Friday, 12 February 2021

Land Value Tax implementation - the easy way

Anytown District Council
1 High Street
Anytown AN1 1AA
xx January 202x

Mr & Mrs Smith
1 Acacia Avenue
Anytown AN2 4BQ

Dear Mr & Mrs Smith

Your Domestic Rates bill 202x-2y - property ref. XYZ1234
Following enactment of The Tax Simplification Act 202x, various taxes will be abolished and replaced with a single tax on land and buildings with effect 1 April 202x. The taxes which will be replaced include Council Tax, Stamp Duty Land Tax, Inheritance Tax and the TV licence fee (for full list see enclosed leaflet). These taxes were arbitrary; economically inefficient; prone to avoidance and evasion; and had high compliance and collection costs.

The new Domestic Rates will raise the same total revenues as the taxes it replaces in a fair and economically efficient way, with low collection and compliance costs. This will make budgeting and planning easier for government and households alike. Each household's share of the total taxes paid will be largely unchanged over the medium or longer term. Your local council's funding will be unaffected.

Valuation and assessment
Your property has been allocated to Band D (large terraced house or typical semi-detached house). According to data compiled by the Valuation Office Agency and HM Land Registry, the average gross rental value of all Band D homes in your assessment area (postcode sector AN2 4, see enclosed area plan) is £11,000 per annum. We have subtracted a general deduction of £4,000 for building and maintenance costs to arrive at a net rental value of £7,000 for Domestic Rates purposes. This is multiplied by the official rate of 25%, so your annual bill is £1,750. Please refer to the enclosed leaflet for details and worked examples.

Ways to pay
Please complete and return one of the enclosed forms within 30 days in the prepaid envelope provided:
* If you receive income subject to PAYE (salary or private pension), we recommend that you complete and return the attached 'PAYE details' form which will enable your employer or pension provider to deduct the amount due directly from your salary or pension in monthly instalments and pay it to HMRC.
* If you are not in receipt of a salary or a private pension and/or prefer to pay directly, please complete and return the enclosed 'Direct Debit' form.
* If you are over retirement age, you can apply for deferment using the enclosed 'Deferment' form.
* If you have suffered a recent change in circumstances and feel you are unable to pay (involuntary redundancy, divorce or death of a spouse), please complete and return the 'Hardship' form.

Failure to complete and return the appropriate form within 30 days may result in interest and penalties being charged.

Please contact us within 30 days by completing and returning the enclosed 'Appeal' form in the prepaid envelope if any of the following apply:
* you are not the owner of the above property (please pass a copy of this letter to your landlord or other owner).
* your property has been converted to flats or you otherwise believe that it does not belong in Band D.
* you believe that there are other reasons why the net rental value of your property is significantly less than £7,000 per annum.

Please keep a copy of the form for your own records. An unsuccessful appeal may result in your property being allocated to a higher Band. If you submit an 'Appeal' form, you must still also complete and return one of the payment forms.

If we do not receive an 'Appeal' form within 30 days, you will be deemed to have accepted that your property has been allocated to the correct Band and that you accept the assessment. This will be binding on you and any future owners of the property.

Yours faithfully

Ms Henrietta George
Director, Council Finance Department


Andrew Carey said...

This sort of works as humour, but rather assumes that Mr & Mrs Smith are homeowners. One of the most significant differences between a LVT and Council Tax relates to renters, who wouldn't be aware that there is a bill to the LA to be paid at all, unless they were sufficiently 'tax aware' to know that it was included in their rent for practical purposes.
As for those who currently get Council Tax Support, who are on balance thickos compared to the average, they would only know about the new system if they are getting evicted because the idiot government of the day hasn't uprated the LHA to allow for the LVT charge.
Anyone coming into the property market at the bottom would be jumping with joy of course.

Mark In Mayenne said...

Hi Mark, would your tax not result in higher monthly payments? If stamp duty, payable on the sale when you have a bit of money floating about, and inheritance tax that you only pay after you die, are to be rolled in, the bills will be higher, no?

I think I might object to having to pay, myself, a tax that wouldn't normally fall on me but on my inheritors, and also to a tax that relies on a hypothetical sale that I might or might not make before I die.

