Decision

RESOLVED:

1. 1.  Recommend to Council that, in accordance with the Local Authorities (Calculation of Council Tax Base) (England) Regulations 2012, the amount calculated by Hackney Council as its Council Tax Base for 2024/25 shall be 77,766.9 Band D equivalent properties adjusted for non-collection. This represents an estimated collection rate of 93.5%.
2. 2.  Recommend to Council that in accordance with The Non-Domestic Rating (Rates Retention) Regulations 2013 Hackney’s non-domestic rating income for 2024/25 is £179,559,273 subject to verification by the Academy (our Revenues Software supplier) software release. This comprises three elements.

·  £66,209,106 which is payable in agreed instalments to the Greater London Authority

·  £54,298,802 which is retained by Hackney Council and included as part of its resources when calculating the 2024/24 Council Tax requirement.

·  £59,051,365 which is payable in agreed instalments to Central Government

1. 3.  To note that changes to the current CTRS scheme in 2024/25 were agreed by Cabinet in December 2023.
2. 4.  Recommend to Council that it approves a proposal to levy a council tax premium equal to a 100% of the Council tax charge in 2024/25 on any liable property which is unoccupied and substantially unfurnished for a continuous period of at least one year.
3. 5.  Recommend to Council that we signal our intent prior to 1st April 2024 that we will levy second homes premium from 1st April 2025.

REASONS FOR DECISION

Council Tax Base

The rules for calculating the Council Tax Base are set out in the Local Authorities (Calculation of Council Tax Base) (England) Regulations 2012. The calculation is based on the valuation list and other information available on 13th December.

Firstly, the authority must estimate the number of properties in each band after allowing for exempt properties. These figures are also adjusted to allow for discounts (e.g. single person discount and Council Tax Reduction Scheme), exemptions and the impact of applying regulations which allow the Council to charge additional Council Tax to the owners of empty homes and second homes. A formula is then used to calculate the total number of Band D equivalent properties. This gives a higher weighting to properties in Bands above Band D and a lower weighting to properties in bands below Band D. This can therefore be thought of as the average number of properties liable to pay Council Tax. The calculation is set out at Appendix 1.

The Authority then must estimate what percentage of the total Council Tax due for the year it will be able to collect. This is usually referred to as the collection rate. This percentage is then applied to the total number of Band D equivalent properties to give the tax base to be used for setting the Council Tax. Another way of considering the tax base is that it represents the amount of Council Tax income that will be received from setting a Band D Council Tax of £1.

There are a number of factors to be considered when assessing the likely collection rate for 2024/25. Collection rates since 2020/21 have been adversely affected by the Covid-19 pandemic, the cyber attack and latterly by the cost of living crisis. The collection rate for council tax in 2023-24 was set at 92.5% but now the Council Tax and NNDR databases are  up to date, the systems are fully operational, and we expect a higher collection rate in 2024-25. However, the collection rate will continue to be depressed by the cost of living crisis. It is very difficult to estimate what the actual rate will be given the impact of this on residents’ ability to pay which make it, as ever, more important that we continue to provide and signpost to support where it is needed in a timely manner to prevent arrears positions escalating for taxpayers. Notwithstanding this we believe a collection 93.5% is achievable and this has what we have assumed in the taxbase calculations

If actual collection in the forthcoming year exceeds the budgeted collection rate this  could generate a surplus in the Collection Fund which would provide additional one-off resources available for use in 2025/26 and beyond, either for one-off revenue spending or the Capital Programme. If on the other hand, the collection rate set is over-optimistic, this may result in a deficit on the collection fund at the end of 2024/25, the major part of which would need to be met from Hackney's 2025/26 Budget.

A collection rate of 93.5% will result in a tax base of 77,766.9 Band D equivalents, as shown in the table below.

