COUNCIL TAX BASE 2015/16
The Committee considered a report of the Head of Revenues, Benefits and Information Technology seeking approval of the Council Tax Base for 2015/2016. The report contained the following appendices:
Appendix A - Council Tax Base by Parish 2015/16;
Appendix B - Variations in Council Tax levels by Parish; and
Appendix C - Example of Council Tax Base calculation for Letchworth Garden City.
The Committee was informed that the abolition of Council Tax Benefit and a new way of providing support for Council Tax to low income families through the introduction of locally based Council Tax Reduction Schemes had meant that there had been changes to the way that the Council Tax Base was calculated from 2013/2014 onwards.
The Committee noted that, since the implementation of Council Tax in 1993 and the 2013 changes, Council Tax Benefit had been a demand-led Benefit, where the Council reduced liability to those who qualified and the subsequent shortfall in the Collection Fund was reimbursed through Council Tax Benefit Subsidy on a pound for pound basis (allowing for any Subsidy Penalties). From 2013/2014, there had been no Council Tax Benefit Subsidy and the local Council Tax Reduction Schemes were funded from a cash limited Council Tax Reduction Scheme Grant, which was paid directly to each Major Precepting Authority (in this Councils case the County Council, District Council and Police & Crime Commissioner for Hertfordshire). A similar Grant was also paid to Local Precepting Authorities (Parish, Town and Community Councils) through funding initially paid to the District Council, which it was then encouraged to distribute to the relevant Local Precepting Authorities.
The Committee further noted that, from 2014/15 onwards, this Grant was no longer separately identified and was rolled in with the overall financial settlement announced in mid December 2014. The amount of Council Tax reduction awarded directly affected the Tax Base by reducing it by the equivalent number of Band D properties proportionate to the amount of expenditure. This was now therefore established within the Council Tax Base.
The Committee was advised that the legislation required the District Council to agree with its Local Precepting Authorities how the Grant should be distributed and this was the basis of the discussion at the Parish Conference held on 23 October 2013. At its meeting on 10 December 2013 Cabinet resolved:
That, in considering the level of funding for the Council Tax Reduction Scheme in 2014/2015 and the amount to be delegated to the Local Precepting Authorities, the Strategic Director of Finance, Policy and Governance and the Portfolio Holder for Finance and I.T. take into consideration Cabinets view that any change should reflect the overall final financial settlement.
Although the final decision on the total funding to Local Councils would be taken by the Council later in January 2015, an assumption had needed to be made at this stage based on the clear Cabinet view that this should reflect any overall changes in Government support. This had implications for the way in which the Local Precepting Authorities used the Council Tax Base to calculate the level of their individual precepts.
The Committee was informed that total amount specifically earmarked for the Local Precepting Authorities Grant in 2013/2014 was £90,850. This was reduced to £79,103 for 2014/2015 and based on a 15% reduction in funding for 2015/2016 this should reduce to £67,238 for 2015/2016. In all cases, each Precepting Authority was expected to reduce its Council Tax Requirement (Precept) by the amount of Council Tax Reduction Scheme Grant awarded, as this was now paid directly to them. Appendix B to the report showed the level of Band D Council Tax for each Parish for 2014/2015 and that projected for 2015/2016 assuming the same level of precept. This meant that the funding for Council Tax Reduction Schemes was now effectively removed from the Collection Fund, and therefore there had to be an adjustment to the Tax Base, otherwise too much revenue would be raised through Council Tax payments. Whilst the Council Tax Base had always had adjustments for Discounts and Exemptions, it had never previously made any allowance for Council Tax Benefit, as this had been directly reimbursed into the Collection Fund.
The Committee was further informed that, to achieve this, the Local Authorities (Calculation of Council Tax Base) (England) Regulations 2012 had introduced an additional element into the Council Tax Base calculation, referred to as item Z. Item Z was the Councils estimate of the amount of Council Tax Reduction Scheme support to be awarded within each Council Tax Band within each Local Precepting Council area and the District as a whole. This figure was then converted into an equivalent number of properties, which was then deducted from the total, thereby reducing the Tax Base. This meant that there had to be a completely different approach taken to calculating item Z as there had to be an assumption of the level of Council Tax to be charged in order to estimate the amount of Council Tax Reduction Scheme support. Previously, the Council Tax Base was used to calculate the amount of Council Tax to be charged, whereas now an estimate of the amount of Council Tax charged had to be made in order to calculate the Council Tax Base.
