Local housebuilders provide local jobs and local homes for local people. So why are local authorities going out of their way to make life painful for them? Take council tax for example
Roy Billingham has managed Billingham & Kite, the 50-year-old contractor set up by his father, through four recessions so far. The Dudley-based businessman thought he’d seen everything a downturn could throw at him – but then he came up against Bromsgrove council.
Already struggling to find enough work going to keep his 25 employees in a job, last autumn Billingham received notice that, within six months, he was to be charged council tax on a property that the council judged would be “complete”, despite the fact that it lacked a bathroom, kitchen, hot water and electricity. Similar notices followed on other projects, piling costs of £2,000 a month onto the five properties he is working on.
“I’ve never seen it before,” he says. “As soon as you screw on the front door of a property, you get a notice from the council. It’s like Big Brother. As soon as the structure is secure and there’s plaster on the walls, they start the clock ticking, even though the houses are just empty shells – completely uninhabitable.”
The ability of councils to certify houses as “complete” for tax purposes is yet another unwanted pressure on housebuilders – particularly the smaller firms – as they struggle to survive the collapse of the market.
But the added irony for those like Billingham is that, had they been building in a neighbouring region, the stage of building at which they would have been hit with the tax might well have been different. Here, Building examines how the government’s policy of allowing every local authority to determine its own definition of completion is creating a postcode lottery, or rather a game of Russian roulette that, for some firms, could mean the difference between collapse and survival.
The lottery
The Home Builders Federation (HBF) is compiling a report for the communities department on the issue of tax on new homes, at the department’s request.
A spokesperson for the organisation said it was against any charges at all, but added: “The inconsistency of the charging is of huge frustration to the industry, as how the charge is levied varies from local authority to local authority, creating in effect a postcode lottery that poses obvious problems for national companies.”
The heart of the problem lies in the fact that the term “completion” has no statutory definition, meaning that councils are free to decide their own terms.
The extent of the discrepancies that result from this is apparent in the example of three neighbouring councils in Lincolnshire. North East Lincolnshire starts taxing properties when the plastering has been finished, but a spokesperson says it operates a six-month exemption period if the property “isn’t fully finished and isn’t being used”.
As soon as you screw on the front door of a property, you get a notice from the council. It’s like Big Brother
Roy Billingham, Billingham & Kite
Neighbouring East Lindsey district council, however, offers no such leeway; it sends out completion notices before the plastering has even been finished (provided there’s a roof on the property). Guidance sent out with completion notices states: “The consensus of opinion is that when the property is ready for ‘second fixing’ it can easily be completed within three months, whether by a large building firm or a one-man band. ‘Second-fixing’ generally means that the property is fully secure and has a roof, glazed windows, external doors, and plastering has commenced.”
Companies should just hope they happen to be building a few miles to the north-west, under the auspices of North Lincolnshire. “We normally issue completion notices at the stage of plastering out,” says a spokesperson. “But since April, owing to the recession, we have relaxed that attitude and inspectors are looking at when a property could actually be finished before we issue a completion notice. So it’s a lot later now. Once the economic situation improves we may go back to issuing completion notices at the plastering stage, but of course we don’t know when that will be.”
To tax or not to tax
The variations have always been there, but the issue has become more pressing now that recession means homes are standing empty, and often incomplete, for longer.
Harold Rackham, chairman of the housebuilders group within the Federation of Master Builders (FMB), says: “This happened in the last recession – we were forced to pay rates on unoccupied homes, including new homes that hadn’t been finished. We really started noticing it in autumn last year when our members around the country began reporting it to the committee. It’s squeezing our members – it’s just another expense they really don’t need in a time of hardship.”
Some builders allege that councils have only started using their powers to levy council tax on unfinished homes since the recession started to hit their coffers. Billingham says: “We’ve never paid anything until a property’s been occupied before. If you have a motor car, you don’t pay tax when it’s not on the road, and we’ve never paid on a house if it’s been in an unfinished state. We’ve never had a notice issued before.”
The FMB and HBF argue that in the current economic climate such rates should be abolished entirely, levelling the playing field and providing a boost to builders that are unable to complete properties. The HBF spokesperson says: “Clearly, in the current climate especially, paying council tax on new-build properties is an issue for our members, and we believe an unfair taxation on an industry that has been hit hard by the wider economic climate.”
He says that the communities department seems prepared to consider the option: “It is now aware this is a problem for the industry and in our recent discussion with them they have seemed sympathetic.”
But if the government does intervene, it will need to do so quickly to help Billingham’s workers. “I’m trying to keep the work going, keep the men on, but we’re getting kicked in the teeth by the local authority. It’s ironic. They’re the ones who should be helping us survive – it’s all local men that we employ – yet it’s the local authority that’s making it worse.”
When is a house finished?
When a local authority judges a house to be in the final stages of construction, it will issue a completion notice giving a date on which it considers it eligible for council tax purposes, regardless of whether or not the house is actually finished on that date. Most dates are between three to six months from the notice being set out. Some councils offer a stay of execution for between six months to a year if the property is not complete by the date given; others begin charging immediately.
The stage that a completion notice is sent out, and the completion period stated, are at the discretion of the local authority. A house can be “complete” for council tax purposes without being deemed complete by building control.
Postscript
Original print headline: How's the glazing coming along?
2 Readers' comments