Policy & Resources Committee

19 January 2022

 

Council Tax Base 2022-23 and Collection Fund Adjustment

 

Final Decision-Maker

Policy & Resources Committee

Lead Head of Service

Mark Green, Director of Finance and Business Improvement

Lead Officer and Report Author

Ellie Dunnet, Head of Finance

Classification

Public

Wards affected

All

 

Executive Summary

 

This report advises members on the estimated tax base for Council Tax purposes. It identifies potential changes to that tax base expected in the forthcoming year and recommends the tax base for 2022-23 for the council and parish areas.

 

The report also provides the anticipated balance on the Council Tax account as at 31 March 2022 which will be recovered from major preceptors and this Council during the next three financial years, in accordance with the amended regulations on deficit phasing.

 

The distribution of balances to precepting authorities is an important part of their

respective budget setting processes and a decision at this time enables timely

advice to those authorities. It also enables timely consideration in relation to the

Councilís own budget strategy for the coming financial year.

 

Purpose of Report

 

Decision.

 

 

This report makes the following recommendations to this Committee:

That

1.   Pursuant to this report and in accordance with the Local Authority (Calculation of

Council Tax Base) (England) Regulations 2012, the amount calculated by this Authority as its Council Tax Base for the year 2022-23 will be 65,896.22;

2.   In accordance with the Local Authority (Calculation of Council Tax Base)

(England) Regulations 2012, the amount calculated by this Authority as the

Council Tax Base for each parish area for the year 2022-23 will be as identified in

Appendix 2 to this report.

3.   The 2021-22 Council Tax projection and proposed distribution detailed in Appendix 3 of this report is agreed.

 

 

Timetable

Meeting

Date

Policy & Resources Committee

19 January 2022

Council

23 February 2022



Council Tax Base 2022-23 and Collection Fund Adjustment

 

1.       CROSS-CUTTING ISSUES AND IMPLICATIONS

 

 

Issue

Implications

Sign-off

Impact on Corporate Priorities

         We do not expect the recommendations will by themselves materially affect achievement of corporate priorities.  However, the recommendations do form a statutory part of the process of setting the budget for the forthcoming financial year and support corporate priorities in this respect.

Ellie Dunnet, Head of Finance

Cross Cutting Objectives

         We do not expect the recommendations will by themselves materially affect achievement of cross cutting objectives.† However, the recommendations do form a statutory part of the process of setting the budget for the forthcoming financial year and support the councilís objectives in this respect.

Ellie Dunnet, Head of Finance

Risk Management

         Risk implications are detailed within section 5 of this report.

Ellie Dunnet, Head of Finance

Financial

         The results of this decision affect the overall budget strategy process and therefore the pressure on the Council

Tax requirement in creating a balanced

budget.

         The setting of the tax base is an essential part of the budget process which is required by legislation.

         Any increase in the tax base effectively means that the cost of services provided by this Authority and others in the area is being spread over more Council Tax payers which would effectively reduce the

Council Tax burden on any individual tax payer.

         However, this relationship must be realistic in that any underachievement on the collection of Council Tax will result in cash flow pressures for this Council as a billing authority.

Ellie Dunnet, Head of Finance

Staffing

         The recommendations do not give rise to any direct staffing implications.

Ellie Dunnet, Head of Finance

Legal

         Accepting the recommendations regarding the tax base will fulfil the Councilís duties under the Local Authority (Calculation of Council Tax Base) (England) Regulations 2012.

Failure to accept the recommendations

without agreeing suitable alternatives may place the Council in breach of

these regulations.

         Billing authorities are required by the Local Authorities (Funds) (England) Regulations 1992 to estimate any surplus/deficit on their collection fund for the year. Accepting the recommended projection in Appendix 3 will enable the Council to meet this requirement.

         The Local Authorities (Collection Fund: Surplus and Deficit) (Coronavirus) (England) Regulations 2020 amend the Local Authorities (Funds) (England) Regulations 1992 and the Non Domestic Rating (Rates Retention) Regulations 2013 which govern the calculation and apportionment of Collection Fund surpluses and deficits for council tax and non-domestic rates respectively. These amendments amend the way in which billing authorities calculate their estimated surplus or deficit on their collection fund in respect of non-domestic rating income for the relevant years beginning on 1st April 2021 and 1st April 2022. These amendments require billing authorities to spread their exceptional balance for a relevant year over a period of three relevant years ending with the relevant year beginning on 1st April 2023. The exceptional balance for council tax within appendix 3 has been calculated in accordance with these regulations.

Senior Legal Adviser, Corporate Governance

Privacy and Data Protection

         The recommendations do not give rise to any direct privacy or data protection implications.

 

Policy and Information Team

Equalities

         The recommendations do not propose a change in service therefore will not require an equalities impact assessment.