The Committee noted that advice received from the County Council and Police and Crime Commissioner for Hertfordshire was that they were unlikely to increase Council Tax levels in 2015/2016. NHDC was considering whether to increase Council Tax levels in 2015/2016 by 1.9%. A 1.9% increase in Council Tax for the District Council would increase the overall level of Council Tax by around £3.88 for Band D. This would result in an increase of Council Tax Reduction of around £18,400, which was well within the expected underspend of the budget, currently estimated at around £187,000 if the Council approved the recommendation from Cabinet to reduce the percentage payment reduction for working age claimants where there was nobody in the household with a disability from 33.13% to 25%.
For the purposes of calculating the Tax Base, therefore, the same Council Tax levels had been assumed for 2015/2016 as for 2014/2015, as a 1.9% increase by the District Council had a minimal effect on overall Council Tax Reduction Scheme spending.
In respect of Council Tax Exemptions and Discounts, the Committee was reminded that, at its meeting held on 13 December 2012, the Council had opted to apply a zero Discount to empty properties undergoing structural repairs and a zero Discount after twenty-eight days to other properties, which were empty and substantially unfurnished from 1 April 2013. These properties were previously exempt from Council Tax and consequently because they would now be liable for Council Tax, this had increased the Council Tax Base. These changes to Discounts and Exemptions were now fully embedded in the Council Tax Base calculation.
The Committee was advised that, in setting its Council Tax Base, the Council had always had to decide on its expected level of non-collection, and this had not changed under the new arrangements. For many years, the Council had assumed a non-collection rate of 1%. However, when considering the non-collection rate, there were a number of factors, other than eventually non-collected payments, which would impact on the collection rate as follows:-
(i) The level of successful appeals against banding valuations;
(ii) The impact of new properties coming into tax which may not be valued until the following year; and
(iii) The number of disablement applications, Discounts and Exemptions.
The Committee noted that any surplus (or deficit) on the Council Tax Collection Fund was split between the major precepting authorities (the County Council, Hertfordshire Police and this Council) in proportion to the relative level of precept on the fund (approximately 76:10:14 County/Police/District in 2014/2015). The surplus could only be used to reduce (or increase in the case of a deficit) Council Tax bills in 2015/2016, but whereas the District proportion of the surplus reduced bills only in North Hertfordshire, the County and Police proportions were dissipated across the whole of Hertfordshire. The actual impact on bills would, therefore, depend not only upon the collection performance of NHDC, but of that of all other Hertfordshire authorities as well.
The Committee was informed that collection performance in 2014/2015 was slightly down on previous years (around 0.4%) and a factor contributing to this was the ability to extend instalments into February and March. These instalments amounted to 2.32% of the collectable debit. In setting the non-collection figure, Members were mindful that this was based on the ultimate expected collection rate and not the in-year collection rate. Ultimate collection rates remained high. Each previous financial year was now over 99.0% and for every year before 2011/2012 was over 99.5%.
The Committee was advised that it was expected that because many families who had previously received 100% Council Tax Benefit would from 2013/2014 have to pay a proportion of their Council Tax, this could significantly affect the collection rate and that Council Tax arrears would increase. The evidence so far would support the conclusion that collection rates remained on course, but were taking longer to achieve.
The Committee noted that analysis of the Councils collection performance showed that actual collection could expect to reach 99.5% within three years and 99.9% within ten years. On that basis, Officers recommended that the non-collection rate should remain at 1% for 2015/2016. At the time of preparing the report, it was estimated that there would be a Council Tax surplus on the Collection Fund for the financial year 2014/2015 of £171,000. This would bring the year end position at 31 March 2015 to a surplus of £250,000. The NHDC share of this surplus would be £79,000.
(1) That a non-collection rate of 1% for 2015/2016 be approved; and
(2) That the amount calculated by this Council as its Council Tax Base for 2015/2016 shall be £47,371.50 in total, and that the individual sums shown for each Parish, as set out in Appendix A to the report, be agreed.
REASON FOR DECISION: To fulfil the statutory requirement to set a Council Tax Base for the District and to enable Major and Local Precepting Authorities to set their levels of Council Tax for 2015/2016.
NATIONAL NON-DOMESTIC RATE RETURN 1 - 2015/16
The Committee considered the report of the Head of Revenues, Benefits and Information Technology in respect of the National Non-Domestic Rate Return 1 (NNDR1). The following appendix was submitted with the report:
Appendix 1 - Draft NNDR 1 Return.
The Committee was advised that the Council had always had a requirement to make an NNDR1 Return to the Secretary of State each year, this being the Councils estimate of the likely income from Non-Domestic Rates for the following financial year.