Piotr Wasik said...

AC - I don't believe the LHA would be updated, otherwise what's the point of goverment introducing a new tax and pay it itself to itself via LHA. And if a landlord wants to evict their tenant and still be liable to LVT, but without rental income, good luck to the landlord. I am sure it would happen here and there, a landlord trying to catch a tenant with a capacity to pay higher rent, and it would be highlighted in the media, but it would not be very common, as it makes no economic sense for the landlord. It makes more sense to a landlord who thinks his icome does not cover his cost simply to put a house or flat for sale.

Mark Wadsworth said...

1. It's not humorous.
2. The council is not assuming anything. They cross checked HM Land Registry and Council Tax records to make sure that such letters are sent only to owners. Tenants get a different letter. There will inevitably be a few mistakes, but that's life.
3. Home owners who claim CTS can fill in the Hardship form. Welfare claimants are pretty good at filling in forms.

MiM, for about half of people, monthly payments will be higher than old council tax and TV licence. Correct. Our bill would be nearly £2,000 a year more. So what? No more SDLT or IHT to worry about, and If we don't like it, we can trade down. But we like our house and will take it on the chin.

Everybody wants taxes that "somebody else" pays. Vegans want taxes on meat. Poor people want taxes on income. Rich people want a poll tax.

What's wrong with people paying tax* on the benefits they get? It's like everybody paying for their own drinks instead of a group running up a massive bar tab and then arguing over how to split it.

As it happens, your heirs WILL bear the tax, if you've spent it on LVT (or a Ferrari, or anything else), then there's a bit less for them to inherit.

* It's a market transaction. You make a small direct contribution towards the cost based on the VALUE you get, instead of paying a random range of stealth taxes at random points in your life which are spent on the same thing.

PW, thanks for back up.

benj said...

So are Domestic Rates a national tax, with councils then getting all their cash from a grant? That's fine, but people/politicians seem to think fiscal localism is a good thing.

Mark Wadsworth said...

B, mathematically, yes.

Politically, no. The councils with high receipts get less central funding. Councils with low receipts get more central funding.

If a local council wants to spend more than its allotted share, it does a local precept. If councils want to focus on value for money, they are free to offer their residents a discount to the 25% basic rate. These do not go into central funding calculation.

The HMRC thing is smoke and mirrors of course. The national HMRC collects it, allocates it to the each council as a 'local' receipt, and then pays that over plus an appropriate share of central funding.

Lola said...

Ho Ho. being an old boy nowadays my sleep patterns are not so regular. When I do wake I have fairly regularly spent those moments working up in my head just such a letter, only I also scrap Income Tax, CGT, corporation tax, every tax break on stuff like VCT's and EIS schemes, as well as subsidies like Housing Benefits and to farmers.

I can dream.

Mark Wadsworth said...

L, HB and farm subsidies were included in the longer list in the enclosed leaflet!

This letter is just step one to get the system up and running.

Next year's letter will say "Following the VAT Reduction Act 202z, the main rate of VAT is to be reduced from 20% to zero over the next four years. In order to plug the shortfall in tax revenues, the percentage rate used for Domestic Rates purposes is set to increase by 10% a year to 65%.

Your Domestic Rates bill for the fiscal year 202z-2a will thus be £7,000 x 35% = £2,450, an increase of £800. Your VAT saving will be approximately £1,000."

Or something like that.

Lola said...

MW. Ah. Me being to impatient then...

mombers said...

The tragically funny thing is the useless personal tax summary conveniently excludes VAT (£134bn), which now raises almost as much as NIC (£145bn) and not too far off income tax (£194bn). It's an average of £4820 per household per year and impossible to calculate what any household actually pays even if you retain every receipt for the year, because the impact on gross pay varies by industry

Mark Wadsworth said...

M I avoid reading the annual tax summary because it is full of lies and omissions and would just boil my piss. VAT might be the worst omission, but the spending categories are highly misleading as well.

Kj said...

Brilliant. More of this 😃

Mark Wadsworth said...

Kj, thanks!