FAO : SD Dimensions : Institutions : Land tenure

Posted April 1997

Bertinoro I
High-level Technical Seminar:
Private and Public Sector Cooperation
in National Land Tenure Development in Eastern and Central Europe
University Residential Centre
Bertinoro, Italy
1-5 April 1997

Using the Private Sector for Property Tax Development in the United Kingdom

by Paul Sanderson
Chief Executive's Office
Valuation Office Agency
London, UK

General introduction

a. Local Property Taxes

Local property taxes are a very important source of revenue to local government in the United Kingdom. They provide in excess of £25 billion annually to assist in meeting expenditure on local facilities and services such as education, housing, highways, police, etc.

There are two main sources of revenue for local government in the UK. They are the council tax which is paid in respect of all dwellings - ie houses, flats, bungalows, etc, - in the local authority area and non-domestic rates which are paid in respect of business properties - ie shops, offices, factories, etc, - situated in the local authority area.

The valuation assessments on which these two types of property tax are based are provided by the Valuation Office Agency.

b. The Valuation Office Agency

The Valuation Office is an Executive Agency within the Inland Revenue which is a Department of the UK Government. It is responsible for the provision of a variety of statutory and non-statutory valuation services to Government Departments and the wider public sector throughout England, Wales and Scotland.

The VOA has a comprehensive network of some 100 local and regional offices throughout England, Wales and Scotland. The VOA has over 4500 staff and is the largest employer of professionally qualified valuation surveyors in the world.

The main functions of the VOA are to undertake valuations for:

local property taxation, ie non-domestic rating and council tax
capital taxes based on property values
valuations for other public sector purposes including purchase, sale, leasing, compulsory acquisition, asset valuation, insurance valuation and a variety of other purposes
the provision of professional advice on policy, legislation and litigation in these areas.

c. Involvement of the Private Sector

In recent years there has been an increasing emphasis on involving the private sector in many activities that have traditionally been handled within the public sector.

Privatisation of public utilities in the UK has been a major change which has taken place over the last 15 years and movement from the public to the private sector continues through a variety of initiatives including further privatisations, the creation of executive agencys, compulsory competitive tendering, outsourcing, the private finance initiative and other measures designed to improve efficiency and effectiveness.

In connection with local government taxation, there is now private sector involvement in many billing, collection, and enforcement activities. There was also substantial private sector involvement in the assessment of dwellings for council tax purposes and it is this aspect in particular that will form the main subject of this paper.

To bring the position up to date, the VOA are currently involved in carrying out a "private sector experiment" which is intended to examine the scope for further involvement of the private sector in the referencing and assessment of properties for both non-domestic rating and council tax.

Brief history of local taxation

a. Duty of the Parish to Provide for Its Poor

From the time of Alfred the Great it was recognised to be the duty of the parish to provide for its poor, and the canons of the Church enacted that the tithes of the rector of the parish had to make provision for them. The religious houses or monasteries until the Reformation usually retained the great tithes for themselves, leaving the spiritual welfare of the parish to a vicar, who was generally paid a small stipend. Distant parishes were often left without assistance for the poor, and in 1391 it was ordained that when churches were appropriated, proper provision should be made for the poor parishioners.

The monastery of the Middle Ages performed within limits many functions; it was in a sense the Poor Law guardian, the relieving officer, the parish doctor, and the schoolmaster of its day. It was practically the only agent of poor relief.

b. Dissolution of the Monasteries

Before the dissolution of the monasteries, relief of the poor was largely maintained by means of alms from the monasteries, and by bequests and charitable institutions. At the suppression of the religious houses the impropriated tithes were given to the friends of the king, consequently it was necessary to provide for the relief of the poor and to deal with the many beggars that wandered about the country.

Under an Act in 1530 concerning punishment of beggars and vagabonds, justices were authorised to give licence to impotent persons to beg within certain limits, beggars begging out of their limits to be set in the stocks, but any person able to labour who begged was to be brought to the next market town and to "be tied to the end of a cart naked and be beaten with whips throughout the same market town or other place till his body be bloody by reason of such whipping."

c. Treatment of the Poor

Under legislation passed between 1535-6, the local authorities were directed, inter alia, to most charitably receive poor people and valiant beggars upon their arrival in their parish, who were "to be succoured, relieved and helped with such and convenient and necessary alms as shall be thought meet by their discretions, in such wise as none of them of very necessity shall be compelled to wander idly and go openly in begging to ask alms in any of the same cities, shires, towns, parishes; but also to cause and to compel all and every the said sturdy vagabonds and valiant beggars to be set and kept to continual labour in such wise as by their said labours they and every of them may get their own living with the continual labour of their own handsÉÉupon penalty that every parish shall lose and forfeit 20 shillings for every month in which it is omitted and undone. And that to be inquired of at every quarter sessions and to be duly presented and found by the verdict of 12 men."

