RADICAL RECONSTRUCTION TO ENABLE LOCAL COUNCILS TO BECOME SELF-FINANCING (while adjusting liabilities of taxpayers) BY INTRODUCING A RESIDENTIAL/RETAIL PROPETRY TAX (to replace Council Tax and Business Rates on Retail Properties)
This new property tax is designed to enable local councils to be self-financing with the right to vary the centrally set Property tax rate (eventually, say, between ½ and 1 % of Band value minimum) by up to 50% either way. Introduction would be phased in during fiscal year 2021/2022 when the value of the previous Council Tax band classification would be updated by 25% and 4 higher bands (up to about £5 million with £60,000 minimum on band A) and Retail added to the band classification(using 5% rental yield basis for valuation on current leases). Registered owners liable for this tax would no longer include shorthold (leases under 21 years) tenants: consequently landlords would have the automatic right to increase rents from April 2021 by any amount of Council Tax previously paid by or on behalf of the tenant. The new Band Classification into which each property falls would in due course be entered on to the Land Register( where or whenever last sale information indicates higher or lower classification revise entry accordingly). Thus the Land Register will become the data base for the new Residential/Retail Property Tax, naming as Registered Owners the freeholder(s) or in the case of long leases (original lease 21 years or more) the leaseholder(s). During 2021/2022 the valuation of all properties effective April 2022 would be required by auto-certification (signed off by a recognised Estate Agent) for entry on to the Land Register on the basis that if on a subsequent official valuation (to be conducted over 3 years) the valuation is found to be one band below a back-dated payment difference plus 5% simple interest will be charged, and for any entry more than one band below 10% compound interest would apply. Severe penalties would apply to interference with or deliberate misuse of information supplied to the Land Register. Any taxpayer who has paid Property Tax in the previous fiscal year (Certificate similar to P61 showing amount paid to be issued by Local Council) will be eligible for Personal Allowance extension in his Tax Return i.e. if Property Tax paid = £1,500, Personal Allowance of £12,500 will be extended to £14,000. The Personal Allowance restriction to Nil for those earning over £100,000 should be abolished and replaced by a Temporary Surcharge levied as follows: 5% on total tax assessed £100,000 up to £200,000 10% on total tax assessed over £200,000 Registered owners would be responsible for paying Property Tax, with unpaid tax having an automatic lien on the property and from the beginning of the next fiscal year and loss of eligibility for Personal Allowance extension. Central Government will provide an Equalisation Funding for any Local Council which has to increase the centrally set Property Tax rate (1/2% assumed) by matching the extra tax so raised with an equal amount (no other subsidy from Central Government which has to bear the cost of Personal Allowance extension). Consequential Proposals Householders (owners of freehold or long leasehold property) who cannot afford the new Property Tax may apply to Local Councils to transfer title to the property to the Council in exchange for a statutory 20-year lease of the same property at an annual peppercorn rent with Property Tax being paid by the Council. The Council may decline the application in the case of badly maintained properties or where the title to the property has been manipulated (e.g. recent transfers), or is inadequate (e.g. lease remainder too short). Householders wishing to apply to transfer title to their property to the Local Council who have mortgages to repay may be granted a Mortgage Loan for the purpose, if approved, on similar interest and repayment terms to the Student Loan scheme. The short leasehold received in exchange may be sold or bequeathed, but at the end of the 20 year period continuation of tenure will follow usual Local Council rules with the new lease attracting prevailing Council rent rates. In appropriate cases the Local Council may sell the property. An exception in the case of the original property owner still being in occupation would allow him/her to renew the lease for a second 20-year term on the same conditions (or buy back the property with the applicable Local Council discount). Such transfers to Local Councils should be exempt from Stamp Duty. This property tax will raise significant revenue (taxing wealth but with income-tax offsets) while allowing the less wealthy to transfer to affordable housing and renters to escape from Council Tax. Local employment, particularly in property departments, will boom. The proposal would be hugely beneficial to the economy and, once at the same time (better than a pay freeze) and other taxation/welfare understood likely to be welcomed. Significant revenue enhancement could be achieved by reducing the Personal Allowance amount to, say, £10,000 proposals could be added e.g. Personal Allowance amount to become Universal Tax Credit replacing Basic State Pension, Graduated Pensions, Xmas Bonus, Winter Fuel payments and all Tax Credits, Job seekers Allowance etc. (thus welfare beneficiaries would pay tax immediately on any other income). No tax returns should be required for those with incomes under x2 the Personal Allowance amount except for the purpose of obtaining relief on Property Tax i.e. no collection of tax not deducted at source.