Decision details

The report advises Members on the estimated tax base for Council Tax purposes. It identifies potential changes to the tax base expected in the forthcoming year and recommends the tax base for 2023-24 for the council and parish areas.

The report also provides the anticipated balance on the Council Tax account as at 31 March 2023 which will be credited to major preceptors and this Council in accordance with regulations.

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 Council’s own budget strategy for the coming financial year.

1.  That 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 2023-24 will be as £67,161.69;

2.  That 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 2023-24 will be as identified in Appendix 2 to the report; and

3.  That the 2022-23 Council Tax projection and proposed distribution detailed in Appendix 3 of this report be agreed.

1.1  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 Council’s priorities.

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

1.3  The basis of the calculation of the tax base is the valuation information received from the Valuation Office on 12 September 2022 and the latest information on exemptions and discounts available as at 3 October 2022.

1.4  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 Council’s needs baseline for business rates; and

·  Property changes that will be used to calculate the Council’s New Homes Bonus award next year.

1.5  The tax base figure supplied to central government is given at Appendix 1. This shows a net tax base of 67,374.80 as at 3 October 2022.  Starting from this figure an estimate of the tax base for 2023-24 can be made by considering movements that may occur in the factors that influence the tax base over the forthcoming year. 

1.6  It is necessary that a realistic assessment is made of the potential changes to the tax base for 2023-24 as an under or over recovery of Council tax income will affect the Council’s 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.

1.7  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

1.8  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.

1.9  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 is required to be distributed proportionately across the preceptors.

1.10  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.

1.11  These balances (surplus or deficit) will be distributed between the billing authority, i.e. Maidstone Borough Council, and major preceptors during 2023-24.  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 2023-24 will be apportioned using the 2022-23 demand and precept amounts.

1.12  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 and Executive in February as part of the Medium Term Financial Strategy proposals.

2. 

CONSULTATION RESULTS AND PREVIOUS COMMITTEE FEEDBACK

2.1  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 2023-24.  The outputs of this exercise are included within a separate agenda item at this meeting.

2.2  This issue was considered by the Corporate Services Policy Advisory Committee on 18 January 2023, and the Committee’s comments and recommendations reported to the Executive.

Tax Base - Option 1 (APPROVED)

1.1  An assessment of the information held by both the Revenues Service and the Planning Service suggests that between October 2022 and March 2024 a total of 1,271 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 2023-24, the result suggests an increase of 897 band D equivalent properties. Adjusting this figure for the current levels of discount and other allowances suggests a decrease of 213 properties from the CTB1 figure.

1.2  This figure is significantly lower than the 1,271 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.

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

1.4  The calculation is set out in the table below:

Table 1: Proposed tax base 2023-24

1.5  The overall position represents year on year growth in the tax base estimate of 1.92%.  The increase is very close to the current estimate in the strategic revenue projections, which are based on an estimated 2% growth in the tax base.

1.6  Appendix 2 to this report provides details of the tax base for each parish based on an identical calculation.

  Tax Base - Option 2 (REJECTED)

1.7  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 Valuers’ 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.

1.8  The risks of making an inaccurate calculation are set out in paragraph 2.6 above and as 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 (REJECTED)

1.9  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 (APPROVED)

1.10  A projection for 31 March 2023 based on the current position is provided at Appendix 3.  This appendix details the precepts and demands on the fund for 2022-23 totalling £137,399,468.

1.11  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 £138,448,759; therefore a surplus of £1,049,291 is anticipated for 2022-23.

1.12  A forecast surplus of £2,130,839 for the current financial year is being allocated to major preceptors and this Council’s general fund.  The actual outturn position at 31 March 2022 was a surplus of £4,141,782 in respect of council tax.  This brings the forecast cumulative surplus as at 31 March 2023 to £5,191,073.

  Deficit Phasing

1.13  Ordinarily, this surplus would be apportioned according to preceptors’ respective shares of council tax and recovered from 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:

Table 2: Forecast cumulative surplus on the council tax account for 2023-24

1.14  However, as a result of pressures associated with the Coronavirus pandemic, and the significant deficits in council tax and business rates which 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.

1.15  Alongside the cumulative estimated surplus as at 31 March 2022, an adjustment is required for the ‘exceptional balance’ calculated in respect of 2020-21.  This represents the estimated 2020-21 deficit, net of any ‘prior year’ 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 ‘opening balance’ 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 £3,181,894.

1.16  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 produced a different amount.  There was no provision in the regulations to allow authorities to opt out of the deficit phasing, or to adopt a different payment profile.

1.17  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 preceptor’s share of the aggregate council tax requirement for the billing authority’s area for the ‘preceding year’.  This apportions the share of the estimated exceptional balance which will be spread across 2021-22, 2022-23 and 2023-24 as follows:

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

1.18  The phasing provisions detailed within the preceding paragraphs require that two thirds of the exceptional balance be removed from the calculation, with the first two thirds having been recovered during 2021-22 and 2022-23, and the remainder to be recovered during 2023-24.  The impact of this amendment leaves an adjusted deficit for council tax to be recovered in 2023/24 of £1,060,632 apportioned as follows:

Table 4: Apportionment of council tax deficit to be recovered in 2023-24

1.19  Authorities’ 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 authorities’ 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 (REJECTED)

1.20  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 2023.

1.21  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 Council’s cash flows.

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

Collection Fund Adjustment - Option 3 (REJECTED)

1.23  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.