Chapter 13 Valuations for Taxation Purposes

In England & Wales
Property Taxation
• Occupiers of dwellings and business premises (hereditaments) are
taxed rather than owners (unless the property is empty)
• Residential capital valuations and non-residential rental valuations are
undertaken by the VOA
• For 23.2m residential dwellings the tax is known as Council Tax and is
based on capital values
• The value estimate is then used to place the dwelling into one of eight
value bands and the amount of tax paid depends on which band the
dwelling is in
• For 1.8m hereditaments the tax is referred to as Business Rates and is
based on rental values, known as rateable values
• The VOA is also required to assist administration of other propertyrelated taxes including Stamp Duty Land Tax (transfer tax), CGT and IHT
Valuation Office Agency (VOA)
• Property tax in England and Wales used to raise revenue for the
provision of local services
• Government agency charged with producing and maintaining the
Council Tax List and Rating List
• Executive Agency of HMRC
• 85 offices with 4,300 staff (including Scotland)
• Undertakes residential capital valuations and non-residential rental
• Required to assist administration of other property-related taxes
including Stamp Duty Land Tax (transfer tax), CGT and IHT
• Offers consultancy services, mainly to other government departments
and agencies
Council Tax
• 23.2 million dwellings
• Introduced in a rush after the poll tax failed
• Set by local authorities but uses relative value of dwellings to
determine each household’s contribution
• VOA places each dwelling in one of 8 value bands based on its value at
1st April 1991
• Liabilities range from £1,000 to £3,000 and average Band D tax is
approx. £1,400
• Exemptions and discounts
– 25% if one resident
– Certain exemptions for empty dwellings
– Exemptions for certain types of resident (e.g. students)
• Yielded £22bn in 2006-07, £25bn in 2008-9
Council Tax
• Council Tax List is kept up to date by
Receiving information from local authorities when dwellings are altered
Sending questionnaires to residents
Visiting dwellings
Accessing transaction data from Rightmove
• Information collected includes
Type of dwelling
Situation of property
Features of the locality
• Data are stored electronically in same database as Business Rates
Business Rates
• Levied annually on individually occupied non-domestic premises
• Amount of tax due from each occupier is based on an assessment of the
annual ‘rateable’ value of the hereditament occupied, which is multiplied
by the appropriate national Uniform Business Rate (UBR) multiplier set by
the Government on 1 April each year
• Payments are collected by local authorities
• The Valuation Office Agency (VOA) is the Government agency charged with
producing and maintaining the Rating List
• Rateable values in the Rating List are reassessed every five years
• A hereditament is valued on an antecedent valuation date, two years
before each rating list comes into force
• Rateable values are based on rental valuations (as opposed to capital
• Yielded £18.4bn in 2006-07, £24bn in 2008-9
• Account for around 3% turnover
Business Rates
• Market transactions provide evidence of rents
• Rateable hereditaments include
– shops, offices, factories, warehouses, workshops, schools, hospitals,
– places of entertainment, hotels, pubs, town halls, sewage farms, swimming
pools, etc.
– there might be rating relief for certain occupiers such as charities
• A central list deals with hereditaments which, generally, are in the form
of a network throughout the country
• Some properties are used for both domestic and non-domestic used
and these ‘composite’ hereditaments require an apportionment of tax
liability between business rates and council tax
• Certain premises are exempt from business rates, e.g. agricultural
premises, fish farms and fisheries, places of religious worship, parks
and property used for the disabled
Business Rates
• 1.8m premises
– 1.267m bulk classes
• 543k shops
• 287k offices
• 437k ind/whouses
– 533k other (e.g. 66k licensed premises, etc.)
• Valuation methods
– Comp
– Contractors
• Health, education and MoD = 3.33%, 5% for the rest
– Profits
– (Investment method as a check)
Number of local units by broad
industry group, 2005
Number of local units
in UK
Motor Trades
Hotels & Catering
Post and Telecom
Property & Business Services
Public Admin & Other Services
(Source: Office for National Statistics)
Business Rates
• The VOA has the legal right to inspect premises and gather occupation
• It can issue notices to all business occupiers requiring information for
rating purposes This information includes
description of accommodation
details of any rent paid
whether outgoings are included in the rent
whether the rent includes other items such as fixtures, fittings and services
details of rent review provisions and so on
• Publication of a new list triggers the ratepayer’s right of appeal, should
he or she disagree with either entry of the hereditament in the list, the
extent of the hereditament assessed, the description of the
hereditament or more particularly, the value ascribed to it
Business Rates
• Local authorities inform the VOA of any changes occurring in their
areas which require an amendment of the Rating List, e.g.
– construction or alteration of property
– change of use of property
• In fact those changes which would normally be apparent from the
granting of planning permissions or the approval of work by Building
Control Officers
• A new or altered property becomes rateable after the local authority
serves a ‘completion notice’ and this can be served up to three months
before the expected completion date
• UBR is adjusted to make revenue roughly the same, adjusted for
inflation but relativities change
– UBR in 2009/10 48.5p, lower in 2010/11