2024/25 TAX BASE/COLLECTION RATE

2024/25

Aggregate of Band D Equivalents Estimate of Collection

Rate

Tax Base (Band D Equivalents)

83,173.1

1. 5%

77,766.9

This compares to a tax base of 77,108.9 Band D equivalents used in the 2023/24 budget setting.

Business Rates and the London Business Rates Retention Scheme

In November 2023, Cabinet approved our continued participation in the localised London business rates pooling scheme in 2024-25. We joined the scheme in 2022-23 and continued to participate in 2023-24. The scheme comprises the City of London and 6 other London boroughs. In 2022-23 and 2023-24, we received a significant financial benefit, estimated to be £5.1m over the two years; and work by the scheme’s financial advisers, LG Futures, suggests that the 2024-25 scheme will deliver a financial benefit of £1.6m to £2m to the Council.

Empty Property and Second Homes Premiums

Currently the Council charges an extra amount of Council Tax (a ‘premium’) if a property has been empty for 2 years or more - a premium equal to 100% of the annual council tax charge on the property is added to bills on properties that have been empty between two years and five years, and a premium of 200% is added to bills on properties that have been empty for five years. We have applied this discretionary power in order to encourage owners of empty properties to bring them back into use. An empty property is defined as a dwelling which is unoccupied and substantially unfurnished.

The Levelling Up and Regeneration Act contains a provision to amend the definition of ‘long term empty homes’ so that, for financial years from 2024-25 onwards, dwellings unoccupied and substantially unfurnished for a continuous period of at least one year are liable to the council tax premium equal to a 100% of the Council tax charge on the property. This compares to the current two year period.

The Council proposes to introduce this new premium in order to further encourage owners of empty dwellings to bring them back into use. If Cabinet approves this proposal we will be able to charge relevant properties the premium in 2024/25.

It should be noted that where a property is unoccupied following the death of the resident, the premises would be exempt from council tax where probate or letters of administration have not yet been granted. If the premises remain unoccupied after the granting of probate or letters of administration a further six months exemption can be applied.

There will also be potentially increased income to the council if empty property owners still do not bring the properties back into use.

The impact of introducing the 100% premium at 1 year rather than 2 years based on current data is that 381 properties will become liable for the premium at 1st April 2024 as opposed to 1st April 2025 and 80 properties would become liable for the premium during the financial year 2024/25 as opposed to 2025/26.

The financial impact of the 381 properties impacted as at 1st April 2024 is shown below based on the 2023/24 Council Tax charges.

Band A 30 properties charge would be £2,364.40 of which Hackney retains £1,785.54 per property (with the balance going to the GLA) so could raise an additional £26,783.10 to Hackney

Band B 102 properties charge would be £2,758.44 of which Hackney retains £2,083.12 per property so could raise £106,239.12 to Hackney

Band C 115 properties charge would be £3,152.52 of which Hackney retains £2,380.72 per property so could raise £136,891.40 to Hackney

Band D 83 properties charge would be £3,546.58 of which Hackney retains £2,678.30 per property so could raise £111,149.45 to Hackney

Band E 42 properties charge would be £4,334.72 of which Hackney retains £3,273.48 per property so could raise £68,743.08 to Hackney

Band F 7 properties charge would be £5,122.84 of which Hackney retains £3,868.66 per property so could raise £13,540.31 to Hackney

Band G 2 properties charge would be £5,910.98 of which Hackney retains £1,785.54 per property so could raise £4,463.84 to Hackney

So Hackney’s Council Tax income could potentially increase by £467,810 in 2024-25. There are 86 council owned properties included in the 381 properties and the cost to Hackney for these properties would be additional £123,145 but we would retain £92,996

A further provision of the Levelling Up and Regeneration Act allows, through an amendment to the Local Government Finance Act 1992, councils in England to levy a Council Tax Premium of up to 100% on second homes. We await during 2024/25, further clarification from the Government on the definition of a second home. Notice of the intent to levy the premium must be given one year prior to the commencement of the premium by notification in at least one local newspaper. Therefore if we signal our intent prior to 1st April 2024 we can levy this premium from 1st April 2025.

