Studio flat council tax fraud: what would you do?

redonion

Sorry if this is considered to be in the wrong place: wasn't sure whether to post it here or in the "Cutting tax" board, but this is about tax evasion, not tax avoidance, so...

I've been looking to rent a small studio flat in London. I've found that maybe 50%, probably more, are on the basis of "council tax included" with a nod and a wink that since you're not claiming housing benefit, you won't tell the council. These are small but self-contained places, no shared kitchen or bathroom facilities.

That means if I don't houseshare (yes, I could houseshare - that's just not what I'm discussing here) leaves me in the position of either

1. dodging tax (no thanks), or
2. getting a place and then immediately reporting my neighbours to the council and getting on completely the wrong side of my landlord in the process (no thanks), or
3. paying a lot for a bigger place I don't need - thus saving less for a mortgage, or
4. getting a crappy bedsit, which I wouldn't need to if it weren't for this tax fraud. Not great choices.

I've been looking at Redbridge lately, but it doesn't seem to be unique to that area - I've looked in other areas of London too, and come across the same thing. What on earth are councils doing here? They behave as if they are oblivious to this problem, but they must be aware of it. I hear no end of stories about evading tax via the 25% single person reduction, and nothing about people paying zero countil tax when they are liable.

I'm half inclined to shop these people to the council. The thing that stops me is the unfairness of the system (what happened to local income tax?), the knowledge that some of these people earn a lot less than me and may have problems I know nothing about - and also really just repulsion against reporting somebody to the authorities. On the other hand, I don't mind paying to support people with a lower income than me, but I do mind paying for people who are evading tax.

What would you do? And why is this so common when it's out in the open for all to see?

BigAunty

Are you sure it's an actual dodge? Could it be that these studios are really bedsits within a larger property and therefore classed as a HMO (house of multiple occupation) which makes the landlord legally responsible for paying the council tax.

This type of legislation was bought in to improve health/safety in HMOs that tended to be prone to slum conditions, higher risk of fires, etc, and presumably making the landlord responsible for paying the council tax is a way of stopping transient tenants from perpetually skipping CT.

Look at the local council website to understand how HMOs are defined, the licensing scheme and the compulsion for landlords to pay the council tax.

There are actually properties out there where the landlord must pay and cannot delegate it to their tenants directly.

redonion

BigAunty wrote: »

Are you sure it's an actual dodge?
...
There are actually properties out there where the landlord must pay and cannot delegate it to their tenants directly.

Yes I'm sure: I live in such a property (an HMO), and I have viewed two of the tax-dodge properties I'm talking about. They most certainly do not fall into the HMO bracket: they were self-contained dwellings, plain and simple. No shared bathroom or WC, no shared kitchen. In one case, not even a shared front door!

Here's Redbridge's web page on this. Note that the property must NOT be self contained. If it's self-contained, you're liable:

http://www2.redbridge.gov.uk/cms/council_tax_benefits_housing/housing/home_improvements_and_repair/grants_and_assistance/housing_multiple_occupation.aspx

BigAunty

There is a council tax liability hierarchy which places the responsibility for the occupier to pay if it isn't a HMO.

Not sure how the local council will handle it if a tenant shows them a tenancy contract which states that the landlord has included council tax in the agreement, whether a tenant must pay up with the council and pursue the landlord for a refund through the small claims court, for example.

What precisely do you mean by the 'nod and wink' of not having to pay council tax if you are a non-HB claimant? Are you saying the landlords have told you that there's little the council can do if you don't register for CT? I doubt that many council's are passive about CT arrears.

Ultimately, it is the tenant's responsibility to register for CT in a non-HMO - a landlord has no rights and obligations to the council in their non-HMO rental properties, nor to the tenant's energy supplier, water supplier, credit card company, etc. Tenant's debts and failures to pay other suppliers belong with the tenant, not the owner of the property!

What would I do in your position? I would insist the landlord gives a written tenancy agreement that demonstrated council tax was included in the property and find out how to enforce this before it was signed. If I didn't get this assurance, I would then realise the onus is on me to register and pay the CT myself and factor this into my budget. I wouldn't worry about my neighbour's business and leave it to the local council to identify and address CT arrears and evasion in their area.

CIS

A lot of the properties are declared as empty and then rented out, unofficially.

There will be a change in these properties now that the 50% premium has been added however many landlords will continue to flaunt the system as the councils don't have the staffing to review the cases.