Ellie Dunnet, Head of Finance

Public Health

 

 

         The recommendations do not give rise to any direct public health implications.

Ellie Dunnet, Head of Finance

Crime and Disorder

         The recommendations do not give rise to any direct crime and disorder implications.

Ellie Dunnet, Head of Finance

Procurement

         The recommendations do not give rise to any direct procurement implications.

Ellie Dunnet, Head of Finance

Biodiversity and Climate Change

         We do not expect the recommendations will by themselves materially affect achievement of corporate priorities.  However, the recommendations do form a statutory part of the process of setting the budget for the forthcoming financial year and support corporate priorities in this respect.

Ellie Dunnet, Head of Finance

 

 

 

 

2.††††† INTRODUCTION AND BACKGROUND

 

Tax Base

 

2.1        Setting the tax base is an integral part of the Council tax collection process

which is a basic financial function of this Authority. It is essential for the

efficient funding of all Local Authorities in the area. The income received

from Council Tax, within the overall context of the budget process, provides resources for the achievement of all the Councilís priorities.

 

2.2        Regulations prescribe that a decision on the tax base for the forthcoming financial year must be made between 1st November and 31st January.

 

2.3        The basis of the calculation of the tax base is the valuation information

received from the Valuation Office on 13 September 2021 and the latest

information on exemptions and discounts available as at 4 October 2021.

 

2.4        This information has been collated for the whole of the Borough area and

for individual Parish areas. Information for the whole area has been

supplied to the Government for their use in the monitoring of:

 

        The Local Council Tax Support Scheme;

        This Councilís needs baseline for business rates; and

        Property changes that will be used to calculate the Councilís New Homes Bonus award next year.

 

2.5        The tax base figure supplied to central government is given at Appendix 1. This shows a net tax base of 66,099.9 as at 13 October 2021.† Starting from this figure an estimate of the tax base for 2022-23 can be made by considering movements that may occur in the factors that influence the tax base over the forthcoming year.†

 

2.6        It is necessary that a realistic assessment is made of the potential changes to the tax base for 2022-23 as an under or over recovery of Council tax income will affect the Councilís cash flow. If the tax base is overestimated, there will inevitably be a deficit on the collection fund which will need to be recovered through the Council tax in the following financial year.† In addition, during the course of the year, the borrowing necessary to cover the under recovery of the tax would need to be paid for by this Council.† If the tax base is underestimated there will be a surplus on the collection fund because the Council will have asked tax payers to contribute more than necessary in this financial year. The surplus would then be used to reduce the need for resources in the following year.

 

2.7        It is also necessary at this time to provide the parish Councils, which set a precept, with the element of the tax base of the borough that equates to their area.† Attached at Appendix 2 to this report is the detail of the calculation of the tax base for each parish.

 

Collection Fund Adjustment

 

2.8        As a billing authority, this Council has a statutory obligation to maintain a Collection Fund for transactions relating to the collection of Council Tax and Business Rates from taxpayers and distribution to preceptors.

 

2.9        For proper maintenance of the Collection Fund, it is necessary to assess, on an annual basis, the projected balance as at 31 March of each year. Any balance, either positive or negative, must be taken into account in the following financial year. Under the Statutory arrangements for the Collection Fund, the balance remaining does not become a credit or charge on this Council but requires it to be distributed proportionately across the preceptors.

 

2.10     The regulations provide that, in estimating a surplus or deficit on the Collection Fund at the end of the year, account is taken of any difference between the amount estimated for the previous year and the amount shown as the surplus/deficit for that year in the accounts.† Surpluses and deficits will be calculated separately for Council tax and business rates.

 

2.11     These balances (surplus or deficit) will be distributed between the billing authority, i.e. Maidstone Borough Council, and major preceptors during 2022-23.† The amounts are apportioned on the basis of the billing authority's demand, and each major precepting authority's precept, based on their respective band D Council tax bases to which the estimate relates i.e. the amounts to be distributed during 2022-23 will be apportioned using the 2021-22 demand and precept amounts.

 

2.12     The Collection Fund Adjustment arising from business rates will be estimated at a later stage due to the statutory timetable for calculating the predicted closing balance.† This will be reported to the committee in February as part of the Medium Term Financial Strategy proposals.

 

 

 

3.   AVAILABLE OPTIONS

 

Tax Base - Option 1

 

3.1        An assessment of the information held by both the Revenues Service and the Planning Service suggests that between October 2021 and March 2023

a total of 1,196 properties will be added to the Council Tax records.

Distributing this sum evenly over the period and taking the average, to identify the effect on the tax base for 2022-23, the result suggests an increase of 885 band D equivalent properties. Adjusting this figure for the current levels of discount and other allowances suggests a decrease of 204 properties from the CTB1 figure.

