bedrooms.

Legal basis unclear

All this  results from an exercise conducted by a VOA official for which the  technical term ‘disaggregation’ is applied, utilising  – or rather abusing – discretionary  powers to split up a larger dwelling into smaller taxable units, with powers  conferred under Articles 3 and 4  the Council Tax ( Chargeable Dwellings) Order 1992 (as amended).

The legal basis for the VOA  doing this is dubious in many cases and  many of these decisions are clearly  irrational and unjust but owners can only effectively challenge them by an appeal to  the High Court, the Valuation Tribunal for England having shown itself repeatedly ill-equipped to deal with them.

Amendment of the law

Now an amendment has been proposed to the Levelling Up and Regeneration Bill to change the law by amending the definition of what constitutes a chargeable dwelling in section 3 of the Local Government Finance Act 1992.

The amendment began life following speech given by Dame  Caroline Dinneage on 8^th June 2022 at the  Second Reading of the Levelling Up and Regeneration  Bill on 8^th June 2022 which related  expressly to council tax.(Hansard Cols 881-882).

In her speech Dame Caroline Dinneage identified being “worries about the Valuation Office Agency’s interpretation of the Local Government Finance Act 1992, which means that these executive HMOs up and down the country will now be considered as separate dwellings despite the fact that they share all the common facilities. This is causing significant hardship to tenants who are seeing increases to bills of around £500 a month because they are then liable for the council tax rather than the landlord. In some instances, tenants have been given backdated bills of around £3,000.

As it is, both the Valuation Office Agency and Councils have been ignoring the existence of Council Tax(Liability of Owners) Regulations 1992 SI 551 which provide for a single bill to be paid by the landlord. Similarly, they have also ignored significant High Court decisions which have overturned such classifications. Unfortunately, the VOA and the Valuation Tribunal for England have similarly been closing their eyes to these provisions, secure in the knowledge that few taxpayers can afford an appeal to the High Court.

A welcome change

A proposed amendment to the law has  followed.  Making it through the Report Stage of the Bill at the end of November 2022, the Government has now agreed to launch a consultation early in January 2023 to look at the treatment of bedrooms in shared houses.

This may also address the fact that there exists a conflict of case law in different High Court rulings, typically a point where Parliament needs to intervene.

Altogether such a change in the law would be very welcome by both landlords and tenants and clear up the fact that council tax on this issue is clearly out of step with wider taxation law as well as housing and planning law in terms of how bedrooms are treated in shared properties.