If it's self-contained, you're liable:

Not always - even a self contained property can be a council tax HMO (the definition is different to a licensed HMO - a licensed HMO is always a council tax HMO but a council tax HMO is not always a licensed HMO).

CIS

Not sure how the local council will handle it if a tenant shows them a tenancy contract which states that the landlord has included council tax in the agreement, whether a tenant must pay up with the council and pursue the landlord for a refund through the small claims court, for example.

The tenant will have to be billed and its then between them and the landlord over the monies.

redonion

BigAunty wrote: »

Not sure how the local council will handle it if a tenant shows them a tenancy contract which states that the landlord has included council tax in the agreement, whether a tenant must pay up with the council and pursue the landlord for a refund through the small claims court, for example.

I'm sure it won't surprise you that that's not an appealing option.

What precisely do you mean by the 'nod and wink' of not having to pay council tax if you are a non-HB claimant? Are you saying the landlords have told you that there's little the council can do if you don't register for CT? I doubt that many council's are passive about CT arrears.

They have simply said that council tax is included. When I point out that it's not, they say, "OK, we'll let it to somebody else" (which came as no surprise). In one case it was an agent, who when pressed agreed that the liability was on me (and I might have let the place - and paid the tax of course - if it weren't for the fact that might create problems with the landlord by putting the place on the council's books). In the other case, it was a private landlord, who, while never actually admitting the liability was 100% UNhappy with me talking to the council.

Ultimately, it is the tenant's responsibility to register for CT in a non-HMO - a landlord has no rights and obligations to the council in their non-HMO rental properties, nor to the tenant's energy supplier, water supplier, credit card company, etc. Tenant's debts and failures to pay other suppliers belong with the tenant, not the owner of the property!

Exactly. How does that help me with staying on good terms with landlord and neighbours, though? Not at all, I'm afraid!

What would I do in your position? I would insist the landlord gives a written tenancy agreement that demonstrated council tax was included in the property and find out how to enforce this before it was signed. If I didn't get this assurance, I would then realise the onus is on me to register and pay the CT myself and factor this into my budget. I wouldn't worry about my neighbour's business and leave it to the local council to identify and address CT arrears and evasion in their area.

It may come to that. I worry about the effect on my relationship with landlord and neighbours (and not about paying the council tax itself).

BigAunty

redonion wrote: »

...

How does that [registering for council tax and accepting that the other tenants failure to pay is none of your business] help me with staying on good terms with landlord and neighbours, though? Not at all, I'm afraid!

..

How would a decision to register for council tax, the fact that clearly the landlord should not be responsible for any of the tenants debts with any of their suppliers, the way other tenants avoid their legal responsibilities to register for CT, actually hinder your relationship with them?!

redonion

CIS wrote: »

A lot of the properties are declared as empty and then rented out, unofficially.

There will be a change in these properties now that the 50% premium has been added however many landlords will continue to flaunt the system as the councils don't have the staffing to review the cases.

Not always - even a self contained property can be a council tax HMO (the definition is different to a licensed HMO - a licensed HMO is always a council tax HMO but a council tax HMO is not always a licensed HMO).

Thanks for this. However, after considerable googling and reading I still can't for the life of me figure out what the criteria are that determine whether a self-contained flat is a dwelling liable for council tax or instead, part of an HMO.

It seems that it's covered by the Local Government Finance Act 1992 and the Council Tax (Liability for Owners) Regulations 1992 (and as you point out, NOT by the Housing Act 2004). However, figuring out what those mean is beyond me. I'd ask the council, but I think the reality is I just don't have time, and I suspect they'd insist on knowing the details of the property, even though there is no such specific property of course, because I'm still flat-hunting. In the absence of advice from here, I'll just have to pick somewhere, tell the council afterwards, and hope for the best that that doesn't put me in a bad situation with the landlord.

Help!

redonion

BigAunty wrote: »

How would a decision to register for council tax, the fact that clearly the landlord should not be responsible for any of the tenants debts with any of their suppliers, the way other tenants avoid their legal responsibilities to register for CT, actually hinder your relationship with them?!

Because it puts the flat on the council's books, I would assume, which would then make it harder for them to suggest the same wheeze to subsequent tenants, which would tend to reduce the rent they can charge.

Certainly the evidence I have is that when I was (very politely) up front about it, in both cases they turned their noses up at me as a tenant.

CIS

the Council Tax (Liability for Owners) Regulations 1992

In summary it mandates that in any property where the occupiers only rent a part of the dwelling (i.e a room only) or the property is adapted for multiple occupancy then the owner is liable for the council tax charge.