Council Tax on Second Homes - Collection Rates 2024/25
Argyll and Bute Council · 26 September 2024
Back to Argyll and Bute Council — 26 September 2024 and its agenda
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ARGYLL AND BUTE COUNCIL COUNCIL FINANCIAL SERVICES 26 SEPTEMBER 2024 COUNCIL TAX ON SECOND HOMES - COLLECTION RATES 2024/2025 1.0 EXECUTIVE SUMMARY 1.1 The Council Tax (Variation for Unoccupied Dwellings) (Scotland) Amendment Regulations 2023 authorised councils to levy a council tax premium of up to 100% on second homes starting April 2024. This policy aims to encourage second home owners to convert their properties into primary residences or contribute additional tax revenue for local services. 1.2 Scottish Government data from April 2023 indicated Argyll and Bute had the highest percentage of second homes at 6.2%, compared to the national average of 0.9%. Six data zones in Argyll and Bute were identified with over 20% of dwellings classified as second homes. 1.3 Argyll and Bute Council approved the council tax premium in November 2023. 1.4 As at 30 June 2024, the council has recovered 34.25% (£2.877 million) of the £8.398 million charged to second home owners, exceeding the 29.81% collection rate for the entire council tax base. Additionally, 86.39% of second home owners pay via direct debit, contributing to the strong recovery rate. 1.5 Since the Council meeting in November 2023 there have been a number of changes to the number of second homes. For example, 492 properties had their second home status updated due to changed circumstances, while 165 new second homes were classified, resulting in a net reduction of 327 second homes. The Assessor at Dunbartonshire and Argyll and Bute Valuation Joint Board (DAB-VJB) has recently reclassified 250 properties from Non-Domestic Rates to Council Tax, potentially increasing the double charge tax base. As at 30 June 2024 there are 2,692 second homes within Argyll and Bute. 1.6 Despite the financial benefits, concerns about tax avoidance persist. Desk- based reviews will be conducted 12 months after properties are reclassified to ensure compliance and address any discrepancies. RECOMMENDATIONS It is recommended that the Council consider the content of this report and that regular updates will be provided as part of the routine revenue budget monitoring reports throughout the year.
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ARGYLL AND BUTE COUNCIL COUNCIL
FINANCIAL SERVICES 26 SEPTEMBER 2024
COUNCIL TAX ON SECOND HOMES – COLLECTION RATES 2024/2025
2.0 INTRODUCTION
2.1 The Council Tax (Variation for Unoccupied Dwellings) (Scotland) Amendment
Regulations 2023 granted councils the authority to impose a council tax
premium of up to 100% on second homes starting from April 2024. This report
examines the implementation and impact of this policy in Argyll and Bute, which
has the highest percentage of second homes in Scotland. It includes an analysis
of the movement in second home classifications, council tax recovery rates, and
potential issues of tax avoidance. The findings aim to provide insight into the
policy's effectiveness in addressing the housing emergency declared in June
2023 and supporting local public services.
3.0 RECOMMENDATIONS
3.1 It is recommended that the Council consider the content of this report and that
regular updates will be provided as part of the routine revenue budget
monitoring reports throughout the year.
4.0 DETAIL
Policy change re the treatment of Second Homes for Council Tax
4.1 The Council Tax (Variation for Unoccupied Dwellings) (Scotland) Amendment
Regulations 2023 ("the Regulations") gave councils discretionary powers to
charge an increase in council tax (a 'premium') on second homes of up to 100%
from 1 April 2024.
4.2 Scottish Government data, published in April 2023 in its Partial Business and
Regulatory Impact Assessment, highlights that Argyll and Bute had the highest
percentage of second homes, at 6.2% of total dwellings, compared to the
national average of 0.9%.
