House builders hit by early council tax charges
Building firms report an increasing trend for local authorities to charge council tax on houses that are not even fully built yet.
The Federation of Master Builders (FMB), which represents small and medium sized enterprises (SMEs) in the sector, says that not only has council tax has become a significant burden for its members, it is also having the unforeseen effect of slowing down building work.
The FMB is lobbying the Treasury, ahead of this year’s budget statement, to lay down new rules for council tax.
FMB chief executive Brian Berry said: “If the government is serious about solving the housing crisis, it must address the issue of unfair council tax charges on house builders. Today we are calling on the government to halt the poor practice of local authorities charging council tax on incomplete new homes. Reports from FMB members suggest it has become relatively commonplace for new homes to be deemed complete for the purposes of council tax long before they are actually inhabitable. This is sometimes the case before even basic work has been completed, such as the walls have been plastered or the floors have been concreted.”
He continued: “Council tax is designed to fund services provided to tenants, so there is little justification for levying it on new homes months before anyone could move in. There is a growing concern that council tax is being unfairly levied as just another development tax. We accept that there is a case for council Tax being levied on existing empty properties in order to incentivise these being brought back into use. However, for new homes, it creates perverse incentives for developers to hold back completing these properties until they’ve agreed sales and slows down the delivery of completed new homes onto the market.”
Mr Berry concluded: “What is urgently needed is an agreed definition of when a new home is complete for the purposes of charging council tax, and one which ties this point much more closely to the point of inhabitability. This will help ensure against current poor practice in some areas and will also serve to speed up the delivery of new homes. For this reason, we’re also urging government to review whether the removal of the automatic six month exemption for ‘unoccupied and substantially unfurnished’ dwellings should have been applied to new dwellings, as we fear this is having the unintended effect of further slowing down house building."
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This article was published on 12 Feb 2016 (last updated on 15 Feb 2016).