Clause 68: Exemptions for agricultural buildings

121.     Schedule 5 to the Local Government Finance Act 1988 sets out the conditions that must be met if land and buildings are to be deemed to be agricultural and thereby entitled to exemption from rates. Clause 68 amends the Schedule to reflect modern farming practices so that where farmers work on other agricultural land, perhaps on a share or contract basis, or through the pooling of resources or machinery, the exemption will apply.

122.     Clause 68 also amends the Schedule with regard to premises used for ancillary activities such as food processing and packaging. At present, the exemption applies provided that the occupier of the premises is a company and any of the members of that company is an occupier of related agricultural land. The amendments will ensure that the exemption will only apply to such premises where the company is controlled by occupiers of related agricultural land.

Clause 69: Exemptions for places of religious worship

123.     Under paragraph 11 of Schedule 5 to the Local Government Finance Act 1988, a place of public religious worship is exempt from non-domestic rates if it belongs to the Church of England or the Church in Wales or is certified as required by law as a place of religious worship. Certification is carried out at present under the Places of Worship Registration Act 1855. Section 41 of the Marriage Act 1949 provides that certified places of religious worship may apply for and be registered by the Registrar General for the purposes of marriage. Under proposals in the White Paper 'Civil Registration: Vital Change' marriages would be able to take place anywhere and it would no longer be necessary for certified places of religious worship to be registered for the purposes of marriage. As a consequence it is likely the 1855 Act will be repealed. Clause 69 amends the exemption so that a certificate is no longer required as proof of entitlement to the exemption.

Clause 70: Removal of power to prescribe rateable values

124.     Under paragraph 3 of Schedule 6 to the Local Government Finance Act 1988 the Secretary of State may disapply the standard rules for determining rateable values contained in paragraph 2 of the Schedule and instead prescribe values by order. This power was used in 2000 to prescribe rateable values for properties such as the railways, ports and harbours, and gas, electricity and water supply networks.

125.     Clause 70 will repeal paragraph 3 of Schedule 6. As a consequence at the next revaluation on 1 April 2005 all properties will be valued by valuation officers using the rules in paragraph 2, with all ratepayers having a right of appeal to independent valuation tribunals if they think their rateable values incorrect: where values are prescribed there is no such right of appeal.

Clause 71: Adjustments for hardship relief

126.     Local authorities which collect rates ('billing authorities') may grant hardship relief to ratepayers under section 49 of the Local Government Finance Act 1988. But if they do so they must meet a prescribed percentage of the cost of granting this rate relief: they have to pay this sum to the Secretary of State. The percentage is set in regulations which because of the provisions of Schedule 8 to the Act cannot be amended in respect of a financial year after the preceding 31 December. Clause 71 will allow an amendment to the regulations reducing (but not increasing) the percentage of hardship relief to be met by authorities to have effect in respect of a particular year even if made after 31 December of the preceding year.

Clause 72: Provision of information

127.     Rateable values are based on rental values. In preparing for a revaluation the valuation officers therefore send forms requesting rental information to a selection of ratepayers. A ratepayer who does not return a form within 21 days is at risk of being convicted of a criminal offence (paragraph 5 of Schedule 9 to the Local Government Finance Act 1988).

128.     Clause 72 will extend the period by which forms must be returned to 56 days, and will replace the criminal sanction with fixed civil penalties.

PART 6: COUNCIL TAX

Clause 74: Exemption of students from joint and several liability

129.     Section 6 of the Local Government Finance Act 1992 ('LGFA 1992') provides, broadly speaking, that where two or more people have an equal legal interest in a dwelling, they shall be jointly and severally liable to pay the council tax.

130.     Section 9 provides that spouses and people who live together as husband and wife are jointly and severally liable to pay the council tax, even if they do not have an equal legal interest in the dwelling.

131.     At present, students, as defined in paragraph 4 of Schedule 1 to the LGFA 1992, are disregarded for the purpose of a discount. Therefore, the liability for council tax for a dwelling whose residents were a student and someone who is not a student (and is not otherwise disregarded) would be calculated as if the dwelling had only one resident, and would therefore be subject to a 25% discount under section 11 of the LGFA 1992. Other categories of people, including the severely mentally impaired, are also disregarded for the purposes of council tax under Schedule 1 to the LGFA 1992.

