The Law Commission published its report on Technical Issues in Charity Law in September 2017 following a public consultation.
As a result of the abolition in 2012 of Class A and Class C exemptions, charities which wish to secure relief from the payment for council tax during any period when their property is unoccupied must now apply for Class B exemption.
A2Dominion Housing Group Ltd and Notting Hill Housing Trust appealed of the decisions of London Borough of Hammersmith and Fulham, the Royal Borough of Kensington & Chelsea and the London Borough of Ealing not to grant Class B exemption pursuant to Council Tax (Exempt Dwellings) Order 2012.
Class B exemption applies to:
“[(i)]a dwelling owned by a [(ii)]body established for charitable purposes only, [(iii)]which is unoccupied and has been so for a period of less than 6 months and [(iv)] was last occupied in furtherance of the objects of the charity.”
The Valuation Tribunal’s Judgment
These appeals were heard together by Professor Graham Zellick QC, the President of the Valuation Tribunal. In his Judgment he made the following conclusions/comments:
- The Valuation Tribunal was satisfied that the appellants were “all charitable bodies. They are social landlords and provide affordable housing for the poor, aged, disabled or sick”.
- The Councils concerned had approached these cases incorrectly and had “overreached themselves”. They had construed the legislation as if it stated “the billing authority shall satisfy itself that in every case each of the conditions specified has been fulfilled.”. The Tribunal acknowledged that there needs to be some basis for determining that the applicant charity owns the dwelling in question (requirement (i)) and that is has been unoccupied (requirement (iii)), but Councils role in relation to requirements (ii) and (iv) “is limited”.
- That it was “inconceivable” that Parliament could have intended to turn Councils into charity regulators “sitting in judgment on charities applying for Class B exemption by scrutinising their objects and evaluating a particular letting or other activity”. The applicants’ charitable statues were conclusive and it was “impermissible for the billing authority to presume to review the body’s objects and activates to confirm that it is in fact “established for charitable purposes only”.
- London Borough of Hammersmith and Fulham, the Royal Borough of Kensington & Chelsea sought to argue that if it was not for the Council to assess the nature of the letting, then why was requirement (iv) included? Professor Zellick QC’S view was that it was “to limit the application of the exemption to an activity of the charity that is directly related to its objects and is therefore charitable in law” as “Not every lawful activity of a charity is charitable”.
- Professor Zellick QC made it clear that had the appellants engaged in “manifestly non-charitable” activities outside their charitable objects then Class B exemption would not be available to them. However, “housing individuals raises a presumption that they are operating within their objects and the Class B exemption applies. That is as far as a billing authority may go in impugning an applicant’s claim.”.
- That if a Council has the power to assess the nature of a particular occupancy, then it: a. Must make clear what information it requires from the applicant charity in order to reach its decision; and b. That information must be such as to support a reasonable decision.
- An application for Class B exemption cannot be rejected on the sole or principal ground that rent charged is the market rent.
The Valuation Tribunal concluded that the appellants “fulfilled all the requirements for Class B exemption and they were wrongly denied the exemption”. As a result the decisions by the Councils concerned to reject Class B exemptions were quashed and the Valuation Tribunal ordered the Councils to repay any money paid in council tax for the properties concerned.
In times where Councils budgets are being cut and pressure is being placed on Council Officers to increase revenue from the collection of Council Tax, it is unsurprising that Councils welcomed the abolition of the Class A and C exemptions and now seem reluctant to grant Class B exemption to housing providers.
This recent Judgment from the Valuation Tribunal provides valuable guidance as to how Councils should be approaching Class B exemption. Whilst the value of an individual property’s Class B exemption may be relatively small, void properties are inevitable and numerous and as such the cost to housing providers of failed Class B exemption applications is very significant.
For more information
Changing charitable purposes and amending governing documents.
Charity registration financial thresholds.
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