4.3 According to the National Records of Scotland, six data zones in Argyll and Bute
were among the 19 data zones across Scotland where over 20% of dwellings
were classified as second homes. Detailed information is provided in Table 1
below which was published by Scottish Government in April 2023.Page 3
Datazone Urban-Rural % second homes No. of second homes Cowal South - 02 Remote Rural 36 150 Cowal South - 01 Remote Rural 28 172 Mull, Iona, Coll and Tiree - 01 Remote Rural 25 170 Cowal North - 01 Remote Rural 24 164 Whisky Isles - 01 Remote Rural 21 61 Loch Awe - 02 Remote Rural 20 83 4.4 Appendix 1 provides an up to date position in respect of the Council’s datazones that have the highest number of second homes in their area. On the whole it shows positive change in terms of a reduction in properties classed as second homes for the purpose of Council Tax from 2022/2023 to 2023/2024 and through to the 30 June 2024. 4.5 In November 2023, Argyll and Bute Council approved the use of these powers, aiming to incentivise second home owners to convert their properties into primary residences. Alternatively, if owners maintained their properties as second homes, they would contribute more in taxes to support local public services, particularly vital in fragile rural economies during winter. 4.6 This measure was part of a broader strategy introduced by the Council to address the housing emergency declared in Argyll and Bute in June 2023. Movement in the number of second homes 4.7 As at 30 September 2023, the Council Tax Base included 3,235 second homes across all bandings, according to the statutory Council Tax Base return submitted to the Scottish Government. These figures provided the basis of the detail that was presented to the Council in November 2023 where they approved the implementation of the double charge on second homes. 4.8 Updated records at the end of November indicated that the number of second homes had reduced to 3,019 from the Council Tax Base return submitted in September 2023 and therefore the figure included within the November report to Council. The reason for this reduction was that some of the properties, 214 in total, were later identified as Purpose Built Holiday Homes, which are exempt from the double charge of council tax on second homes. 4.9 Since the Council meeting in November 2023 there have been a number of further changes in second home status and the updated figure as at 30 June 2024 is 2,692. Changes to this figure include 492 second homes which have had their status updated due to changed circumstances and 165 properties were newly classified as second homes, resulting in a net reduction of 327 second homes in Argyll and Bute between November 2023 and June 2024. Collection of Council Tax on Second Homes 2024/2025 4.10 The table overleaf illustrates Council Tax recovery rates for second homes as at 30 June 2024:
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Second Homes as at 30/06/2024 for 2024 Band Number of Properties Paid by Direct Debit Number Unpaid % Second Home Owners Paid up to date Total Council Tax Charges Raised (£) Total Payments Received 2024/2025 (£) Total Payments (%) A 555 465 11 98.02% 1,097,648 359,607 32.76% B 471 411 5 98.94% 1,165,180 362,329 31.10% C 465 400 11 97.63% 1,211,697 422,739 34.89% D 391 334 9 97.70% 1,156,035 417,110 36.08% E 421 371 9 97.86% 1,624,799 560,091 34.47% F 215 191 6 97.21% 1,031,324 350,482 33.98% G 151 134 4 97.35% 868,126 311,789 35.92% H 34 29 0 100.00% 242,810 92,428 38.07% Total 2,703 2,335 55 97.97% 8,397,621 2,876,574 34.25% % DD Payers 86.39% 4.11 The Council has collected 34.25% (£2.877 million) of the £8.398 million charged to second home owners, with £4.152 million of the charges attributed directly to the levy. This return is higher than the 29.81% collection rate for the entire Council Tax base during the same period up to 30 June 2024. Additionally, 86.39% of second home owners pay via direct debit. 4.12 Based on figures to date a projected year end collection rate of 97.97% is estimated which would generate income of £4.067 million, with this figure expected to increase over the summer months due to ongoing data cleansing and changes being passed from the Assessor. 4.13 The Council Tax collection performance has been strong, despite the increase in charges. It has surpassed the target of £3.739 million in additional income from council tax on second homes, which was set during the 2024/25 budget process. As of now, we anticipate an over-recovery of income against the budget by £0.328 million, as shown in the table below:; Budget 2024/2025 (£'M) Council Tax from Second Homes - Budget Outlook 24/25 at 22 Feb 2024 4.000 Adjustment to Council Tax on Second Homes Estimate - 15 April 2024 -0.261 Current Budget Outlook 24/25 3.739 Projected Recovery - June 24/25 4.067 Over/(Under) Recovery of Income 0.328
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4.14 Standard recovery processes are in place for non-paying taxpayers, which should further improve collections. Monthly monitoring will continue and will be reported to Policy and Resources Committee through the routine Revenue Budget monitoring report. Significant level of correspondence 4.15 Since the policy change announcement, the Council received over 1,350 enquiries (45% of the caseload) from second home owners. While some enquiries were escalated to stage 1 and stage 2 of the corporate complaint process, no formal appeals were lodged with the Scottish Local Taxation Chamber (SLTC), although one case is now awaiting a date for a hearing. 4.16 The SLTC has ruled in favour of local authorities in similar disputes across other Council areas in Scotland and we can be confident that our position will be supported once the hearing takes place. Potential Tax Avoidance Concerns 4.17 While the additional revenue from the double charge is beneficial, there are concerns about the ease of avoiding this tax. Revenues practitioners nationally share this concern. 