132.     Exempt Class N, contained in the Council Tax (Exempt Dwellings) Order 1992 (S.I. 1992/558), made under section 4 of the LGFA 1992, provides an exemption from council tax in certain circumstances for dwellings occupied solely by students or occupied as term-time accommodation by students.

133.     However, where a dwelling is occupied by a student and non-student, although disregarded for the purpose of a discount, the student can still be held jointly and severally liable for council tax, under either section 6(3), or, where the student and non-student are spouses as defined in section 9.

134.     Clause 74 amends sections 6(4) and 9(2) of the LGFA 1992 to remove students from joint and several liability where they are a spouse or living with someone as husband and wife, or where they have an equal legal interest in the dwelling, for financial years beginning on or after 1 April 2004.

135.     Exemptions already apply where students and people with a severe mental impairment live together and there are no other residents.

Clauses 75 to 76: Discounts and exemptions

Clause 75: Discounts - special provisions for England

136.     Section 11 of the LGFA 1992 provides for nationally set council tax discounts. Currently under section 11(1) there is a discount of 25% where there is only one resident, or all but one of the residents fall to be disregarded for council tax purposes, and under section 11(2) there is a discount of 50% where there is no resident or all residents fall to be disregarded. Billing authorities in Wales already have power under section 12 of the LGFA 1992 to reduce or remove the discounts which would otherwise apply under section 11. English authorities have no such power at present.

137.     Clause 75 inserts a new section 11A into the LGFA 1992 which enables the Secretary of State to prescribe by regulations classes of dwellings where a billing authority may change the level of council tax discount. Under subsection (3), the Secretary of State may prescribe a class of dwellings where the billing authority may reduce but not remove the discount, and the regulations may not allow for the discount to be less than 10%. It is proposed to make regulations under this subsection to define a class of second homes which are not owned by persons required to live in tied accommodation elsewhere because of their work. Under subsection (4), the Secretary of State may prescribe a class of dwellings where the billing authority may reduce or remove completely the discount. It is proposed to make regulations under this subsection to define a class of long term empty homes (which are not exempt dwellings). In either case, the billing authority may determine to change the discount in all or part of its area. Subsection (5) requires the authority to make such a determination before the start of the financial year, and subsection (6) requires such determinations to be published in local newspapers.

Schedule 6: Minor and Consequential amendments

Paragraphs 41, 48 and 49: determinations to reduce discounts

138.     Paragraph 41 of schedule 6 amends section 11 of the LGFA 1992 to make clear that any discount under that section must take effect subject to any determination the authority has made under the new section 11A inserted by clause 75, to reduce or remove discounts.

139.     Paragraph 48 of Schedule 6 amends section 66 of the LGFA 1992 to provide that a determination by a billing authority to reduce or remove the discount under section 11A of the LGFA 1992, inserted by clause 75, can only be challenged by judicial review.

140.     Paragraph 49 of Schedule 6 amends section 67 of the LGFA 1992 to require the determination to reduce or remove discounts in accordance with section 11A inserted by clause 75 to be made by the full council and not delegated.

Clause 76: Billing authority's power to reduce amount of tax payable

141.     Under the LGFA 1992, dwellings may be exempt from council tax if they fall within one of the exempt dwelling classes set out in an order made under section 4 of that Act (S.I. 1992/558). The amount of council tax payable may be subject to a discount under section 11 (where there is one or no resident, or all, or all but one of, the residents fall to be disregarded), or in Wales, under section 11 to the extent that the authority has not exercised the discretion under section 12 to reduce the discount. Finally, the amount may be reduced through the effect of regulations made under section 13 of the LGFA 1992, e.g. where it is occupied by a disabled person: see the Council Tax (Reductions for Disabilities) Regulations 1992 (S.I. 1992/554). All of these exemptions, discounts and reductions are prescribed in orders or regulations made by the Secretary of State, or in Wales, the National Assembly for Wales.

142.     Billing authorities do not, at present, have a discretion to grant further discounts and exemptions, or to remit or waive council tax on hardship grounds. Authorities do not have the power to respond to hard cases which do not fall within any of the centrally prescribed categories.

143.     Clause 76 inserts a new section 13A into the LGFA 1992 which will give billing authorities in England and Wales a broad discretion to reduce the amount of council tax payable as respects a dwelling, to such extent as they think fit. Clause 76(2) provides that this may include reducing the amount payable in respect of a day to nil.