Until we receive further clarity on the definition we are unable to establish precisely how many properties this premium will apply to. Once we have this clarity we can then advise residents of the change from 1st April 2025 so that they can take appropriate action if they wish to avoid the premium by selling/letting their second home.

It is proposed therefore that Cabinet approves a recommendation to levy a council tax premium equal to a 100% of the Council tax charge in 2024/25 on any liable property which is unoccupied and substantially unfurnished for a continuous period of at least one year.

It is also proposed that we signal our intent prior to 1st April 2024 that we will levy the second homes premium from 1st April 2025.

NNDR Estimates, Reliefs and Special Grants

In past national budgets, the Government has announced various rate reliefs for all businesses, in particular the significant retail, hospitality and leisure (RHL) sector reliefs. Hackney, in common with all Councils, will receive compensation for these reliefs.

It is estimated that Hackney Council will receive £22.343m in s31 grants in compensation for the reliefs given in previous and current Autumn Statements and National Budgets, and from the impact of other current and past Government policies. The grants are primarily in respect of reliefs we award for Small Businesses; Retail, Hospitality and Leisure; and Transitional Payments. We also get a S31 grant to compensate us for the fact that the government did not increase the business rates multiplier in line with inflation in 2024-25 (on properties with an rateable value of below £51k) and in prior years. It did though increase the multiplier applied to properties with an rateable value of more than £51k in line with inflation in 2024-25. This is discussed in 4.24 below

In addition to this, the Council retains a cost of collection allowance for the administration of the collection of business rates and for 2023-24 this allowance is £0.616m

The total resources available to the Council in respect of Non- Domestic Rates and to be included in the budget to be approved by Council in March will therefore be an estimated £76.642m. This can be itemised as follows:

£m

Net rates yield retained by Hackney

1. 135

2023/24 Surplus c/fwd.

1. 54

Cost of Collection allowance

1. 616

Total NNDR Income for the Year

1. 299

2024/25 Retail, Hospitality, Leisure (RHL) Reliefs S31 Grant

1. 385

Cost of Multiplier Cap - 2014/15 to 2024-25

1. 874

Other S31 Grants

1. 08

Total NNDR resources

1. 642

It should be noted that the Government is introducing changes to how business rates will be calculated in 2024-25. In order to calculate a property’s rates liability before reliefs and discounts, its rateable value is multiplied by a factor called the multiplier, which is adjusted for inflation each year. In 2023-24, the multiplier is 49.9p and it is applied to all properties irrespective of the size of their rateable value. However, as from April 2024, there will be two multipliers. The first remains at 49.9p and this will apply to all properties classed as ‘small’, i.e. with a rateable value of £51k or below. An inflation uplift therefore, will not be applied to the multiplier for these properties and so the ratepayers will not face any increase in their bills (assuming that there is no change to their discounts or reliefs) and the Council will receive S31 grant to compensate for our loss of income. However, an inflation uplift will be applied to the multiplier of properties with a rateable value of more than £51k (taking the multiplier up to 54.4p) which means that these businesses will be faced with an increase in their rates bills in 2024-25

This is a very complex change and it has taken us a considerable amount of time to produce the necessary business rates information for this report. This explains why this is a late report. It should also be noted that at the time of writing this report, we had not received a Business Rates software update from our supplier which covers these changes. Once we receive this, we will recalculate the estimates and if this produces materially different results from our internal analysis, we will inform Council and Cabinet of any changes at the meetings.

Council Tax Reduction Scheme (CTRS).  

In December 2023, Cabinet approved changes to the current CTRS scheme, primarily the reduction in the minimum contribution from 15% to 10%. A report asking Council to adopt the scheme is also on the January agenda.

DETAILS OF ALTERNATIVE OPTIONS CONSIDERED AND REJECTED

The requirement to calculate the Council Tax base and business rates has been laid down by Statute. As such, there are no alternatives to be considered.