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Ian Fletcher, Director of Policy
(Real Estate) at the British Property Federation explains why reform is needed in student council tax law
An uneven playing field
for council tax reform. Devised in 1992, the system is long overdue an overhaul, and the purpose-built student accommodation sector (PBSA) is currently suffering at the hands of this out-of-date tax. The problem lies in the fact
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that the PBSA did not exist when council tax bands were first devised. According to the 1992 Council Tax Regulations, students are exempt from paying council tax, either categorised as Class M (living in university halls of residence), or Class N (other property that is wholly occupied by students, ie a house in multiple occupation (HMOs). This has resulted in all sorts
of problems for the PBSA sector, which can be Class M or Class N, with different requirements for each. Are private sector-owned halls, halls or very large HMOs? The distinction is important in terms of the proof and bureaucracy that will be required to ensure students gain their exemptions. One issue that is arising is
that local authorities are pursuing very different practices when dealing with the PBSA, some providers gaining the luxury of Class M exemption and less associated bureaucracy, other comparable blocks not. Class M exemption is prized
Ian Fletcher
because it generally provides exemption for the year, whereas local authorities under severe budget pressures are increasingly looking to apply council tax during out-of-term periods. Practice varies from council to council with, in some cases, PBSA properties charged council tax in all or some student holiday periods, and even where a 51-week tenancy is used for the residual week when the students don’t reside at the property. PBSA planning agreements however, often restrict PBSA properties from being let to non-students, creating additional costs.
“The problem lies in the fact that the PBSA did not exist when council tax bands were first devised”
s we approach the next general election, a number of bodies have been calling
A further difficulty is that
certain types of accommodation may look like a hall, but formats such as cluster flats may be treated as Class N. The clusters will therefore have their own council tax band. Some developments are ‘sliced and diced’ when they contain units of this nature, leading to half a building being put in Class M and half in N. This means that a third year student within a cluster who has finished their academic year, therefore not classed as a student, could disqualify the whole cluster and its occupants from the student exemption. There is also inconsistency
between councils on what a private provider has to do to prove occupants are students. Some councils don’t seek proof, others ask for certificates from universities. This lack of consistency leads to extensive and burdensome administrative work, both for PBSA providers and for students. More generally with Class N
exemption, resolving the status of occupants can take time, some authorities are slow to engage, yet in the meantime their systems are ploughing on issuing final demands and court summonses, which naturally causes deep concern. The current inconsistent
approach is creating unfairness and an uneven playing field between providers, as well as unexpected bills for students and extra work for councils. The British Property Federation (BPF) believes this area of policy is ripe for updating, with PBSA recognised within the regulations, and as an interim step guidance issued by the Valuation Office Agency. If the PBSA sector is to thrive,
and to sufficiently service the UK’s growing student populace, change in this area is critical. The BPF’s Student Accommodation Commitee is currently working to achieve recognition and clarification of this issue so that students are not paying for a tax they are supposed to be exempt from and the UK’s higher education sector can continue to succeed. UB
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