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Decision details
Report of the Director of Regeneration and Communities - Council Tax 2015 16 Collection Fund Adjustments
Decision Maker: Cabinet.
Decision status: Recommendations Approved
Is Key decision?: No
Is subject to call in?: Yes
Purpose:
The report detailed the anticipated balance on the collection fund as at 31 March 2015 from council tax and business rates collection. The distribution of balances to precepting authorities is an important part of their budget calculation 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.
Decision:
(a)
That the council tax projection detailed in the
report of the Director of Regeneration and Communities be agreed
and as a result the distribution of the surplus set out in
paragraph 1.4.5 of the report be agreed as follows:
Preceptor |
£ |
Maidstone Borough Council |
302,209 |
Kent County Council |
1,270,007 |
Kent Police Authority |
171,465 |
Kent and Medway Towns Fire Authority |
82,354 |
Total |
1,826,034 |
(b) That the business rates projection detailed in the report of the Director of Regeneration and Communities be agreed and as a result noted the distribution of the surplus set out in paragraph 1.5.4 of the report as follows:
Preceptor |
£ |
Central Government (50%) |
35,545 |
Maidstone Borough Council (40%) |
28,436 |
Kent County Council (9%) |
6,398 |
Kent and Medway Towns Fire Authority (1%) |
711 |
Total |
71,089 |
Reasons for the decision:
The council is required to maintain a collection fund which accounts for all local tax payments for council tax and business rates. The income into the fund is used to pay the precepts to Kent County Council, Kent Fire Authority, Kent Police (council tax only), central government (business rates only) and the equivalent requirement of this council, which includes parish precepts.
For the proper maintenance of the collection fund it is necessary to assess, on an annual basis, the likely balance as at 31 March of each year. Any balance, either positive or negative, must be taken into account in the following financial year. However, under the statutory arrangements which govern the collection fund, the balance remaining does not become a credit or charge on this council solely but needs to be split proportionately across preceptors.
Council Tax
The current situation regarding council tax in 2014-15 is projected to 31 March 2015 as set out in Appendix Ato the report of the Director of Regeneration and Communities. The appendix detailed the precepts and demands on the Fund totalling £85,544,191.
Appendix A also detailed the latest situation regarding council
tax bills dispatched, incorporating exemptions and
discounts. Total income is now
anticipated to be £86,355,243; therefore a surplus of
£811,052 is anticipated for 2014-15. The collection fund regularly produces a surplus
due to the continuing increase in properties on the valuation
list.
The
actual council tax surplus as at 31 March 2014 was
£1,444,278. The predicted outturn at this time last year was
£429,296 and this value was taken into account in setting the
Council Tax in 2014-15. In 2013-14
there was increased uncertainty around the predictions used in
relation to the local council tax support scheme that replaced
council tax benefit from 1 April 2013.
The level of demand for support through the scheme was lower than
predicted, which had a positive impact on the surplus at 31 March
2014. A further variance arose during
the year due to the reversal of unutilised provision for bad debts,
which also increased the surplus on the fund at 31 March 2014.
There is therefore a balance of £1,014,982 resulting from an
under distribution in this year.
In
total, Appendix A estimated that there would be a net surplus on
the collection fund for 2014-15 of £1,826,034.
In line
with the Local Government Finance Act 1992 it is necessary to
declare the distribution of any surplus or deficit on the
collection fund and for this reason it was recommended that the
surplus be distributed as set out in the table below. This apportioned the surplus in line with the
preceptors’ share of the council tax as set out inAppendix
A.
Preceptor |
£ |
Maidstone Borough Council |
302,209 |
Kent County Council |
1,270,007 |
Kent Police Authority |
171,465 |
Kent and Medway Towns Fire Authority |
82,354 |
Total |
1,826,034 |
Business Rates
It was
noted that a new system for business rates came into effect
on
1 April 2013. This introduced the
distribution of business rates via the collection fund in a similar
way to council tax. Under the previous
system, income was pooled and distributed nationally by the
government. Precepts for business rates
are determined prior to the start of a financial year based on
fixed percentages applied to estimated income. Variations from the
estimates realised within the collection fund are then distributed
in the following two financial years (based on estimates in the
following year and actuals in the
subsequent year). 2014-15 will therefore be the first year that the
balance arising on business rates impacts on the collection fund
balance.
The current situation regarding business rates for 2014-15 is projected to 31 March 2015 in Appendix B to the report. As at 31 March 2015 the collection fund is estimated to have a surplus of £85,817 for business rates relating to the financial year 2014-15, to be distributed to preceptors in 2015-16.
The actual outturn, as at 31 March 2014, was a deficit of £1,804,789. The predicted outturn in January 2014 was a deficit of £1,790,061. Therefore, there is a balance of -£14,728 to be shared with preceptors. The deficit in 2013-14 arose principally from requirement for the council to create a provision for losses on appeals against rateable value. Under the previous system the impact of these losses was passed onto central government as part of the national pooling arrangements. This has already been reported to central government and preceptors, and sufficient resources were set aside in 2013-14 to cover this council’s share of the deficit.
The total balance on the collection fund for business rates of £71,089 would be distributed to preceptors as set out in the table below, by applying the central and local share percentages set by the government.
Preceptor |
£ |
Central Government (50%) |
35,545 |
Maidstone Borough Council (40%) |
28,436 |
Kent County Council (9%) |
6,398 |
Kent and Medway Towns Fire Authority (1%) |
711 |
Total |
71,089 |
Since the beginning of the new system the government has utilised a number of incentives to assist businesses such as small business rates exemptions and limiting business rates increases to 2%. These have a direct impact on the collection fund by reducing the value of business rates collected. The council is reimbursed through other government grants that do not affect the collection fund. For this reason the detailed distribution above does not reflect the details set out in the medium term financial strategy elsewhere on this agenda as that report takes into account the consequences of the business rates pool and the section 31 grant.
Alternative options considered:
It is a
statutory requirement that any adjustment be calculated annually
and Cabinet could have chose to ignore
this decision.
Cabinet
could have varied 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 estimate of the
situation.
If Cabinet chose 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.
Wards Affected: (All Wards);
Details of the Committee: None
Contact: 01622 602396 Email: paulriley@maidstone.gov.uk.
Report author: Paul Riley
Publication date: 19/12/2014
Date of decision: 17/12/2014
Decided: 17/12/2014 - Cabinet.
Effective from: 31/12/2014
Accompanying Documents: