Who’s to blame for the HMO council tax crisis?

Alan Murdie

Four  branches of government  are currently causing problems for  HMOs and council tax

All four play a part in creating and upholding unfair and irrational decisions which are making single rooms liable for council tax.

As more information has been gathered about the situation affecting HMO landlords and tenants over the last six months it is clear the following branches of officialdom all bear responsibility for the mess that is being exposed:

The Valuation Office Agency (VOA): Responsible for drawing up Council Tax Lists and banding dwellings and identifying separate self-contained  dwellings. The approach of the VOA is inconsistent across the country and it is clear that individual Listing Officers enjoy to much freedom to list or not list rooms as dwellings as they see it

Basically, when pressed  the Valuation Office Agency will tell you that it has a four-fold test for declaring a that a bedroom in a shared house is a  self-contained dwelling exist *

They will tell you there are four necessary ingredients to list a bedroom as a self-contained test:

* actual occupation;

* exclusive

* possession must be  some benefit

*  the possession must not be for too transient a period.”

However, it is quite clear the VOAcannot clearly explain what these exactly tests actually mean in terms of the wider law, most  particularly with whether possession is ‘not too transient’.

There is no definition of transience – is it three months, six months or some other period?  The word is not used in any council tax legislation but it has been elevated to their own imaginary standard.

Unfortunately, this policy leaves individual Listing Officers to make up their minds on this – there being no clear statutory test.

This is not a legal recipe for certainty –and it is proving disastrous for shared accommodation with numerous unfair decisions making tenants in en-suite rooms liable to tax.

Is the VOA shutting its eyes?

Most significantly it is unclear why the Valuation Office Agency is shutting its eyes to a Supreme Court judgment and the ruling by Lord Sumption in Woolway v Mazars[2015] UKSC 53. This held that determining the existence of a hereditament (basically a taxable property) should predominantly be based on a physical plan a bricks and mortar test and applying common sense.

Anyone challenging the VOA over  a decision to re-band an HMO might like to consult this case and quote it to the VOA (or at a tribunal if you are facing one).

A wider problem is that it leaves actual housing numbers all over the place. In theory, turning a bedroom into a dwelling creates a new property on paper and in the council tax list. But in reality, it remains a single bedroom – and the danger is that national and regional housing figures are being fudged as a result.

It also means that sometimes you might be get luck if you’re HMO owner (or tenant of a bedroom) and sometimes you will not. That is not the way a system should be.

Department of Levelling Up, Housing and Communities (DLUHC): The new name of what has gone by many names over the years and interacts with the Secretary of State (currently  Rt Hon Michael Gove) to produce council tax regulations.

The Department have been very busy with council tax in the past – numerous regulations have been created over the years. Yet they have failed to address this problem and the lack of definition on a self-contained dwelling – or even the word ‘dwelling’ in the Local Government Finance Act 1992!.

More widely the Department has failed to keep pace with their own legislation and co-ordinate  the development of council tax law with wider housing legislation, in particular planning legislation and the law on HMOs set down by the Housing Act 2004.

Unfortunately, the lack of action at DLUHC  in clarifying the law has left VOA Listing Officers with too much  discretion. The end result is that it creates situations where HMOs get multiple council tax bills regardless of logic or reason – bills which tenants then fail to pay as they typically move out. So arrears in council tax grow because these tenants will typically be untraceable.

Local Councils

Local Councils. Responsible for sending out bills, many councils are failing to apply the existing regulations which would solve the HMO problem. These are the Council Tax (Liability of Owners) Regulations 1992 SI 551 which allow a council to make a landlord liable for a single bill in a shared house that has been adapted as an HMO. These have become ‘the regulations that time forgot’ and even one else seems to want to the  VOA, DLUHC and local councils. Failure to exercise their discretion or hiding behind the Valuation Office Agency rulings ultimately means councils are shooting themselves in the collective foot, since HMO tenants who become liable to a council tax bill on their bedroom often give notice and leave, unable to afford the bill. It ends up with whole period of tax having to be written off.

The Valuation Tribunal (VTE). It has to be faced that the Valuation Tribunal for England no longer is able to meet the challenges put upon it in the 20th century. Set up thirty years ago it is a fraction of former size and resources, having suffered numerous cutbacks. The VTE is almost the last survivor of the old way of doing tribunals before the Tribunals, Courts and Enforcement Act 2007 which replaced many  panels of laymen and women sitting on tribunals with judges (for some reason the Valuation Tribunal was left off the list). Typically, it may take up to a year or more to get a hearing. Often having little understanding of the complexity of the law, panels often give the impression of struggling with appeals  and are guided by hard-pressed over-worked clerks who can’t be expected to rock the boat and may well tend to  veer on the side of administrative convenience – in other words by encouraging the  dismissing of appeals. When it comes to HMOs we always used to have to depend on the clerk’ was what one former veteran VTE panel member says. Quite simply, the average Valuation Tribunal member gets lost in the complexities of the law and with virtual hearings rather than physical  one cannot ultimately even be sure that they are looking at the same paperwork or even if they have the volume turned up to hear what an appellant is saying.

 An important principle in local taxation law was re-iterated a decade ago by a judge Mr Justice Sales inLondon Borough of Harrow v Ayiku [2012] EWHC WLR 1200

“It is not just officials and courts who need to know what persons are or are not exempt from liability to pay Council Tax. Ordinary members of the public may look to the legislation in order to work out whether they have a liability to pay or not and may plan their lives and their financial affairs in the light of their own (or their advisers') straightforward reading of the provisions.”

 Unfortunately, these four branches of government are all in their own way contributing to a system that fails to meet this standard, affecting  whether landlords, tenants  and ultimately the public purse as unpaid council tax bills accumulate.


Alan Murdie is a specialist in council tax, housing and debt law issues dating back to 1989, including many test cases in the lower and higher courts. He is director of Council Tax Legal Services and Nucleus Legal Advice in Earl's Court, London. He has been involved with the Council Tax since its inception in 1992, editing eight editions of the Council Tax Handbook since 1998 and co-author of The Enforcement of Local Taxation (2001) with Ian Wise QC.