144.     Authorities may exercise this power in individual cases (e.g. individual hardship, in cases where the taxpayer is not eligible for council tax benefit, for example, where the dwelling is not their sole or main residence). Or they may determine classes of case in which liability is to be reduced (i.e. the equivalent of authorities determining exempt dwellings classes, or reductions in circumstances other than those prescribed in regulations under section 13 of the LGFA 1992).

Schedule 6: Minor and Consequential amendments

Paragraph 52(3): treatment of discretionary reductions for council tax administration purposes

145.     Paragraph 52(3) of Schedule 6 amends Schedule 2 to the LGFA 1992 by inserting a new paragraph 21, in consequence of clause 76.

146.     Paragraph 21(2) of Schedule 2 to the LGFA provides that where an authority has made a determination of a class of case in which council tax liability is to be reduced to nil, the dwelling shall be treated as an exempt dwelling for the purposes of Schedule 2 to the LGFA 1992. Paragraphs 8, 9 and 10 of Schedule 2 to the LGFA 1992 allow regulations to be made in relation to exempt dwellings. Such regulations could also be made in relation to dwellings subject to a 100 per cent reduction under clause 76 as a result of paragraph 52(3) of Schedule 6. These could, for example, require the billing authority to notify the person who would otherwise be liable for council tax of various matters. These include the dwelling's entry in the valuation list, any assumptions made that a 100% reduction applies, and requiring the person to notify the billing authority if he has reason to believe that the assumptions were inaccurate.

147.     Where the authority's determination is to reduce the amount payable for the class of dwellings other than to nil, the new paragraph 21(3) inserted into Schedule 2 of the LGFA 1992, provides for the dwelling to be treated for the purposes of that Schedule as if it were subject to a discount (i.e. a discount under section 11 or section 12 of that Act). Regulations may be made under paragraphs 4 and 5 of that Schedule e.g. requiring the authority to take reasonable steps to ascertain the applicability of any discounts, notify the liable person of assumptions made following such steps, requiring the taxpayer to notify it if he believes the assumptions to be incorrect. Such regulations could also be made, as a result of paragraph 52(3) of Schedule 6, in relation to discretionary reductions.

Clauses 77 and 78: Valuation Lists and Bands

Clause 77: Statutory revaluation cycle

148.     For non-domestic rates, there is a statutory requirement (under the Local Government Finance Act 1988 ('LGFA 1988')) for new valuation lists to be compiled every 5 years (commonly known as revaluation, since the rateable values of hereditaments subject to the non-domestic rate are included in the lists under section 42(4) of that Act). However, there is currently no such requirement for council tax valuations to be updated, and new council tax valuation lists prepared, under the Local Government Finance Act 1992 ('LGFA 1992').

149.     Dwellings are currently included on valuation lists originally drawn up on 1 April 1993, and assigned to one of eight valuation bands based on their 1 April 1991 values. At present, under the LGFA 1992, a revaluation will only take place for council tax if the Secretary of State (or in Wales, the National Assembly for Wales ('the NAW')) makes an order under section 5(4) of the LGFA 1992 substituting new bands for the current valuation bands, with new lists based on a new valuation date prescribed under section 25 of the LGFA 1992.

150.     Clause 77 inserts section 22B into the LGFA 1992, which will provide for a statutory revaluation cycle for the council tax in England and Wales. Section 22B(2) will require new lists to be compiled and come into force for England on 1 April 2007 and 1 April 2005 in Wales.

151.     Section 22B(3) requires that further new lists must be compiled and come into force no more than ten years after the date of the previous (2005 and 2007) lists. This means that the period between revaluations will be no longer than 10 years. However, the Secretary of State (for England) and NAW will be able to make orders under that section to require the compilation of new lists (and hence revaluation) sooner. The Secretary of State's orders shall be subject to the affirmative resolution procedure (subsection (11)).

152.     Subsections (4) and (5) of section 22B provide for the coming into force of new lists and their maintenance. Subsection (6) provides for the valuation officers to take such steps as are reasonably practicable to ensure that lists are accurately compiled - it is this subsection which in effect provides for the revaluation of dwellings.

153.     Subsections (7) to (10) of section 22B impose certain duties on the listing officers to compile and send copies of the new lists to billing authorities and for billing authorities to deposit the lists at their principal offices and give notice that they have done so.