The clergy were also directed to "exhort, move, stir, and provoke people to be liberal and bountifully to extend their good and charitable alms" for the purpose of this Act.

Under later legislation in 1551-52, it was required that collectors should "gently ask and demand of every man and woman, what they of their charity will be contented to give weekly toward the relief of the poor," and if any who were "able to further this charitable work do obstinately or frowardly refuse" they could be summoned by the bishop, who could "take order for the reformation thereof." Ten years later the bishop was further empowered to bind a person who obstinately refused to give according to his ability, to appear at quarter sessions, where the justices could rate him according to their discretion for poor relief and could, on default, commit him to prison.

The breakdown of the manorial system, the Black Death which had virtually abolished serfdom and had given the bondsman a liberty which often meant a liberty to starve, the end of the Wars of the Roses, which set free a large number of soldiers, the failure of voluntary subscriptions, and the dissolution of the monasteries all contributed to the necessity of putting poor relief on a satisfactory footing; and in the reign of Elizabeth rating was put on a compulsory basis by the Act of 1601. This dealt with the authorities, funds, recipients, and methods, and was the commencement of the Poor Law system.

d. The Poor Relief Act, 1601

Modern rating law is generally regarded as based on the Poor Relief Act 1601, often called the Statute of Elizabeth (herein-after called the Act of 1601). Sect. 1 imposed the liability to be rated on "every inhabitant, parson, vicar and other of every occupier of lands, houses, tithes impropriate or propriations of tithes, coal mines or saleable underwoods," provided that the churchwardens of every parish, together with four, three, or two substantial householders according to the size of the parish, should be overseers of the poor by whom the rate was to be made and gave a right of appeal to quarter sessions against the rate. This scheme of poor relief made each parish responsible for the maintenance of its own poor; the parish became the Poor Law unit; the Poor Law official, the overseer, was chosen from or selected by a rate levied upon the householders of the parish.

e. The General Rate Act 1967

Although the Act of 1601 was amended in certain respects by later Acts (in particular the Parochial Assessments Act 1836 and the Rating and Valuation Act 1925), it was not finally repealed until the passing of the General Rate Act 1967 which was the primary statute governing the system of local property taxation until major changes took place in 1990. The General Rate Act 1967 consolidated legislation governing the local property tax system in England and Wales.

It contained provisions covering the setting of the rate, the liability for payment of the rate, the assessment for properties in connection with the rate, relief and exemption from rates and the general administrative structure required to deal with valuation, billing, collection and enforcement matters, and the appeal system.

f. The Changes in 1990

This legislation remained in place until major changes were introduced in 1990. Under the Local Government Finance Act 1988, the old system of rating was replaced with two new types of revenue for local government - the community charge (or poll tax) which was to be payable by all individuals aged 18 or over who had their sole or main residence in the local authority's area and non-domestic rates which were to be payable in respect of business properties.

Non-domestic rates were essentially a continuation of the old rating system but, as the name implies, it was limited to non-domestic properties. The assessments of these properties, which had not been amended since 1973, were updated by a revaluation of all non-domestic properties in 1990 to provide new rating lists. Although the tax was collected by local government, the tax rate was set by central government and was called the National Non-domestic Rate (NNDR) or multiplier.

Provision was made for annual review of the tax rate (NNDR) by central government and for regular (5 yearly) revaluations of non-domestic properties.

g. Further Changes in 1993

The community charge or poll tax was unpopular and there was considerable resistance to its introduction. The government therefore decided to abolish it with effect from April 1993 and replace it with a property tax relating to dwellings. This new property tax was called the council tax.

The council tax is a local tax set by local government to help pay for local services. There is one bill per dwelling, whether it is a house, bungalow, flat, maisonette, mobile home or house boat, and whether it is owned or rented.

The bill is based upon the relative value of the property to others in the local area. The tax is payable by the owner/occupier or the tenant or, if the property is empty, by the owner of the dwelling.

The council tax is set by the local council and the amount at which it is set will depend on how much it and other public bodies in the area spend and how much they get from elsewhere. The amount payable also depends upon the valuation band in which the dwelling is placed.

There are a variety of discounts, reliefs and exemptions available to council taxpayers depending on a variety of circumstances and there is also financial assistance for people on low incomes.

Council taxpayers were able to appeal between 1 April 1993 and 30 November 1993 against the banding of the properties they occupied. After 30 November 1993 the rights of appeal are limited.