 

3.2        This figure is significantly lower than the 1,196 new properties identified because they will not all be band D properties, they will not all start to pay Council Tax at the beginning of the year and some will receive the discounts and allowances that are part of the system.

 

3.3        Furthermore, the revised total tax base must be adjusted to allow for non-collection for which has been calculated at 1.5%.

 

3.4        The calculation is set out in the table below:

 

Tax Base as at Appendix I

66,099.9

New properties (Avg: by band D & time)

885.37

Adjustment for potential allowances

-88.54

Non-collection allowance (1.5% of above)

-1,000.51

Proposed Tax Base

65,896.22

Table 1: Proposed tax base 2022-23

 

3.5        The overall position represents year on year growth in the tax base estimate of 3.69%.† This results in a favourable impact for the strategic revenue project, which was based on an estimated 1.5% growth in the tax base.

 

3.6        Appendix 2 to this report provides details of the tax base for each parish

based on an identical calculation.

 

Tax Base - Option 2

 

3.7        It would be possible to vary some of the factors set out above. The exception is the figure from Appendix 1 as this is reconciled to the District Valuersí records and has been reported to central government. The other figures given above are based on current known data and though they could rise or fall during the year.

 

3.8        The risk of making an inaccurate calculation are set out in paragraph 2.6 above and the data used in calculating Option 1 is accurate and evidenced any variation the committee may wish to make should be similarly evidence based.

 

Tax Base - Option 3

 

3.9        The do nothing option is not available to the Council as it has a statutory obligation to set a tax base each year.

 

Collection Fund Adjustment - Option 1

 

3.10     A projection for 31 March 2022 based on the current position is provided at Appendix 3.† This appendix details the precepts and demands on the fund for 2021-22 totalling £128,617,771.

 

3.11     Appendix 3 also details the current position regarding Council tax bills dispatched, incorporating exemptions and discounts, and an allowance for irrecoverable debt.† Total income is now anticipated to be £129,961,275; therefore a surplus of £1,343,504 is anticipated for 2021-22.†

 

3.12     A forecast deficit of £736,806 for the current financial year is being recovered from major preceptors and this Councilís general fund.† The actual outturn position at 31 March 2021 was a deficit of £273,297 in respect of council tax.† This brings the forecast cumulative surplus as at 31 March 2022 to £1,070,207.

 

Deficit Phasing

 

3.13     Ordinarily, this surplus would be apportioned according to preceptorsí respective shares of council tax and distributed to the general fund and major preceptors over the next financial year in accordance with the provisions of the Local Government Finance Act 1992 as follows:

 

Preceptor

£

Maidstone Borough Council

161,889

Kent County Council

† 750,226†††

Kent Police Authority

115,356

Kent and Medway Towns Fire Authority

42,737

Total projected deficit as at 31 March 2022

1,070,207†††

Table 2: Forecast cumulative deficit on the council tax account for 2022-23

3.14     However, as a result of pressures associated with the Coronavirus pandemic, and the significant deficits in council tax and business rates which have resulted from this, the Government amended secondary legislation to allow authorities to spread the estimated deficit on the 2020-21 Collection Fund over the three years 2021-22 to 2023-24. The provisions do not allow deficits in other financial years to be phased.

 

3.15     Alongside the cumulative estimated surplus as at 31 March 2022, an adjustment is required for the Ďexceptional balanceí calculated in respect of 2020-21.† This represents the estimated 2020-21 deficit, net of any Ďprior yearí elements (the prior year element is the difference between the estimated and actual surplus/deficits for 2019-20 and is calculated as the difference between the Ďopening balanceí on the Collection Fund at 1 April 2020 and the sums paid to/from the Collection Fund during the course of 2020-21 in respect of the estimated surplus/deficit calculated by authorities in January 2020).† The exceptional balance for council tax was calculated to be a deficit of £3,181,895.†

 

3.16     As the exceptional balance calculated for 2020-21 was a deficit, the deficit phasing provisions were triggered and this amount must be spread in three equal portions across the three financial years 2021-22 to 2023-24. In the interests of reducing potential complication as far as possible, the exceptional balance may not be adjusted in the event that the end of year calculation of actual surplus or deficit for 2020-21 produces a different amount.† It should be noted that this will give rise to a short-term cash flow shortfall for this council as a billing authority.† There was no provision in the regulations to allow authorities to opt out of the deficit phasing, or to adopt a different payment profile.