The Committee noted that, in December 2011, the Government had published its proposals for a Business Rates Retention Scheme alongside the introduction of the Local Government Finance Bill, which became an Act of Parliament in November 2012. The intention of this proposal was to ensure that a proportion of Non-Domestic Rates was locally retained. In November 2012, the Government had issued a Policy Statement reflecting its desire to see the Business Rates Retention Scheme at the heart of its reform agenda aimed at achieving two of its key priorities: economic growth and localism.
The Committee further noted that the amount to be retained by Billing Authorities, and the amount to be paid to Central Government and Major Precepting Authorities, was to be fixed at the start of the financial year on the basis of the Billing Authoritys estimate of its Non-Domestic Rating income for the year (the NNDR1 Return). For this reason, the Government had decided that this return should now be subject to approval by Members. The basis on which a Billing Authority was to make that estimate was set out in regulations made under the provisions of the Local Government Act 1988.
The Committee was informed that, the calculation of Non-Domestic Rating income for the year could be found in Schedule 1 of the Non-Domestic Rating (Rates Retention) Regulations (the Retention Regulations). The Regulations required Billing Authorities to calculate the sum due, for that year, and inform:
(a) The Secretary of State in respect of the central share of their Non-Domestic Rating income; and
(b) Their Major Precepting Authorities.
Following the Autumn Statement, the DCLG confirmed the intention to amend the NNDR1 Return to reflect the changes to Non-Domestic Rates announced by the Chancellor of the Exchequer which included:
A cap on the increase in Business Rates to 2% in 2015/16. Treasury to fund the difference between cap and RPI;
A further extension of the doubling of the Small Business Rate Relief (SBBR) to April 2016;
SBBR would be retained for one year when a company took on an additional premises, which would up to now have resulted in SBBR being lost;
Increasing the discount for retail premises from £1,000 to £1,500 (including pubs, cafes, restaurants and charity shops) with a rateable value of up to £50,000 in 2015-16;
To extend in effect the existing transitional relief scheme for two years for properties with a rateable value up to and including £50,000. Therefore, small properties (with a rateable value of less than £18,000) that would otherwise face bill increases above 15% and medium sized properties (with a rateable value of £50,000 or less) that would otherwise face bill increases above 25% would benefit (this was to allow for the scheme to be extended for two years because the revaluation due to come into force on 1 April 2015 had been delayed until 1 April 2017): and
Business Rates appeals: backdating - the government would change the rules so that alterations to rateable values could only be backdated to the period between 1 April 2010 and 1 April 2015 for Valuation Office Agency alterations made before 1 April 2016 and ratepayers appeals made before 1 April 2015.
The Committee was advised that Local authorities would be refunded for the loss in Business Rates receipts as a result of the above measures. Refunds would be made through Section 31 grants. Under the business rates retention scheme, local authorities were able to come together on a voluntary basis to pool their business rate income. A pooling arrangement allowed the Council to reduce the amount of levy payable to Government on any business rate growth achieved above the baseline need. At its meeting on the 16 December 2014, Cabinet endorsed the in principle decision to enter into a business rates pool with Hertfordshire County Council (HCC) and four other districts within the County. This decision had no impact on the completion of the NNDR1 form, as each Authority must independently complete the form.
The Committee noted that Appendix 1 to the report illustrated the provisional 2015/16 NNDR 1 Return. It was recommended that any necessary changes to the final version of the NNDR1 be delegated to the Strategic Director of Finance, Policy and Governance, in consultation with the Chairman of the Council Tax Setting Committee.
The Committee was informed that the NNDR1 suggested that the total net amount of Non-Domestic Rates to be collected in 2015/16 would be £38,127,732. The NNDR 1 then indicated that the Councils share of the total Non-Domestic Rates to be collected in 2015/16, after deducting the share of the deficit position, should be £14,230,677. This represented 80% of the 50% of total business rates that were kept locally. The other 50% was paid over to the Government. The Government had chosen to then apply a tariff and levy within the system. The 2015/16 provisional settlement announced that the Councils tariff was £12,743,673 and this would have to be paid over to Central Government regardless of the amount of business rates collected. The Council had chosen to participate in a pool with other Hertfordshire Authorities in 2015/16. This would have the effect of reducing the levy to a negligible amount that the Council would need to pay Central Government for growth above the baseline need. Based on the NNDR1, it was estimated the Council would collect around £600,000 more than the baseline need in 2015/16.
(1) That the Draft National Non-Domestic Rate (NNDR) 1 Return, as detailed at Appendix 1 to the report, be approved; and
(2) That any amendments required on the Return resulting from changes to the form and the publication of additional guidance be delegated to the Strategic Director of Finance, Policy and Governance, in consultation with the Chairman of the Council Tax Setting Committee.
REASON FOR DECISION: To comply with statutory requirements.