154.     Subsections (4) to (10) closely follow provisions in section 22 of the LGFA 1992 which provided for the original council tax lists to be compiled, except that in future the listing officer will be required by section 22B(7) to send a proposed (i.e. draft) list to the billing authority on one occasion rather than two as required in section 22(5) of the LGFA 1992.

Schedule 6: Minor and Consequential amendments

Paragraphs 43 to 47, 51 and 52(2): amendments consequential on clause 77

155.     Dwellings are currently assigned to a valuation band based on their 1 April 1991 values, in accordance with section 21(2) of the LGFA 1992. Paragraph 43 of Schedule 6 amends section 21, by inserting new subsections (2A) and (2B) to enable valuations to be as at a new valuation date. The new date will be either two years before the date the next revaluation is due (e.g. for the first English revaluation, 1 April 2005); or, a date during that two year period specified in regulations made by the Secretary of State or NAW.

156.     Paragraph 44 of Schedule 6 ensures that an original list will remain in force until the date on which the new list is compiled.

157.     Paragraph 45 of Schedule 6 amends section 24(9)(b) of the LGFA 1992. Section 24 allows the Secretary of State to make regulations about the alteration of valuation lists. Subsection (9)(b) currently refers to copies of lists deposited by the authority under section 22(8) or section 22A(10) (which related to the compilation of new lists following local government reorganisation in Wales). New lists will be deposited under section 22B(10), not section 22(8), so paragraph 45 amends section 24(9)(b) to refer to section 22B(10).

158.     The current section 25 of the LGFA 1992 enables the Secretary of State to require a new valuation list to be compiled and decide the new valuation date and when the new list should come into effect. This general power is being replaced by a fixed revaluation cycle. Paragraph 46 of Schedule 6 will make section 25 no longer effective.

159.     The current section 28(2)(a) of the LGFA 1992 governs a person's right to inspect the valuation lists. Paragraph 47 of Schedule 6 will apply that right to the new lists, and proposed new lists, compiled under section 22B.

160.     Paragraph 51 of Schedule 6 amends section 113(3) of the LGFA 1992. Section 113(3) provides that all orders or regulations under that Act shall be subject to the negative resolution procedure, save for listed exceptions. Paragraph 51 adds to the list of exceptions orders under the new section 22B(3)(a), i.e. orders bringing forward revaluations from the 10 year cycle, which will be made by affirmative resolution procedure (see clause 77(11)).

161.     Paragraph 8 of Schedule 2 to the LGFA 1992 enables regulations to be made requiring billing authorities to notify owners of exempt dwellings of the valuation band the property has been assigned to in proposed lists. Paragraph 52(2) of Schedule 6 enables such regulations to cover the new lists, and proposed new lists, prepared under section 22B.

Clause 78: Power to change number of valuation bands

162.     There are currently eight valuation bands (A-H) with different bands in England, and Wales, set out in subsections (2) and (3) respectively of section 5 of the LGFA 1992. Under section 5(4)(b) of the LGFA 1992 the Secretary of State (in Wales, the NAW) has power to substitute different bands for the existing bands. Clause 78 amends section 5 of the LGFA 1992, by inserting a new subsection (4A) which makes clear that the Secretary of State (in Wales, the NAW) can vary the number of bands at the time of revaluation.

Clause 79: Transitional arrangements

163.     Revaluation is likely to affect the amount of council tax individual households pay. New bands with new thresholds will be substituted, by order under section 5(4)(a) LGFA 1992, for the existing bands set out in subsections (2) and (3) of that section, as part of the revaluation process, since dwelling values have increased since the original thresholds were set. Dwellings may go up one or more bands whilst others may go down.

164.     When the council tax was introduced, transitional reductions regulations were made under section 13 of the LGFA 1992. However section 13 only allows regulations to be made which would reduce what would otherwise be the council tax liability for the dwelling.

165.     Clause 79 inserts section 13B into the LGFA 1992. This section will enable the Secretary of State and the National Assembly for Wales to make regulations to phase in changes to council tax bills following revaluation, i.e. following the compilation of new lists under section 22B inserted by clause 77, or following the making of an order under section 5 substituting new valuation bands or different ratios between the bands.

166.     Section 13B(3) will allow regulations to provide for the council tax liability in respect of a particular dwelling to be higher or lower than it would otherwise be. Liability may be made higher than it would otherwise be where a dwelling moves down one or more bands as a result of revaluation, and lower, where a dwelling moves up one or more bands. The equivalent section which applies to non-domestic rating (section 58 of the Local Government Finance Act 1988) contains similar provision to allow increases as well as decreases in what would otherwise be the liability.

