This item was published during the term of a previous administration that ended in April 2007
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Councils gain discretion over tax on second homes
27/12/2004
Proposals to give local authorities discretion to reduce
the current 50 per cent discount on council tax on second
homes and long-term empty properties have taken another
step forward.
The legislative Order which will give councils the new
power has been laid in the Scottish Parliament. It will
come into effect at the start of financial year
2005-06.
Associated guidance - drafted in consultation with the
Convention of Scottish Local Authorities, Communities
Scotland and the Scottish Federation of Housing
Associations - has been issued to all local authorities
setting out the detailed arrangements for the new
powers.
Any additional income generated by cutting the discount
will be retained locally and used to provide new-built
affordable social housing.
Minister for Finance and Public Service Reform Tom
McCabe said:
"The laying of this Order is another step forward and
should ensure these additional new powers are available to
local authorities from the start of financial year
2005-06.
"This is excellent news and will allow decisions to be
taken at the local level in the best interests of
communities.
"The additional income is no panacea, but I believe it
has potential to provide a genuine boost to the supply of
affordable housing for local people.
"Second home owners contribute strongly to local
communities in many areas. But second homes and properties
which have been left vacant over a number of years can
cause problems for local areas, including limiting the
supply of affordable housing for local people."
At September 1, 2003, there were around 66,500
dwellings - the majority of which will be second homes or
long-term empty dwellings - on the valuation list entitled
to a 50 per cent council tax discount.
Potentially around £24 million could be raised if all
councils chose to reduce these discounts to 10 per
cent.
One of the recommendations in the Local Government
Committee's Report on Local Government Finance was that
full council tax should be levied on second homes.
The Executive sought views on this through a
consultation paper and decided that from the start of
financial year 2005-06, local authorities will be given
discretion to reduce or retain the discount between 10 per
cent and 50 per cent.
Local authorities will be able to take local
circumstances fully into account.
They will be able to vary the discount within their
area, e.g. to target only those areas where second homes
are a particular problem or to differentiate between second
homes and long-term empty properties.
The Executive has decided that a minimum 10 per cent
discount is necessary so that owners will have an incentive
to tell their local authority that their property is a
second home or long-term empty property.
The additional income generated from reducing the
discount for second homes and long-term empty properties
can then be identified.
This additional income will be retained locally and
routed through Registered Social Landlords for the
provision of new-built affordable social housing in areas
determined by the local authority.
It was clear from the responses to the consultation that
one of the main concerns regarding second home ownership
was the impact on local housing prices.
Directing the extra money generated from reducing the
discount towards increasing the provision of affordable
housing will help towards alleviating this problem.
The extra revenue can also, in certain circumstances, be
allocated towards the provision of specific elements of the
water and sewerage infrastructure required by the new
homes, and the purchase of land for future RSL affordable
housing projects.
The Executive has also decided to retain the mandatory
50 per cent discount for certain second homes and long-term
empties to ensure a consistent approach is adopted
throughout Scotland. These properties are:
purpose-built holiday homes - f or these
types of properties, second home owners are not competing
in the same market as local house buyers
second properties owned or rented by those living
in tied accommodation - this would include members
of the clergy, farm-workers and publicans who are required
to live in the licensed premises where they are
tenants.
The Executive does not want higher council tax bills to
discourage those living in tied accommodation from owning
or renting second homes for their future security.
vacant dwellings which subsequently undergo
extensive repair after sale - currently, dwellings
which are undergoing major repair works are exempt for up
to 12 months from the last occupation day. After that they
pay 50 per cent council tax.
This means that if someone buys a property that has been
vacant for over a year and undertakes major repair works
that prevent it from being occupied they will be faced
immediately with a council tax (and water and sewerage)
bill.
It is felt reasonable to grant a new owner a 50 per cent
discount for a further period of six months if the property
is undergoing or requires major repair work to render it
habitable, or is undergoing structural alteration, before
opening it out to local authority discretion.
dwellings vacant for less than 12 months -
currently, vacant properties are exempt from council tax
for the first six months and then pay 50 per cent
thereafter.
Increasing this after six months may place undue
financial pressure on some owners, particularly those who
are genuinely trying to deal with a vacant property.
There are many reasons why a property might be vacant
(and unfurnished). Some may be local authority properties,
some may be those which are proving difficult to sell. It
has therefore been decided that it is reasonable to
maintain the 50 per cent discount for the second six months
and allow the local authority discretion to start after 12
months.