 

3.17     The Local Authorities (Funds) (England) Regulations 1992 require collection fund surpluses and deficits to be apportioned on the basis of each billing authority and major preceptorís share of the aggregate council tax requirement for the billing authorityís area for the Ďpreceding yearí.† This apportions the share of the estimated exceptional balance which will be spread across 2021-22, 2022-23 and 2023-24 as follows:

 

Preceptor

£

Maidstone Borough Council

492,546

Kent County Council

2,224,404†††

Kent Police Authority

334,419

Kent and Medway Towns Fire Authority

130,525

Total projected exceptional balance as at 31 March 2021

3,181,894†††

Table 3: Forecast exceptional balance on council tax at 31 March 2021

 

3.18     The phasing provisions detailed within the preceding paragraphs require that two thirds of the exceptional balance be removed from the calculation, with the first third having been recovered during 2021-22, and the remainder to be recovered during 2023-24.† The impact of this amendment leaves an adjusted surplus for council tax to be distributed in 2022-23 of £2,130,839, apportioned as follows:

 

 

 

Preceptor

£

Maidstone Borough Council

318,588

Kent County Council

1,495,785†††††

Kent Police Authority

232,529

Kent and Medway Towns Fire Authority

83,937

Total surplus to be distributed during 2022-23

2,130,839†††

Table 4: Apportionment of council tax deficit to be recovered in 2022-23

 

3.19     Authoritiesí shares of the aggregate area council tax requirement can vary from year to year, creating a risk that their shares of the phased exceptional balance could change during the lifetime of the scheme. To prevent this, the regulations require the exceptional balance to be apportioned each year according to the authoritiesí council tax requirements in 2020-21. All other estimated surpluses or deficits will continue to be apportioned according to the council tax requirements of authorities at the time of the estimate.

 

Collection Fund Adjustment - Option 2

 

3.20  The committee could choose to vary the figures used in the estimate provided within the appendices.† However, these are based on data from the revenues system, projections developed from past experience and known factors.† They are considered to represent a reasonable basis for estimating the position on the collection fund at 31 March 2022.

 

3.21  Should the committee choose to vary the data and distribute a different surplus or deficit this could affect the balance on the collection fund and the Councilís cash flows.

 

3.22  The apportionment methodology is defined in statute and therefore may not be altered.

 

Collection Fund Adjustment - Option 3

 

3.23  It is a statutory requirement that any adjustment be calculated annually and the committee cannot choose to take no action in relation to this decision.

 

 

4.        PREFERRED OPTION AND REASONS FOR RECOMMENDATIONS

 

4.1     The recommended option is Option 1 (as detailed in paragraph 3.4 above) as this calculation is based on current known data and collection rates.

 

Collection Fund Adjustment

 

4.2     It is recommended that the committee agrees the projections detailed within option 1 above and within Appendix 3, as they are based on data from the revenues system, projections developed from past experience and known factors.† They are considered to represent a reasonable basis for estimating the position on the collection fund at 31 March 2022.

 

 

5.       RISK

5.1     The risks associated with this proposal, including the risks if the Council does not act as recommended, have been considered in line with the Councilís Risk Management Framework. That consideration is shown in this report within section 2.† We are satisfied that the risks associated are within the Councilís risk appetite and will be managed as per the Policy.

 

5.2     The main risks relate to an over optimistic estimate of the tax base and/or balance on the Council Tax account at 31 March 2022.† Although any deficit arising on the Collection Fund would be recouped in subsequent years, the impact of this risk materialising could be flow problems during the year. As a direct consequence this would reduce interest income generated on the Councilís cash balances or, in extreme cases, result in a need to borrow on a temporary basis.

 

5.3     Over pessimistic estimates would lead to increased balances on the Collection Fund.† When fed into the overall budget process this can produce yearly variations which need to be managed as part of the Budget Strategy and place unnecessary burdens on tax payers in advance of need.

 

5.4     Monthly monitoring of collection rates and growth seen in the tax base over recent years help the Council to mitigate this risk.



 

 

 

6.       CONSULTATION RESULTS AND PREVIOUS COMMITTEE FEEDBACK

 

6.1     No consultation is necessary on this specific issue but consultation has occurred with the public and with service committees on the wider issues relating to the budget and Council tax for 2022-23.† The outputs of this exercise are included within a separate agenda item at this meeting.

 

 

7.       NEXT STEPS: COMMUNICATION AND IMPLEMENTATION OF THE DECISION

 

7.1     The tax bases approved as part of this decision will be provided, as appropriate, to relevant preceptors.

 

7.2     The Council will use this tax base in setting its 2022-23 budget on 23 February 2022.

 

7.3     The Council is required to notify preceptors of the estimated Council Tax surplus/deficit as at 31 March 2022.

 

 

 

 

 

 

8.        REPORT APPENDICES

 

         Appendix 1 - Calculation of Council Tax Base (CTB1 Return)

         Appendix 2 - Calculation of Individual Parish Tax Bases 2022-23

         Appendix 3 - Council Tax Projection to 31 March 2022

 

 

9.        BACKGROUND PAPERS

 

None