Trustees' Liability for Council Tax

GauisScotius · 15 February 2018 at 7:57PM

My father died before Christmas and I notified Northumberland County Council of his death, expecting that they would confirm a Class F exemption for probate. I completed the form they sent, which included a question as to whether my father was sole owner of the property. I responded that my father was tenant in common with an executory trust established under my mother's will (she died in 2005, he and she having originally jointly owned their house. Her share of their home was placed into a trust by way of some - in hindsight - less than perfect and unnecessary estate planning).

The result is that I have now been told that I, as a trustee, am liable for CT on the house, at least from my father's date of death. The (limited) explanation I have received is that class F (probate) exemption is alllowed only if the property has (had) a SOLE owner and, since the property has two tenants-in-common (My father's executors and my mother's trustees) it is not eligible.

Can anyone confirm if this is correct? If it is, it strikes me as being mightily unfair. As trustee I may have legal ownership, but I certainly don't have beneficial ownership. I couldn't sell or let the property whilst my father was alive, and I still can't without the joint action by his executors (this being England, I can't even bring an action for division and sale were we to disagree as to how best to dispose of the property).

I have consulted the Local Government Finance Act 1992 to see who can be made liable for council tax. Section 6(2)(f) refers to "the owner of a dwelling" and s.6(3) to the joint and several liability if more than one person is liable. An "owner" is define [s.6(5)] as a person having "a material interest in the whole or any part of the dwelling". Section 6(6) further defines "material interest" as a "freehold interest or a leasehold interest", but fails to say whether that should be interpreted as legal or beneficial interest.

Has anyone come across this before? If so, what was the outcome?

Thanks

CIS · 15 February 2018 at 9:37PM

You have two main issues - 1) should a Class F apply and 2) who is the owner for Council Tax purposes.

1) Tribunals have confirmed that for Class F purposes the existence of a Trust in respect of part ownership is sufficient to prevent the Class F applying.

2)Who has been registered as owner at the land registry ? Under what name has the council tax demand been issued - you personally or the trust ?

Section 6(6) further defines "material interest" as a "freehold interest or a leasehold interest", but fails to say whether that should be interpreted as legal or beneficial interest.

The courts have previously found that the found that 'material interest' include both a legal and beneficial interest when it comes to Council Tax purposes under s6 of the LGFA 1992.

GauisScotius · 16 February 2018 at 8:41AM

CIS, Thanks. I'd thought this was a sufficiently common situation that it might well have been considered by th Land Trinunal. You don't by any chance have a case reference I could locate?

getmore4less · 16 February 2018 at 9:45AM

Although the trustees may be legal owners and obliged to make sure the CT is paid the actual money should come from the trust or those with the beneficial interest not the trustees own pockets(as trustees).

CIS · 16 February 2018 at 10:55AM

GauisScotius wrote: »

CIS, Thanks. I'd thought this was a sufficiently common situation that it might well have been considered by th Land Trinunal. You don't by any chance have a case reference I could locate?

Try Valuation Tribunal decisions http://info.valuation-tribunals.gov.uk/decision_document.asp?appeal=/decision_documents/documents/CT_England/1035M70410037C.htm&Decision=liability and http://info.valuation-tribunals.gov.uk/decision_document.asp?appeal=/decision_documents/documents/CT_England/2605M124993037C.htm&Decision=liability to get you started.

GauisScotius · 17 February 2018 at 9:28AM

CIS, thanks, I!!!8217;ve read them. First thoughts are that they don!!!8217;t seem very well reasoned and eminently appealable. Could be, of course, that they weren!!!8217;t well argued in the first place. I guess nobody appeals these because you!!!8217;re only looking at, say, 6 - 9 months exemption and the cost/ benefit is heavily skewed towards the council.

CIS · 17 February 2018 at 10:57AM

GauisScotius wrote: »

CIS, thanks, I!!!8217;ve read them. First thoughts are that they don!!!8217;t seem very well reasoned and eminently appealable. Could be, of course, that they weren!!!8217;t well argued in the first place. I guess nobody appeals these because you!!!8217;re only looking at, say, 6 - 9 months exemption and the cost/ benefit is heavily skewed towards the council.

The first issue with appealing, of course, is always the cost. The second issue is that the Trust (leaving out the aspect of Trustees for now) shows that there is an entity, in one form or the other, who has an interest in the property. This interest will always be either legal or beneficial (or both) and this point alone would be sufficient to meet the requirement under s6 of the LGFA92 for a material interest and thus cause the Class F application to fail.

There is of course a third argument, over the liability of trustees themselves, and the case law on this aspect goes far beyond the realms of council tax legislation - the case law which finds that trustees can be liable costs of the trust etc are unlikely ever to be changed as it would upset things across a whole swathe of different issues (and would be a massive victory to whoever pulls it off).

From scanning the tribunal decisions quickly, with my background in council tax legislation, I can't see any obvious flaws in the decisions when compared to council tax legislation - if you've read them more closely then something may have jumped out at you.

Trustees' Liability for Council Tax

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