4.18 Desk-based reviews of properties removed as second homes will be conducted 12 months after reclassification to ensure compliance and address any potential information discrepancies. 5.0 CONCLUSION 5.1 The implementation of the council tax premium on second homes in Argyll and Bute has demonstrated both significant financial benefits and promising strides toward addressing the local housing emergency. There is a notable reduction in the number of second homes and a strong year to date recovery rate of 34.25% of the total council tax charged with a projected year end recovery rate of 97.97%. The additional revenue supports local services, particularly in rural areas where resources are most needed. 5.2 However, the potential for tax avoidance remains a concern, necessitating ongoing vigilance and thorough reviews to ensure compliance. The council's proactive measures, including desk-based reviews and monitoring changes in property status, are essential to maintaining the policy's integrity and effectiveness. Overall, the policy has made a positive impact, but continued efforts are required to address remaining challenges and optimise outcomes for the community. 6.0 IMPLICATIONS 6.1 Policy: Policy for double charging Council Tax on Second Homes. 6.2 Financial: Additional income of £4.067 million anticipated from the new policy. 6.3 Legal: Policy complies with powers outlined in The Council Tax (Variation for Unoccupied Dwellings) (Scotland) Amendment Regulations 2023. 6.4 HR: Additional resources of £94,000 previously approved by Council to support all extra administration. Three temporary posts in place for summer students to cleanse data prior to recruiting to posts permanently. 6.5 Fairer Scotland Duty:
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6.5.1 Equalities – double charge on second homes applied equally to all property owners irrespective of protected characteristics in line with the Council policy and the law. 6.5.2 Socio-economic Duty – None. 6.5.3 Islands – It is anticipated that the policy may free up housing on many of our islands for the use of local people. 6.6 Climate Change: None. 6.7 Risk: There is a risk that the Council relies on the income generated by the policy change to support core budgets. The level of income recovered will continue to fluctuate as the policy is embedded as people react to the changes either by bringing properties back into use or by paying the double charge. Regular reporting such as this will help mitigate these risks. 6.8 Customer Service: High level of enquiries generated with a number of formal complaints about the policy, all responses have been dealt with professionally. 6.9 The Rights of the Child (UNCRC): None. Kirsty Flanagan Executive Director/Section 95 Officer July 2024 Policy Lead for Finance and Commercial Services: Councillor Ross Moreland For further information contact: Anne Blue, Head of Financial Services Anne.Blue@argyll-bute.gov.uk Fergus Walker, Revenues and Benefits Manager Fergus.Walker@argyll-bute.gov.uk Appendix 1 – Movement in the number of second homes by datazone
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APPENDIX 1: MOVEMENT IN SECOND HOMES BY DATAZONE Please note that the method of data mapping has recently changed from the use of postcodes to identify properties to UPRN (Unique Property Reference Number). UPRN is the preferred data for the purpose of geospatial matching. NRS data includes Purpose Built Holiday Homes as second homes, there are 214 of these in the 2023/2024 data, they cannot be subject to the double charge and therefore they have been removed in our data going forward. Second Homes by 2011 Datazone (n=125) Datazone Name All Homes 22/23 2nd Homes 22/23 2nd Homes (%) 22/23 All Homes 23/24 2nd Homes 31/3/24 2nd Homes (%) 31/3/24 Change 22/23 to 23/24 2nd Homes 30/6/24 Cowal South - 01 625 192 30.72% 641 164 25.59% -5.13% 158 Cowal South - 02 414 125 30.19% 420 65 15.48% -14.72% 61 Mull, Iona, Coll and Tiree - 01 703 187 26.60% 713 187 26.23% -0.37% 180 Bute - 01 377 93 24.67% 438 77 17.58% -7.09% 71 Cowal North - 01 684 164 23.98% 699 87 12.45% -11.53% 78 Whisky Isles - 01 282 65 23.05% 287 58 20.21% -2.84% 59 Whisky Isles - 02 572 126 22.03% 603 129 21.39% -0.63% 127 Bute - 04 444 95 21.40% 454 86 18.94% -2.45% 89 Knapdale - 01 486 94 19.34% 494 81 16.40% -2.94% 74 Loch Awe - 02 426 82 19.25% 445 42 9.44% -9.81% 37 Loch Awe - 03 562 104 18.51% 569 102 17.93% -0.58% 97 Kintyre Trail - 02 497 81 16.30% 500 72 14.40% -1.90% 71 Knapdale - 02 420 68 16.19% 429 57 13.29% -2.90% 53 Benderloch Trail - 04 453 73 16.11% 460 67 14.57% -1.55% 64 Bute - 03 435 65 14.94% 467 59 12.63% -2.31% 55 Bute - 02 452 66 14.60% 463 73 15.77% 1.16% 69 Cowal North - 03 535 75 14.02% 547 59 10.79% -3.23% 56 Mull, Iona, Coll and Tiree - 04 390 53 13.59% 398 51 12.81% -0.78% 48 Rothesay Town - 07 470 63 13.40% 471 57 12.10% -1.30% 49 Mid Argyll - 03 616 80 12.99% 634 76 11.99% -1.00% 72 Rothesay Town - 01 307 38 12.38% 323 39 12.07% -0.30% 38 Mull, Iona, Coll and Tiree - 05 400 49 12.25% 415 46 11.08% -1.17% 44 Hunter's Quay - 02 322 37 11.49% 350 15 4.29% -7.20% 14 Loch Awe - 01 468 53 11.32% 474 49 10.34% -0.99% 48 Mull, Iona, Coll and Tiree - 02 534 58 10.86% 576 54 9.38% -1.49% 58 Mid Argyll - 02 436 46 10.55% 444 47 10.59% 0.04% 42 Knapdale - 04 292 28 9.59% 293 23 7.85% -1.74% 21 Mid Argyll - 01 401 34 8.48% 401 30 7.48% -1.00% 29 Cowal North - 02 406 34 8.37% 409 22 5.38% -3.00% 21 Other Datazones in Argyll and Bute 35,034 956 2.73% 35,745 869 2.43% -0.30% 809 Total 48,443 3,284 6.78% 49,562 2,843 5.74% -1.04% 2,692