167.     Subsection (3) of the clause gives flexibility to develop schemes which will cover one or more years and to apply different rules in different years.

168.     Subsection (5) enables regulations under this section to make consequential amendments to social security legislation. This may be needed for council tax benefit purposes.

Clauses 80 to 82: Enforcement

169.     Schedule 4 to the LGFA 1992 enables the Secretary of State (in Wales the NAW) to make regulations allowing local authorities to secure payment of any outstanding sum specified in a liability order. A liability order must be obtained from the magistrates' court before any of the other enforcement steps can be taken. The detailed requirements are set out in the Council Tax (Administration and Enforcement) Regulations 1992 (S.I. 1992/613).

Clause 80: Amendments relating to distress

170.     Under paragraph 5 of Schedule 4 to the LGFA 1992, regulations can be made allowing billing authorities to make an attachment of earnings order, so that the outstanding council tax can be recovered by requiring the debtor's employer to deduct amounts from the debtor's pay. Quite often, a local authority only finds out about a debtor's employment details late in the enforcement process, after the authority has tried other enforcement mechanisms provided by regulations under Schedule 4, including seeking to levy distress (permitted by regulations under paragraph 7 of Schedule 4), and if that proves unsuccessful, by applying to magistrates for a warrant to commit the debtor to prison (permitted by regulations under paragraph 8 of Schedule 4).

171.     For example, a person may only reveal their employment details during a committal hearing, since the magistrates are required to inquire into the debtor's means before they can issue a warrant of commitment. Where this happens, rather than proceed with the committal hearing, the billing authority is likely to serve an attachment of earnings order. However, only the amount specified in the original liability order can at present be recovered through attachment of earnings. This will include the outstanding amount of council tax, plus a sum in respect of the costs of obtaining the liability order (in accordance with regulations made under paragraph 3 of Schedule 4 to the LGFA 1992). It will not, however, include any costs incurred trying to levy distress after the issue of the liability order or any costs incurred during the committal hearing itself.

172.     Clause 80(1), (2) and (3) will enable costs incurred in trying to levy distress or incurred during the aborted committal proceeding to be recoverable through an attachment of earnings order.

173.     Clause 80(4) amends paragraph 7 of Schedule 4 to the LGFA by inserting a new sub-paragraph (4A). This will enable regulations to be made by the Secretary of State (in Wales the NAW) to prescribe information which authorities or bailiffs must supply to debtors when distress has been levied or when distress has been attempted unsuccessfully. The existing paragraph 7(4)(a) of Schedule 4 only allows the imposition of requirements on local authorities to supply information prior to the levy of distress. There are no powers to impose requirements to supply information when the process is complete or when someone tries to levy distress but fails.

Schedule 6: Minor and Consequential amendments

Paragraph 53: Exercise of powers by the NAW under clause 80

174.     Paragraph 53 of Schedule 6 amends Schedule 4 to the LGFA 1992 in consequence of subsections (2) and (3) of clause 80. These subsections refer to prescribed amounts in relation to the costs of the application for commitment which can be included in the attachment of earnings order.

175.     Paragraph 53 of Schedule 6 defines prescribed as prescribed in regulations made by the Secretary of State, in relation to England, and by the NAW in relation to Wales. Because subsections (2) and (3) confer a new power on the Secretary of State to prescribe amounts in regulations, this power has not already been devolved to the NAW under the National Assembly for Wales (Transfer of Functions) Order 1998 (S.I. 1998/672) which provided for other functions under Schedule 4 (except those under paragraph 6) to be exercisable by the NAW.

Clause 81: Charging orders: aggregation

176.     Paragraph 11 of Schedule 4 to the LGFA 1992 enables billing authorities to apply to the county court for a charge against the debtor's dwelling for which the council tax remains unpaid, in respect of a liability order made by the magistrates' court. Regulation 50 of the Council Tax (Administration and Enforcement) Regulations 1992 stipulates that at the time of the application for the charging order, at least £1000 of the amount for which the liability order was made must remain outstanding.

177.     Clause 81 enables local authorities to aggregate two or more liability orders made against the same person to meet the £1000 limit to enable an application for a charging order. The clause inserts a new paragraph 11A into Schedule 4 to the LGFA 1992 to allow regulations made under that Schedule to include appropriate provision.